South Africans already grappling with rising living costs are set to face further electricity tariff increases after the National Energy Regulator of South Africa (NERSA) granted final approval for Eskom’s adjustments for the 2026/27 financial year.
NERSA has approved an average tariff increase of 8.76% for customers purchasing electricity directly from Eskom, effective from 1 April 2026, while municipalities buying bulk electricity from the utility will see increases of 9.01% from 1 July 2026.
Both increases sit well above the prevailing inflation rate of approximately 3.5%, placing additional pressure on households and businesses already navigating a difficult economic environment.
In light of the decision and its broader implications, Newcastillian News approached Eskom with several questions regarding the tariff determination, the recovery of regulatory shortfalls, tariff restructuring, and whether electricity prices could decline in future once current financial pressures are resolved.
The latest increases stem largely from a regulatory dispute between Eskom and NERSA relating to the sixth Multi-Year Price Determination (MYPD6).
NERSA later acknowledged that an earlier calculation error had understated Eskom’s allowable revenue by R54.7 billion, primarily due to depreciation miscalculations, including a R14.5 billion depreciation error, as well as incorrect asset transfers to commercial operation.
Eskom contested the original determination, and although a confidential settlement of approximately R54 billion was initially reached between the regulator and the utility, the Pretoria High Court set the agreement aside on 21 December 2025, ruling that it was unlawful because the public had not been consulted.
The court ordered NERSA to undertake a full redetermination of Eskom’s revenue requirements. That process was completed on 7 February 2026, confirming the R54.7 billion revenue shortfall.
To reduce the immediate financial impact on consumers, NERSA approved a phased recovery of the shortfall.
The recovery will occur as follows:
• R12 billion in the 2026/27 financial year
• R23 billion in the 2027/28 financial year
• The remaining R19 billion in subsequent regulatory periods
This adjustment significantly raises tariff increases above the originally approved MYPD6 projections of 5.36% for 2026/27 and 6.19% for 2027/28.
Taking this into account, Eskom submitted its Retail Tariffs and Structural Adjustment (ERTSA) application on 10 February 2026, outlining the proposed tariff structure required to recover the approved revenue.
NERSA’s Energy Regulator approved the application on 5 March 2026, with the public announcement issued on Tuesday, 10 March 2026.
NERSA explained the difference between Eskom direct customers and municipal increases:
“The approved standard tariff increase of 8.76% will be implemented from 1 April 2026 until 31 March 2027 for Eskom direct customers, and the 9.01% increase will be implemented from 1 July 2026 until 30 June 2027 for municipal customers, in accordance with the requirements of the Municipal Finance Management Act, 2003 (Act No. 56 of 2003) (‘MFMA’). This difference in percentages is brought about by the differences in implementation dates between Eskom direct customers and municipalities buying from Eskom.”
The variation arises because Eskom must recover its full allowable revenue within its April-to-March financial year, while municipalities operate on a July-to-June financial cycle.
Under the MYPD framework, NERSA determines Eskom’s allowable revenue based on projected electricity demand and cost recovery requirements, while Eskom submits annual ERTSA applications to distribute those revenue requirements across customer categories.
The process complied with public consultation requirements under the Promotion of Administrative Justice Act, the National Energy Regulator Act, and the Constitution. While stakeholder submissions raised affordability concerns, NERSA confirmed that these did not result in material changes to the determination.
NERSA has stated that its full Reasons for Decision document, along with stakeholder comments, will be published on its website in due course.
When asked about the phased recovery of the R54.7 billion shortfall, Eskom told Newcastillian News that the decision ultimately rests with the regulator.
“Thus far, a decision has been made for the 2027 financial year and 2028 financial year. The remaining R19 billion will be recovered subsequently.”
Eskom further explained that NERSA has attached performance-related conditions to the revenue determination, meaning that certain elements of the recovery process are linked to Eskom achieving specific operational performance milestones.
Newcastillian News also asked Eskom about the recent restructuring of electricity tariffs, which introduces higher fixed charges alongside flatter energy usage rates.
In some cases, this change may result in effective increases of up to 28% for certain low-usage tariffs, despite the lower average tariff adjustment. With this in mind, Eskom explained that the restructuring forms part of a broader move toward cost-reflective pricing aligned with NERSA’s regulatory methodology.
“Eskom’s costs do not increase in line with consumer price inflation (CPI), as key input costs, including primary energy, environmental compliance, infrastructure maintenance, and security, are influenced by factors beyond CPI.”
The utility also emphasised that consumer protection mechanisms remain in place.
“The Regulator also considers customer protection measures in its determinations. These include support mechanisms for poor residential customers such as Free Basic Electricity allocations and subsidies administered primarily through municipalities.”
Furthermore, Eskom added that the utility continues to monitor changing electricity consumption patterns — including the growth of rooftop solar installations — while also addressing challenges such as illegal connections and electricity theft, which place additional pressure on the system and ultimately increase costs for paying consumers.
Detailed pricing impacts for different customer categories are contained in NERSA’s draft schedule of standard tariffs, currently available on the regulator’s website, with the final tariff schedule expected to be published on Eskom’s website following regulatory approval.
Newcastillian News also asked Eskom whether electricity prices could decline in future once repair backlogs are cleared, generation reliability improves, and financial pressures ease.
Eskom explained that electricity tariffs in South Africa are not determined by Eskom alone, but through regulatory processes administered by NERSA.
“Electricity tariffs in South Africa are determined annually through regulatory processes administered by NERSA rather than unilaterally by Eskom. Tariff outcomes depend on approved allowable revenue requirements, which are influenced by factors such as operating costs, capital investment needs, primary energy expenses, environmental compliance obligations, debt servicing requirements, and system reliability investments.”
Although Eskom confirmed that improving operational performance and financial stability remain key priorities, it stated that future tariff outcomes depend on regulatory determinations and evolving cost drivers.
Eskom also noted that it does not publish projections for tariff decreases, explaining that pricing decisions remain subject to annual regulatory review.
The utility also added that Eskom is still in the process of recovering its efficient costs through the tariff structure, meaning that price reductions are neither projected nor anticipated at this stage.
Several ongoing cost pressures continue to influence electricity pricing, including the refurbishment of an ageing generation fleet, environmental compliance investments, global supply-chain inflation, security costs, grid expansion, and investment required to support reforms within the electricity supply industry.
NERSA recognises that many of these cost drivers do not move in line with CPI, while Eskom noted that it does not yet recover its full cost of capital, which is still being migrated into the tariff framework.
As South Africans continue to navigate mounting economic pressure, electricity prices remain one of the most significant costs facing both households and businesses.
Although programmes like Free Basic Electricity and municipal subsidies are meant to support vulnerable households, the above-inflation tariff increases and changes to the pricing structure could still leave many families and small businesses feeling the pressure as they try to make their monthly budgets work.
While regulatory safeguards such as Free Basic Electricity allocations and municipal subsidies exist to support vulnerable households, above-inflation tariff increases combined with structural pricing changes may place additional pressure on low-consumption users and small businesses.
The coming regulatory cycles will therefore be closely watched as policymakers attempt to balance utility sustainability, infrastructure investment, and consumer affordability in a rapidly evolving energy landscape.
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