Major power users call on Nersa to reopen Eskom tariff determination

The country’s largest electricity users have called upon the energy regulator Nersa to re-open Eskom’s tariff determination for the current and next two financial years (MYPD6), in light of the regulator’s R54 billion mistake that will result in further, unexpected tariff increases over the period.

The Energy Intensive Users Group of Southern Africa (EIUG) expressed its shock in a statement regarding the settlement Nersa reached with Eskom to recover the amount from consumers. “It is not only about the quantum of the additional revenue, but also about a lack of transparency on a decision that has fundamental consequences for consumers who have to bear this settlement,” the organisation stated.

Nersa only came clean about the matter, after Moneyweb reported on it and remains quiet about an earlier R40 billion settlement which was made an order of the court in May – following other errors it made.

Read:
Nersa confirms R54bn secret settlement with Eskom
Nersa’s mistakes will hit you hard
Eskom wants 36% more out of your pocket [Jun 2024]

The EIUG’s call comes as the parliamentary portfolio committee on electricity and energy has resolved to hold Nersa to account on 10 September.

This follows a request by Kevin Mileham, DA parliamentary spokesperson on electricity and energy, for the chairman of the portfolio committee to convene an urgent inquiry into Nersa’s internal processes and its fitness to regulate the energy sector, in light of Nersa’s admission regarding the latest settlement.

The Organisation Undoing Tax Abuse (Outa) is in the meantime preparing an application to intervene in the court hearing aimed at making the settlement a court order. “We will write to Eskom and Nersa to ask for an undertaking to keep the settlement in abeyance pending our application to intervene,” Advocate Stefanie Fick, head of accountability at Outa, told Moneyweb.

Civil rights group AfriForum is also consulting its legal team on the matter.

AfriForum questions the constitutionality of the secret settlement, saying it “may undermine the principles of transparency, accountability and the protection of consumers, which Nersa is constitutionally obligated to uphold.”

The EIUG says electricity prices have consistently posed a significant challenge for its members, particularly since Eskom began implementing frequent double-digit price increases over the past two decades, with the average price rising from 19.9c/kWh to 165.43c/kWh between 2008 and 2024 – an eight-fold increase.

The organisation says Eskom’s total electricity sales dropped by nearly 20% over the same period, and sales from large power users (LPUs) by 23%, while the number of LPU customers declined by 709 (17%). Affordability was a big factor in this, according to the EIUG.

“This period has been characterised not only by rapidly increasing prices but also by high volatility and an uncertain price trajectory, which complicates investment decisions and general production planning for our members,” the EIUG says.

“Given that some intensive electricity consumers have electricity costs constituting up to 40% of their production costs, the price increases volatility, and uncertainty are major factors contributing to some operations shutting down and to low investment levels in the South African market.

“The decision by Nersa in January 2025 on MYPD6 brought a glimmer of hope that, as a country, we are moving away from high increases and uncertainty, particularly because Eskom and their shareholder had indicated acceptance of the Nersa MYPD6 decision.

“However, this behind-close-doors settlement of R54 billion is a complete shock to consumers.”

Read:
Nersa approves cheaper electricity for Amsa
Consumers may cough up billions more, after Nersa’s closed-door Eskom deal

The organisation argues that the earlier R40 billion settlement and further clawbacks that have been approved but not yet implemented may lead to additional increases.

Due to Eskom’s tariff restructuring, some of its members have already seen increases of 19% this year, as opposed to the average increase of 12.74%, the EIUG says.

“With these additional costs, their situation will get even worse.” Given all these uncertainties, the organisation calls for the reopening of the tariff determination as it may “reset the base and afford the industry a starting point for a predictable price path.”

Electricity pricing expert Deon Conradie is, however, sceptical about the possibility of reopening.

He says while the pricing methodology does provide for reopening, this is only in the context of the Regulatory Clearing Account (RCA).

The RCA is a clawback mechanism to mitigate against over- or under-recovery, should the assumptions on which the determination is based differ materially from the actual outcome.

Conradie says if the RCA balance is more than 10% of Eskom’s allowable revenue for any specific year, the original determination must be reopened. Nersa is only authorised to reopen under these limited circumstances. The only other recourse would be through the courts, though it is uncertain whether sufficient grounds exist for success, Conradie says.

Read: Eskom’s pricing proves we need competitive markets now

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