Nersa's blunder: crisis for energy sector

TARIFF TURMOIL

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SOUTH Africa's energy sector is the lifeblood of the economy; slight changes in electricity prices impact business and have a domino-like impact on prices, supply and demand of almost all goods.

The National Energy Regulator of South Africa (Nersa), a post-apartheid entity, was created by consolidating the Electricity Control Board, the Gas Regulator and the Pipelines Regulatory Authority. It is the independent regulatory authority mandated to govern the South African energy industry in accordance with the country’s laws. Its core function is to balance the interests of energy producers, distributors, and consumers to ensure a sustainable and efficient energy sector for South Africa.

The recent revelation was that Nersa made a catastrophic multibillion-rand error in its tariff calculation for Eskom resulting in a spike in electricity prices for households and businesses. This will likely result in an increase in inflation and negatively impact all South Africans. There have been calls for Nersa to reopen Eskom’s tariff determination for the current and next two financial years, given the regulator's R54-billion error that is expected to result in further tariff increases over the period.

Nersa gave a green light for Eskom to introduce several double-digit price increases over the past two decades, with recent reports confirming that the average price rose a multiple of 8 from 19.9c/kWh to 165.43c/kWh between 2008 and 2024.

From a financial perspective, this error is multifaceted in its damage: