The urgent need to reform SA’s electricity tariff system

ON AUGUST 27, 2025, the National Energy Regulator of South Africa (Nersa) announced that it had reached an out-of-court settlement with Eskom after errors were made in determining revenue for the current and following two financial years.

- THOMAS GARNER

This triggered sharp responses from across the industry.

Stephen Grootes described it as “the electricity pricing farce’, while Business Leadership South Africa CEO Busisiwe Mavuso said it had the “farcical effect of allowing Eskom to charge tomorrow's customers for yesterday's costs.” Minister of Electricity and Energy Kgosientsho Ramakgopa responded that government intends to change the entire system. The problem is that this recognition comes too late.

It is evident that the Multi-Year Price Determination (MYPD) methodology is outdated and not fit for purpose. Designed by Nersa in the early 2000s, it functioned reasonably in a system with a single supplier and no competition. Its underlying philosophy was to regulate tariffs to keep the monopoly utility in check. At its core, the methodology rests on two components: revenue and a regulated asset base.

It allows Eskom to recover revenue, to cover prudently managed costs, and a return on its asset base.

But the past decade has undermined confidence that costs are being managed prudently.

As André de Ruyter highlighted in his account of his three years inside Eskom, corruption and mismanagement have eroded trust. The construction of Medupi, Kusile, and Ingula ran massively over budget, while the true costs of maintaining and refurbishing Koeberg remain opaque.