South Africa’s Eskom gets $3.4 billion boost from revised electricity tariffs

South Africa’s state-owned power utility, Eskom Holdings SOC Ltd., is set to receive an additional R34.7 billion ($3.4 billion) in revenue over three years following a series of pricing errors and a failed private settlement attempt.

The National Energy Regulator of South Africa (Nersa) said Sunday that Eskom can increase electricity tariffs by up to 8.3 percent annually through the 2028 financial year, revising its previous revenue allowance for the utility and providing a notable boost to its financial position amid ongoing operational challenges.

Court orders Nersa recalculate tariffs

The adjustment stems from a court ruling that found Nersa had misapplied its methodology when calculating Eskom’s allowable revenue for the 2023 financial year. The initial error involved the treatment of depreciation and return on assets, which led to a lower-than-justified tariff approval. Eskom challenged the decision in court, and the Supreme Court of Appeal sided with the utility, ordering Nersa to recalculate tariffs using the correct methodology.

The ruling now translates into a significant financial uplift for the utility. For consumers, the decision means higher electricity bills, adding to the impact of previous increases. Nersa said the revised tariffs aim to balance Eskom’s financial sustainability with customer affordability. While details on the recovery mechanism are still being finalized, the increase is expected to be phased in over time.

Tariff correction to ease debt pressure

The correction underscores the complex relationship between Eskom, its regulator, and the public, who ultimately bear the cost of electricity adjustments. Eskom has repeatedly argued for cost-reflective tariffs, citing its heavy debt burden and the need for ongoing investment in infrastructure maintenance and expansion.

The additional revenue is intended to ease Eskom’s financial pressures, which include a large debt load and the high cost of maintaining aging power plants. The utility has struggled for years to remain financially viable, often relying on government bailouts. This $3.4 billion boost could allow for critical investments in plant refurbishment and resources to stabilize the national grid, though critics question whether higher revenue will improve service delivery.

The tariff error also raises broader questions about Nersa’s regulatory framework and its ability to assess the needs of state-owned enterprises accurately. While the court ruling corrected the immediate mistake, it highlights the challenges of setting tariffs in a volatile economy and the importance of precise oversight.

Eskom sees profit, plans energy upgrade

Looking ahead, Eskom faces pressure to use this financial injection to improve operations, reduce load-shedding, and transition toward a more sustainable energy mix. Eskom’s prices will rise 8.76 percent in April 2026 and 8.83 percent in April 2027, higher than the previous 5.36 percent and 6.19 percent rates. The utility giant, which supplies most of Africa’s largest economy, made its first full-year profit in eight years last year, supported by a multi-year government bailout and improved performance at its coal-fired power stations.

The high court’s decision to reject the prior settlement in December and require a fresh determination from Nersa after public input reflects the stakes involved. While the $3.4 billion provides relief, Eskom’s long-term challenges, including governance, infrastructure, and operational efficiency, remain, making its next moves crucial for South Africa’s energy future.