- NERSA has published the reasons for its decision to redetermine Eskom’s Generation Regulatory Asset Base following a High Court ruling.
- The regulator approved an additional allowable revenue of R54.734 billion after reassessing Eskom’s generation assets using the existing evidence and the approved MYPD4 methodology.
- The decision follows a public consultation process and confirms that no retrospective tariff adjustment will apply for the 2025/26 financial year.
The National Energy Regulator of South Africa (NERSA) has published the reasons for its decision to redetermine Eskom’s Generation Regulatory Asset Base (RAB), following approval by the Energy Regulator at its meeting on 10 July 2026.
The redetermination was undertaken in response to a High Court judgment issued on 21 December 2025, which reviewed and set aside the regulator’s previous decision and ordered NERSA to reconsider the matter through a lawful, transparent and procedurally fair process.
Following the review, the Energy Regulator approved an additional allowable revenue of R54.734 billion for Eskom on 7 February 2026.
The court directed NERSA to ensure that the redetermination was lawful, rational and transparent, while providing stakeholders with an opportunity to participate. In response, the regulator conducted a public consultation process in line with the National Energy Regulator Act and the Promotion of Administrative Justice Act.
Written submissions were received from Eskom, industry associations, the agriculture and mining sectors, business organisations, municipalities, civil society groups and members of the public.
Stakeholders raised a range of technical, legal and economic issues, including asset valuation, the evidence supporting the Generation RAB, capital expenditure related to outages and technical plans, transfers to commercial operation, work under construction, affordability, the economic impact of tariff increases, regulatory transparency and predictability.
NERSA said it considered all submissions before reaching its decision, with the published reasons reflecting a balanced assessment within the framework of the applicable legislation, the approved methodology and the evidence before the regulator.
The regulator emphasised that the exercise was not a new tariff determination but a reconsideration of its original MYPD6 decision issued on 30 January 2025. The purpose was to reassess Eskom’s Generation RAB and the associated allowable revenue using the same evidentiary record while applying the approved MYPD4 methodology consistently and transparently.
NERSA reviewed each component of the Generation RAB individually, taking into account Eskom’s application, stakeholder submissions, the requirements of the MYPD4 methodology and the High Court’s directives.
Under the redetermination, the regulator approved the depreciated replacement cost approach after benchmarking overnight construction cost assumptions against international ranges.
Transfers to commercial operation were approved to avoid regulatory inconsistency and revenue under recovery, while expenditure that did not create new generation capacity and maintenance related work under construction was excluded.
Work under construction was limited to projects that create additional generation capacity. Outage related and maintenance expenditure was excluded to prevent double recovery.
Coal inventory included in net working capital was limited to 42 days in line with Eskom’s stockholding policy. Excess stockpiles resulting from construction delays were excluded to ensure customers are not required to fund inefficiencies.
Asset purchases were approved using trend analysis as a benchmarking tool, supported by used and usable criteria and Regulatory Clearing Account safeguards. Depreciation was also approved in line with Section 9 of the MYPD4 methodology and the depreciated replacement cost approach.
NERSA said the redetermination was confined to the Generation RAB, depreciation and the resulting impact on allowable revenue. The regulator confirmed that no retrospective adjustment will be applied to electricity tariffs for the 2025/26 financial year and said it had consistently applied the approved methodology while exercising its independent regulatory judgement.
Author: Bryan Groenendaal
