The National Energy Regulator of South Africa (NERSA) would like to provide factual and correct information regarding the settlement agreement with Eskom on the Sixth Multi-Year Price Determination (MYPD6) revenue decision for the 2025/26, 2026/27 and 2027/28 financial years, which has resulted in a R54 billion settlement with Eskom, as follows:
On 30 January 2025, the Energy Regulator made the following decisions on Eskom’s allowable revenue application:
- Approved revenues of R384 610 million for the 2025/26 financial year, which translates to a percentage increase of 12.74%.
- Approved revenues of R409 524 million for the 2026/27 financial year, which translates to a percentage increase of 5.36%.
- Approved revenues of R436 860 million for the 2027/28 financial year, translating to a percentage increase of 6.19%.
On 2 July 2025, Eskom lodged a judicial review of the Energy Regulator’s decision in line with section 10(3) of the National Energy Regulator Act of 2004. Eskom sought to set aside the Energy Regulator’s decision, citing a revenue shortfall of R107 billion, which is the difference between what Eskom applied for and what the Energy Regulator approved. Eskom challenges the Energy Regulator’s decision only in respect of a revenue shortfall that occurred in the generation business due to a data input error, which mainly affected depreciation and the Regulatory Asset Base (RAB) value for the generation business.
The reliefs Eskom sought through the judicial review were assessed to evaluate the validity of Eskom’s claims and to determine whether NERSA could mount a sustainable opposition to the grounds of the review application. NERSA also considered Eskom’s requested reliefs in relation to their potential impact on customers and the broader economy, considering the public interest. Drawing on the findings from the founding papers and relevant case law on administrative decision reviews, NERSA decided not to oppose the application. However, this decision did not imply acceptance of all the reliefs Eskom requested in its review application.
As is common in litigation, parties may choose to engage in negotiations rather than proceed with full legal proceedings when there is a genuine intent to settle. After reviewing the founding papers and established case law, both parties decided to engage in settlement negotiations to amicably resolve the issues in a manner that would not compromise the interests of Eskom and its customers. NERSA approached these discussions by carefully considering Eskom’s application, the decisions made and the issues raised in the court documents. This approach allowed NERSA to engage objectively while maintaining regulatory independence and adhering to the principles governing price determination.
Following an assessment of Eskom’s review application, NERSA identified errors that resulted in underestimation in certain components of Eskom’s application, specifically an error on the depreciation amount captured in Table 14 of the decision and reasons for decision document compared to Table 1 of the RAB section. Consequently, this resulted in a shortfall of R14 514 million. The other error relates to an asset transferred for commercial operation, where the cumulative balance principle (rolling forward) was not applied for the generation business, which affected the 2026/27 and 2027/28 financial years.
Notwithstanding this error, it must be stated that the cumulative balances principle was properly applied for transmission and distribution businesses. After rectifying these errors, NERSA concluded that Eskom was entitled to an additional R54 billion over the three-year MYPD6 period, an amount substantially lower than Eskom’s original claim of R107 billion. The parties settled for R54 billion on 30 July 2025. This means that South Africans now face additional tariff hikes of 3.4% in 2026/27 and 2.64% in 2027/28.
It is important to note that, as this is a judicial review consideration, NERSA cannot undertake the public participation process normally followed when considering applications. The settlement between Eskom and NERSA can only be effective after it has been made an order of the court, which has not yet been secured, and which has delayed the release of this media statement to avoid pre-empting the decision of the courts.
The disbursement of this R54 billion settlement amount will be phased as follows:
- R12 000 million will be recovered during the 2026/27 financial year.
- R23 013 million will be recovered during the 2027/28 financial year.
- The balance will be addressed in the next MYPD determination cycle.
There will be no additional price increase for the current financial year (2025/26 FY). However, the settlement agreement will have the following estimated price impact for the 2026/27 and 2027/28 financial years:
- For the 2026/27 FY, the additional increase will be 3.4%, resulting in a price increase of 8.76%.
- For the 2027/28 FY, the additional increase will be 2.64%, resulting in a price increase of 8.83%.
The above figures will be subject to adjustment through the RCA process. The following are key considerations for the settlement agreement:
- The settlement avoids prolonged litigation, enabling both NERSA and Eskom to focus on their core mandates.
- The phased implementation of the settlement mitigates immediate tariff shocks to consumers.
- NERSA remains committed to balancing Eskom’s financial sustainability with the need to protect electricity consumers from undue price increases.
The decision reflects the Energy Regulator’s ability to correct technical underestimations while maintaining transparency and accountability.
‘This settlement agreement represents a fair and balanced resolution. It safeguards the interests of South African electricity consumers while addressing Eskom’s legitimate revenue requirements to ensure operational sustainability – both achieved by the pragmatic settlement agreement. The Energy Regulator will continue to apply rigorous regulatory oversight to guarantee that all revenue allowances are efficiently utilised for the benefit of the electricity supply industry and the economy at large,’ said Ms Nomfundo Maseti, NERSA Full-Time Regulator Member Responsible for Electricity Regulation.
Source: NERSA
