Meta Description: The National Energy Regulator of South Africa (Nersa) is launching a market inquiry in 2025 to study the impact of Eskom’s restructured generation charges and municipal electricity tariffs. Learn about the objectives, consumer effects, and policy implications.
Introduction
South Africa’s electricity sector continues to be under intense scrutiny. With rising tariffs, financial pressure on households, and growing dissatisfaction from consumers, the National Energy Regulator of South Africa (Nersa) has announced a market inquiry into the impact of electricity tariff changes in 2025.
This inquiry will look at the splitting of Eskom’s generation charge into multiple components and the effect of municipal fixed charges on households and businesses. The regulator hopes to better understand how these pricing changes affect affordability, transparency, and competitiveness across the energy market.
This article explores why the inquiry is happening, what it will focus on, and what the implications are for consumers, municipalities, and the broader economy.
Why the Inquiry is Necessary
Electricity tariffs have become one of the most contentious economic issues in South Africa. Over the past decade, rising costs have fueled widespread public dissatisfaction and even protests in several municipalities.
Several factors highlight the urgency of this review:
- High electricity costs: Consumers, including middle- and upper-income households, have described tariffs as unaffordable.
- Policy missteps: Nersa admitted to a R54 billion error in Eskom’s tariff determination, which will need to be recovered through additional increases.
- Market distortions: Disputes have emerged between industrial users, municipalities, and Nersa itself over fairness and compliance.
- Legal challenges: Municipalities like Cape Town have taken Nersa’s approvals on judicial review, creating uncertainty in tariff-setting.
In short, the inquiry is not only about numbers—it is about trust, transparency, and fairness in South Africa’s energy pricing system.
Key Objectives of the Market Inquiry
Nersa has published detailed objectives for the 2025 inquiry. These goals reflect both consumer protection and regulatory oversight.
| Objective | Explanation |
|---|---|
| Ensuring compliance | Verify if licensees (Eskom & municipalities) adhere to approved tariffs. |
| Protecting consumers | Safeguard customers from excessive or unauthorized charges. |
| Promoting transparency | Simplify tariff structures and improve public understanding. |
| Assessing cost-reflectivity | Ensure tariffs are based on actual costs and justified by service delivery. |
| Identifying market failures | Detect practices that distort competition or harm consumer interests. |
| Improving oversight | Strengthen regulatory monitoring and enforcement. |
| Balancing stakeholder needs | Align consumer, municipal, and business interests fairly. |
| Supporting policy goals | Ensure tariffs align with sustainability and affordability objectives. |
These objectives are designed to address systemic weaknesses and rebuild confidence in South Africa’s electricity pricing.
Useful Links:
Eskom’s Tariff Restructuring
Earlier in 2025, Eskom implemented new tariff structures as part of its Retail Tariff Plan, approved by Nersa. This included splitting the generation charge into three components:
| Tariff Component | Description |
|---|---|
| Generation capacity charge | A fixed fee based on the cost of maintaining generation capacity. |
| Legacy charge | Costs linked to historical obligations and debt repayments. |
| Variable energy charge | Cost per unit of electricity consumed (kWh). |
The aim was to make tariffs more cost-reflective and reduce cross-subsidisation, where smaller users historically carried a heavier burden compared to large industrial customers.
Impact on Consumers
- Small-volume residential users: Faced above-average increases, sparking concern over affordability.
- Large power users: Benefited from some relief, as cross-subsidies were reduced.
- Revenue neutrality assumption: Changes were expected to be revenue-neutral, but real impacts may differ and will be corrected through the Regulatory Clearing Account.
The inquiry will examine whether these assumptions held true and how the new tariff structures are reshaping affordability.
Municipal Tariffs: A Source of Discontent
Beyond Eskom, municipalities play a major role in electricity pricing. Municipalities purchase electricity from Eskom and resell it to residents, often at a markup.
Nersa has noted several problems in this space:
- Non-compliance: Some municipalities implement tariffs not approved by Nersa.
- Legal disputes: Cape Town and other metros have challenged Nersa approvals in court.
- Council approval issues: Some municipalities lacked proper council approval before implementing tariffs.
- Unlawful deviations: Ekurhuleni and others have implemented tariffs inconsistent with Nersa’s guidelines.
Table: Common Issues in Municipal Tariffs
| Issue | Example |
|---|---|
| Council approval missing | Naledi and Mogale City municipalities implemented tariffs without council sign-off. |
| Court disputes | Cape Town challenged Nersa’s tariff approvals for 2023 and 2024. |
| Deviations from approvals | Ekurhuleni implemented tariffs inconsistent with Nersa’s approval. |
| Cost-reflective requirements | Municipalities now pressured to separate fixed and variable costs. |
The inquiry aims to gauge the impact of municipal fixed charges on different categories of consumers and ensure municipalities comply with legal and regulatory requirements.
Stakeholder Reactions
The announcement has already triggered responses from different groups:
- Electricity Intensive User Group (EIUG): Called for reopening of Eskom’s tariff determination, citing competitiveness concerns for industries like mining and smelting.
- Middle-class households: Raised affordability concerns, especially with compounded increases due to Nersa’s R54 billion error.
- Political parties: The Democratic Alliance flagged irregularities in certain municipalities.
- Civil society: Protests highlight growing frustration among low-income communities.
These reactions underscore the high stakes of electricity pricing—not only for economics but also for social stability.
Policy Context
The inquiry also aligns with broader government efforts. Dr. Kgosientsho Ramokgopa, Minister of Electricity and Energy, has confirmed that his department is reviewing the Electricity Pricing Policy (EPP). Public consultations are expected in early 2026.
The goal is to balance:
- Affordability: Protecting vulnerable consumers.
- Sustainability: Ensuring Eskom and municipalities remain financially viable.
- Competitiveness: Keeping industrial users globally competitive.
- Transition: Supporting South Africa’s long-term move toward renewable energy.
Expected Outcomes
If successful, the inquiry could bring:
- Clearer tariff structures – making bills easier to understand.
- Better regulatory compliance – reducing disputes between municipalities, Eskom, and Nersa.
- More equitable distribution of costs – balancing the burden between households and industries.
- Policy reforms – aligning electricity pricing with South Africa’s sustainability agenda.
- Consumer relief – potentially avoiding unauthorised or excessive charges.
However, outcomes will depend on the quality of stakeholder engagement and the regulator’s ability to enforce changes effectively.
What Consumers Should Know
- Public Participation: Nersa will invite public input, giving consumers and businesses a chance to voice their concerns.
- Tariff Transparency: Expect clearer breakdowns in future electricity bills, showing fixed and variable charges.
- Legal Oversight: Court cases involving municipalities like Cape Town could reshape how tariffs are approved.
- Future Adjustments: Even if tariffs rise, adjustments may improve fairness across user groups.
Conclusion
The 2025 Nersa market inquiry into electricity tariffs comes at a critical moment for South Africa. With households struggling, industries demanding relief, and municipalities under scrutiny, this review could reshape how electricity is priced for years to come.
By examining Eskom’s tariff restructuring and municipal pricing practices, the regulator aims to restore trust, ensure compliance, and promote affordability in the energy market.
Consumers, businesses, and municipalities alike should watch this process closely, as its outcomes will directly impact both household budgets and the country’s economic competitiveness.
