City of Cape Town weighs legal options over electricity price increases

The City of Cape Town says it will assess its legal options after the National Energy Regulator of South Africa (Nersa) finalised its redetermination of allowable revenue for Eskom.

South Africans will be saddled with electricity price hikes of 8.76% in the 2026/27 financial year, effective from April 1, and 8.83% for the 2027/28 financial year.

The tariff increases had to be redetermined after there was an error in Nersa's calculations regarding Eskom's revenue. 

Eskom and Nersa then agreed to correct this and confirmed a settlement with Eskom with an amount of R54 billion mentioned. They approached the Gauteng High Court to have this settlement agreement made an order of the court but the court in December rejected the agreement and ordered that there be public consultation on the matter.

In its public consultation document, Nersa detailed an amount of R76 billion sparking fears that tariff increases could be much higher however the regulator has indicated that the approved allowable revenue remains at R54.7 billion.

“The impact on the Eskom price would be additional increases of 3.4% and 2.64%,respectively, resulting in an increase of 8.76% for 2026/27FY and 8.83% for 2027/28FY. The phased approach limits additional price impacts to single digit increases in 2026/27 and 2027/28, and avoids any retrospective adjustment for 2025/26, in line with the court judgment. It further reduces tariff volatility and demand erosion risk, and balances Eskom’s financial sustainability with customer affordability.” 

Nersa added that it had taken into account public comments received from a range of parties including Eskom, organised industry, agriculture, mining, business groupings, civil society organisations, municipalities, and individual members of the public.

The tariff increases which come into effect in April 2026 are for municipalities and direct Eskom customers. For customers who are supplied electricity by municipalities, the tariff increases could be even higher as municipalities decide on the hikes based on their budgetary considerations. 

The electricity tariff hikes for consumers supplied by municipalities will come into effect on July 1, 2026.

The City said Nersa should have scrapped the hike entirely pending a full redetermination of Eskom’s multi-year price application. 

Mayoral committee member for energy, Xanthea Limberg, said Nersa should have completed a thorough and error-free assessment of Eskom’s financials. 

“It is now public knowledge that Eskom is in a better financial position than forecasted to Nersa, based on actual interim Eskom financial results. In fact, Eskom is already generating substantial profits even under the lower originally approved tariffs. This is strong evidence that the public is being unfairly burdened with this extra Eskom hike, over 50% higher than originally permitted,” Limberg said. 

“The City’s submission opposing the hike pointed out that – beyond Nersa’s error of failing to take asset depreciation into account – there are likely many more inaccuracies with Eskom’s application, including incorrect financial performance forecasts and outdated asset valuations. "Eskom’s improved financial performance can only be rationally explained by a combination of higher electricity sales or lower operational costs than what was forecasted to Nersa,” Limberg said.

She said the City will now assess its legal options following Nersa’s decision.  

“Under Section 15 (1) of the Energy Regulation Act, Eskom is not permitted to generate excessive margins on electricity sales or make consumers cover the costs of inefficient operations,” Limberg added.

Cape Times