City of Cape Town challenges Nersa's proposed 100% increase in Eskom tariffs

The City of Cape Town has warned that electricity consumers could be forced to shoulder steep tariff hikes to correct a regulatory error, despite Eskom being in a stronger financial position than originally forecast.

The City has called on the National Energy Regulator of South Africa (Nersa) to immediately halt plans that could allow Eskom to impose additional increases of up to 10.5% a year for the next two years — potentially more than double the initially approved 5% to 6%.

Nersa’s proposal follows a court ruling that found a calculation error in Eskom’s original tariff application, after asset depreciation was not properly accounted for in the regulator’s earlier decision.

Mayor Geordin Hill-Lewis said the proposed correction was based on flawed figures and risked unfairly transferring the consequences of regulatory mistakes onto households and businesses.

“We call on Nersa to immediately cancel plans to permit up to a 100% additional increase for Eskom over the next two years,” Hill-Lewis said in the City’s submission to the regulator. “Nersa should instead complete a proper, error-free assessment of Eskom financials.”

The Mayor said interim financial results show Eskom has generated substantial profits even under the lower tariffs already approved, raising serious questions about the need for further steep increases.

“This is strong evidence that the public is being unfairly asked to absorb Eskom hikes of up to 10.5% annually, which could end up being more than double the initially approved increases,” he said.

According to the City, Eskom’s improved financial performance can only reasonably be explained by higher-than-expected electricity sales, lower operational costs, or a combination of both — factors which, it argues, were not properly tested as part of Nersa’s redetermination process.

The City’s submission states that beyond the acknowledged calculation error, Eskom’s tariff application contains several other inaccuracies, including outdated asset valuations that are critical in determining revenue needs without overcharging consumers.

“Nersa’s redetermination process calls into question the credibility of Eskom’s tariff application, which by Nersa’s own admission contains data with underlying deficiencies,” said the City’s Mayco  Member for Energy, Xanthea Limberg.

Limberg said it was essential that all data submitted by Eskom be accurate and independently verified, given the cost-of-living implications for residents and businesses.

Under Section 15 of the Energy Regulation Act, Eskom is not permitted to earn excessive margins or recover the costs of inefficient operations through tariffs.

The Green Connection has formally called on the National Energy Regulator of South Africa (NERSA) to reject further Eskom electricity tariff increases and rising power prices under the Sixth Multi Year Price Determination (MYPD6).

The Green Connection’s Programmes and Advocacy Lead, Lisa Makaula said: “NERSA is bound by the environmental obligations set out in section 2 of the National Environmental Management Act (NEMA). These principles require that social, economic and environmental impacts are properly considered, that decisions are taken openly, and that access to information is guaranteed. These are not optional extras – they are legal obligations.”

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