The Energy Intensive Users Group (EIUG) has called for a reopening of the most recent electricity tariff determination, arguing that a R54-billion behind-closed-doors settlement between the regulator and Eskom has created fresh price-path uncertainty.

This uncertainty was also being amplified by the fact that the liquidation schedule for several regulatory clearing account (RCA) allowances, also running into billions of rands, had not yet been finalised. These RCA approvals entitle Eskom to claw back revenue foregone in previous periods in future tariffs.

The EIUG is made up of South Africa’s largest industrial and mining companies, which collectively consume about 40% of the country’s electricity, while employing more than 650 000 people in entities that collectively generate 20% of South Africa’s GDP.

In some cases, electricity costs constitute up to 40% of their production costs, and tariff hikes and volatility over the past two decades have been major factors contributing to some operations shutting down or cancelling investments. Several large resources firms have also initiated retrenchment processes in recent weeks, especially in the ferrochrome, steel and iron-ore sectors.

The EIUG noted an eightfold rise in Eskom’s average electricity price from 2008 to 2024, from 19.9c/kWh to 165.43c/kWh, while electricity sales dropped by nearly 20% from 224 TWh to 183 TWh. Demand from large industrial and mining companies fell by 23% over the same period, while the number of customers in the sector declined by 709, or 17%.

The immediate trigger for EIUG’s call for a reopener, however, is the shock out-of-court settlement between Eskom and the National Energy Regulator of South Africa (Nersa), which acknowledged errors in its calculation of tariffs for the 2025/26, 2026/27 and 2027/28 financial years under the sixth multiyear price determination, or MYPD6.

The first R35-billion of the settlement amount would be liquidated in the latter two financial years, resulting in an electricity tariff hike of 8.76% on April 1 next year instead of the 5.36% approved in January, and 8.83% in the following year, instead of 6.19%.

The balance of the amount would be recovered by Eskom in subsequent financial years, but no liquidation schedule has been provided by the regulator.

On April 1 this year, electricity tariffs rose by 12.74% in line with the MYPD6 determination.

However, the EIUG highlighted several RCA approvals, some also the result of legal action against Nersa by Eskom, which could result in even bigger hikes over the coming years.

This included the RCA balance of R8.1-billion already declared for the 2021/22 financial year, with Eskom in the process of finalising its 2023/24 RCA application.

The EIUG noted that both the R54-billion settlement and the outstanding RCAs would increase the tariff by more than 4% over the original MYPD6 decision, and were thus sufficient to reopen the MYPD6.

“Such a review may reset the base and afford the industry a starting point for a predictable price path,” EIUG CEO Fanele Mondi said, arguing that the MYPD6 decision of January had “brought a glimmer of hope” that the country was moving away from high increases and uncertainty.

He also raised serious concern over the way Nersa had gone about reaching the settlement with Eskom.

“[This] behind close doors settlement of R54-billion is a complete shock to consumers.

“It is not only about the quantum of the additional revenue but also about a lack of transparency on a decision that has fundamental consequences for consumers who have to bear this settlement,” Mondi said.

He expressed particular concern that the implementation period had not been consulted, despite its material consequences for customer that were already facing serious financial constraints.

“Making matters even worse is that some operations already see as high as 19% increase against the 12.74% Nersa decision [for the 2025/26 financial year] due to the changes in the Retail Tariff Plan.”

Besides reopening the MYPD6, the EIUG wants the regulator to consider reviewing the MYPD pricing methodology or its implementation, arguing that it had not succeeded in bringing price stability and predictability.

“Nersa must also explain the basis of its decision and commit to consistency of decision-making in future.

“On the other hand, Eskom must ensure ongoing efficiency improvements in their operations to reduce costs,” the EIUG said.

Mondi welcomed the proposed review of the electricity pricing policy as announced by Electricity and Energy Minister Dr Kgosientsho Ramokgopa.

“We stand ready to contribute to this review once it is open for public consultation.”