Eskom to implement additional 8.8% price hikes in 2026 and 2027
Eskom is making progress on its reform agenda and turn around its generation performance, but this looks like it will come at a great cost for South African consumers and businesses.
Following heightened load shedding in 2023 and 2024, Eskom has kept load shedding at bay for close to a year.
This comes amidst lower demand from industrial users, greater renewable energy uptake, and structural improvements at Eskom.
Roy Havemann from the Bureau for Economic Research (BER) noted that Eskom is starting to see the results of its prior reforms.
The state-owned utility has seen its energy availability factor (EAF) improve markedly to around 75%, mainly due to lower unplanned outages.
Havemann said the improvement indicates that Eskom’s maintenance plan might be paying off.
Eskom itself noted that unplanned outages were reduced from over 13,000MW entering the winter period to just over 10,000MW in August. This sometimes dropped as low as 7,000MW.
It added that EAF reached 66% in August and has improved 10% year-on-year, with 38 units over operating at an EAF of 80%.
Eskom noted that diesel usage has also steadily declined, falling from around 16.02% load factor in April to just 1.84% in August—well below the allowable limit of 6% set by Nersa.
The utility also does not expect any further load shedding in the coming summer and believes it provides a blueprint for turning around struggling state-owned companies.
Despite the performance improvement, Havemann is critical of the recent news that Eskom will be increasing prices further.
This joins a chorus of critics speaking out against the further price pain that will be raining down on energy users in the coming years.
Other problems still remain
The National Energy Regulator of South Africa (NERSA) recently admitted to errors that will allow Eskom to recover a further R54 billion through price hikes.
Eskom and NERSA reached an out-of-court settlement for the amount after Eskom raised concerns over the Sixth Multi-Year Price Determination (MYPD6).
NERSA originally approved 5.36% and 6.19% price increases for 2026 and 2027, respectively.
However, it admitted to errors in its depreciation and asset valuation, agreeing in the settlement that Eskom could raise the additional R54 billion, and hike prices by 8.8% in 2026 and 2027.
While Nersa and Eskom have argued that the amounts and the price hikes are what the utility is entitled to by law, many have hit back at the state company for placing additional burden on energy users.
One of the biggest points of criticism is that Eskom is making South Africa at large pay for its decades of inefficient operations, where widespread corruption, a bloated workforce and excessive diesel use have kept its costs high.
This makes its arguments for “cost-reflective” tariffs a farce, while the current methodology used to regulate its price hikes in no way incentivises the utility to be more measured.
As it stands, the increased electricity costs are set to bleed into other expenses and will likely place upward pressure on inflation over the medium term.
“Electricity tariffs feed directly into the CPI basket, where administered prices already make up a sizable share,” said Havemann.
“The revised hikes of about 8.8% in 2026/27 and 2027/28 instead of 5%–6% mean electricity will be one of the fastest-rising components of inflation.”
This will have broader second-round impacts across the economy, which has already had to carry the burden of electricity price hikes far outstripping inflation.
Specifically, operating costs for businesses will increase further, especially in energy-intensive sectors like mining, manufacturing and retail.
These costs will then be passed onto consumers, amplifying inflationary pressures beyond the direct electricity component.
Higher electricity expenditure will reduce household disposable income, impacting spending patterns.
The settlement may add 0.2 to 0.4% points to headline inflation in the affected years, depending on how businesses absorb the cost.
For the Reserve Bank, the high administered price inflation is a major challenge, bringing down inflation to the new 3% target, particularly as energy price increases coincide with food or fuel price shocks.