From NERSA's regulatory oversight to municipal tariff applications, discover the process behind South Africa's electricity pricing system and what it means for your household and business.

Electricity is one of the largest monthly expenses for South African households and businesses. Every year, South Africans are informed of electricity tariff increases, often leading to understandable frustration and questions about why prices continue to rise. But who actually determines these increases? Can Eskom simply decide what electricity should cost? And why do neighbouring municipalities sometimes charge different rates?

Understanding how South Africa's electricity pricing system works is essential for consumers, businesses and investors alike. Behind every electricity bill is a structured regulatory process involving multiple organisations, each with its own responsibilities. By understanding this process, consumers can better appreciate how electricity prices are determined and why they differ across the country.

What is NERSA?

The National Energy Regulator of South Africa (NERSA) is an independent regulatory authority established under the National Energy Regulator Act of 2004. Its responsibility is to regulate South Africa's electricity, piped gas and petroleum pipeline industries while balancing the interests of consumers with the long-term sustainability of the country's energy sector.

NERSA does not generate or distribute electricity. Instead, it serves as South Africa's independent energy regulator, ensuring that electricity tariffs are fair, transparent and financially justifiable.

Each year, NERSA carefully reviews tariff applications submitted by electricity providers before deciding whether proposed increases should be approved, adjusted or rejected.

Can Eskom Decide Electricity Prices?

One of the biggest misconceptions among consumers is that Eskom simply decides how much electricity should cost.

In reality, Eskom cannot increase electricity prices on its own.

Instead, Eskom must prepare a comprehensive tariff application detailing its expected operating costs, maintenance requirements, infrastructure investment plans, revenue requirements and future electricity demand. This application is then submitted to NERSA for independent review.

NERSA evaluates whether the requested increase is justified by considering various factors, including operating costs, infrastructure needs, economic conditions and the potential impact on consumers. Public participation also forms part of this process, allowing businesses, municipalities and members of the public to provide comments before a final decision is made.

Historically, Eskom has frequently received tariff increases that were lower than the amounts it originally requested, demonstrating NERSA's role in protecting consumers while ensuring that the electricity sector remains financially sustainable.

Why Does Every Municipality Have Its Own Electricity Tariff?

One question many South Africans ask is:

"If Eskom supplies electricity across the country, why doesn't everyone pay the same electricity price?"

The answer lies in how electricity reaches your home or business.

Although Eskom generates electricity and supplies many customers directly, millions of South Africans receive their electricity through their local municipality rather than directly from Eskom.

Municipalities purchase electricity in bulk from Eskom before distributing it through their own electricity networks. They are responsible for maintaining substations, transformers, overhead lines, underground cables, electricity meters, customer service operations and emergency maintenance teams.

Every municipality has its own operational environment, infrastructure and maintenance requirements. As a result, operating costs differ across the country.

For example, one municipality may have:

  • An older electricity network requiring more frequent maintenance.
  • A larger geographical area to service.
  • More substations and transformers to maintain.
  • Higher staffing and operational costs.
  • Greater electricity losses resulting from ageing infrastructure or electricity theft.
  • Different levels of investment in upgrading its electricity network.

These operational differences directly influence how much revenue each municipality requires to operate and maintain its electricity distribution system.

As a result, municipalities prepare their own electricity tariff applications and submit them to NERSA for approval. NERSA evaluates each municipality's application independently to ensure that the proposed tariffs are reasonable, financially justified and comply with national regulatory requirements.

This explains why residents in municipalities such as Johannesburg, Cape Town, eThekwini, Tshwane or Govan Mbeki may all pay different electricity tariffs despite operating under the same national regulatory framework.

Simply put:

  • Eskom generates electricity and sells it in bulk.
  • Municipalities purchase that electricity and distribute it locally while maintaining the necessary infrastructure.
  • NERSA regulates and approves the tariffs ultimately charged to consumers.

Understanding this relationship helps explain why electricity pricing is not uniform across South Africa.

South Africa's Recent Tariff Trend

Electricity tariffs have continued to rise over recent years as South Africa works to maintain and modernise its electricity infrastructure. While the size of the increases has varied from year to year, the overall trend reflects growing operating costs, infrastructure investment requirements and broader economic pressures.

For the 2026/27 financial year, NERSA approved an average electricity tariff increase of 8.76% for Eskom direct customers and approximately 9.01% for municipalities purchasing electricity in bulk. Although these increases were lower than some previous adjustments, electricity remains one of the fastest-growing household and business expenses, placing continued pressure on consumers and increasing operating costs across the economy.

Why Have Electricity Prices Increased?

Electricity tariffs are influenced by several interconnected economic and operational factors rather than a single event.

Infrastructure Investment

South Africa's electricity infrastructure requires continuous maintenance, upgrades and expansion to improve reliability and meet future demand. Ageing infrastructure requires significant investment to ensure a stable electricity supply.

Rising Operating Costs

Maintaining power stations, transmission lines, substations and distribution networks has become increasingly expensive. Labour, specialised equipment, maintenance and procurement costs have all risen over time.

Global Energy Markets

Although South Africa relies primarily on coal for electricity generation, global energy markets continue to influence operating costs. International events such as the Russia-Ukraine conflict disrupted global energy markets, increased fuel prices, raised transportation costs and contributed to higher inflation across many economies. These broader economic pressures have indirectly increased the cost of operating South Africa's electricity sector.

Inflation

General inflation affects nearly every component of electricity generation and distribution, from construction materials and replacement equipment to employee wages, maintenance services and municipal operating expenses.

How Does This Affect Households?

Electricity is more than just another monthly bill. It is an essential service that affects almost every aspect of daily life.

Higher electricity tariffs often result in:

  • Increased monthly household expenses.
  • Higher food prices as retailers face increased operating costs.
  • Increased municipal utility bills.
  • Greater pressure on household disposable income.
  • Higher operating costs for small businesses.
  • Increased prices for goods and services across the economy.

In many ways, electricity costs ripple throughout the economy, influencing everything from manufacturing and agriculture to transport and retail.

Looking Ahead

South Africa continues investing in strengthening electricity generation, expanding transmission infrastructure and modernising the country's energy sector.

While improvements in generation performance have reduced the severity of load shedding compared with previous years, maintaining and expanding South Africa's electricity network requires significant long-term investment.

While future tariff increases cannot be predicted with certainty, ongoing investment in generation, transmission and municipal distribution networks means electricity pricing will remain an important economic issue for households and businesses alike.

Understanding why these adjustments occur enables consumers and businesses to make more informed financial decisions and better plan for future expenses.

GIOTRADE Network® Insight

Electricity tariffs are often viewed simply as another annual increase, but they represent a far more complex balancing act between affordability, infrastructure investment and long-term energy security.

Understanding how electricity tariffs are determined is more than simply knowing why your monthly bill changes. It provides insight into how regulation, infrastructure investment and economic policy intersect to shape everyday life.

Eskom generates electricity and supplies it in bulk. Municipalities purchase that electricity, distribute it to homes and businesses, and maintain the local infrastructure that keeps communities connected. NERSA independently evaluates tariff applications to ensure electricity pricing remains transparent, justified and financially sustainable.

The more consumers understand these systems, the better equipped they are to interpret future tariff announcements, make informed financial decisions and appreciate the broader economic forces shaping South Africa's energy landscape.