For years, South African electricity users have watched their monthly bills climb, not just due to annual Eskom tariff increases, but because of a complex web of additional charges levied by their local municipalities.
These surcharges, often opaque and heavily criticised, have become a significant source of revenue for municipal coffers and a major point of contention for frustrated consumers.
Now, in a move that could fundamentally reshape local government finances and bring relief to ratepayers, the National Energy Regulator of South Africa (Nersa) has launched a high-stakes inquiry that could see these municipal surcharges become a thing of the past.
The regulator has announced the publication of the terms of reference (TOR) for a focused market inquiry into the implementation and impact of fixed charges, a generation capacity charge, legacy charges, and other associated charges levied by electricity distributors, including Eskom and municipalities.
This market-wide inquiry responds to widespread concerns from customers and stakeholders about the impact of these charges, as well as the level of increase imposed and the structure and justification of these charges.
This is not a minor review; it is a comprehensive investigation empowered by law. The inquiry, undertaken in terms of section 4(b)(ii) of the Electricity Regulation Act, 2006 (Act No. 4 of 2006) (‘the ERA’) as amended, read with sections 2(b) and 4(a)(viii), aims to reveal how the distributors formulated the charges, which resulted in substantially high increases being added to the approved 12.74% tariff increase for Eskom, as well as assess the impact of these charges on different customer segments and evaluate their alignment with approved tariff methodologies.
This evidence-driven process is intended to enhance transparency, foster regulatory certainty, and ensure that tariff structures remain equitable and economically sustainable.
The inquiry strikes at the heart of a common complaint: that the final price of electricity paid by consumers is often significantly higher than the headline Eskom increase approved by Nersa.
Municipalities, acting as redistributors, buy bulk electricity from Eskom and then sell it to their residents, adding their own layers of charges to cover infrastructure costs, administrative fees, and, critics argue, to subsidise other non-electricity-related municipal services. This practice has placed an increasingly heavy burden on households and businesses, impacting affordability and economic activity.
According to Nomfundo Maseti, Nersa member responsible for electricity regulation,: “This inquiry underscores Nersa’s commitment to safeguarding the interests of electricity users while ensuring the financial viability of the sector. By engaging stakeholders and rigorously interrogating the basis of these charges, we aim to deliver regulatory guidance that promotes fairness, cost-reflectivity, and stability in the electricity market.”
The inquiry will focus primarily on municipal fixed charges and Eskom’s unbundled generation tariffs, comprising the generation capacity charge, legacy charge, and variable energy charge. It will involve requests for documents, data analysis, benchmarking, stakeholder submissions and public hearings, leaving no stone unturned in its assessment.
The process has a clear and public timeline.
Following the publication of the TOR on September 25, stakeholders have 30 days, closing on October 25, to submit written representations and supporting evidence. To ensure procedural fairness and compliance with the Promotion of Administrative Justice Act, 2000 (Act No 3 of 2000), a public hearing will be convened on November 17.
The inquiry will then proceed to the drafting of a Market Inquiry Report in December, with the final report expected early in 2026.
The implications are profound. If Nersa finds that these surcharges are unjustified, misaligned with tariff methodologies, or place an unfair burden on consumers, it could issue binding guidelines that force municipalities to drastically reduce or even eliminate them.
For cash-strapped municipalities, this represents a significant threat to a key revenue stream, potentially forcing a rethink of their financial models. For long-suffering consumers, it promises a more transparent and potentially cheaper electricity bill.
Through this inquiry, Nersa aims to reinforce regulatory stewardship, advance transparency, and support a sustainable and efficient electricity supply industry. While the outcome is not yet known, the message is clear: the era of unexplained and escalating municipal surcharges is facing its most serious challenge to date. For South African ratepayers, the inquiry offers a glimmer of hope that fairness and transparency may finally prevail.
But for municipalities that rely on these tariffs to raise funds, it could be the drying up of yet another income stream.
