Eskom entering ‘death spiral’ as higher costs push consumers to alternative energy sources

As Eskom seeks an 8.8% tariff increase from April next year, energy experts say municipalities’ failure to pay the utility is contributing significantly to its financial difficulties and tariff increases.

As a result, Eskom is entering what is known as a “death spiral”, in which rising electricity prices drive customers towards alternative sources of energy, further eroding the utility’s revenue, said Prof Hartmut Winkler, from the University of Johannesburg’s physics department.

“If municipalities paid Eskom what they are due, it would be in a much stronger financial position and thus would not be able to justify why they need above-inflation tariff increases,” Winkler said.

Eskom has asked the National Energy Regulator of SA (Nersa) to approve an 8.8% tariff increase for the 2027/28 financial year. If Nersa approves, the electricity hikes will take effect in April next year.

Low-income consumers and financially distressed municipalities are struggling to pay their Eskom bills because they simply do not have the money.—  Hartmut Winkler, from the University of Johannesburg’s physics department

Nersa has asked citizens to comment on Eskom’s requests before it makes a decision.

According to energy specialist Ruse Moleshe, Eskom’s request for the tariff increase falls within its undertaking to keep future increases below 10%.

Each year, Eskom approaches Nersa to request a tariff increase to help fund infrastructure investment, maintenance and operational costs.

In December 2017, Nersa denied Eskom a 9.9% tariff hike application and instead approved 5.23%. Two years later, in March 2019, Nersa approved Eskom’s increases of 17.1% for 2019/20, 15.4% for 2020/21, and 15.5% for 2021/22.

For 2022/23, Nersa approved a 9.61% increase. The following year, it approved an 18.65% increase, and in the 2024/25 financial year, Eskom got a 12.74% increase.

Effectively, a unit of electricity that cost R1 in 2020/21 will have cost R1.90 in 2025/26. —  Independent energy analyst Tshepo Kgadima

Moleshe told Sowetan that Eskom’s improved operational performance had contributed to its undertaking to keep future tariff increases below 10%.

“It’s on the basis of the improvements that they have made in terms of operations,” she said. “It does not mean that there will be no increases because they still need to invest in infrastructure, and in order to do that, they have to come back to customers and say we need this much to invest in and maintain the infrastructure.”

Moleshe said consumers would continue to feel the impact of Eskom’s previous tariff increases, despite the latest request being below 10%.

According to the Competition Commission, electricity has remained one of the fastest-growing administered prices between July 2025 and July 2026 following the implementation of the annual tariff adjustment.

Another factor contributing to higher electricity costs is revenue lost through non-payment by consumers and municipalities, said Moleshe.

She also pointed out that recent Eskom figures showed a significant decline in electricity demand, something Winkler also alluded to.

According to Winkler, more customers are turning to alternatives such as rooftop solar. While installing solar panels, inverters and batteries requires a significant upfront investment, generating electricity from the sun costs very little once the system is operational, he said.

This had eroded a significant source of revenue for Eskom, leaving it with fewer customers who were also using less electricity because of rising prices, he said.

Winkler said Eskom faced a difficult cycle: as electricity becomes more expensive, more customers turn to alternative power sources, reducing Eskom’s revenue and putting further pressure on its long-term financial sustainability.

“Some of Eskom’s biggest customers, including shopping malls, mines, office parks, farms and residential estates, have increasingly adopted alternative energy sources.

“At the same time,” he said, “low-income consumers and financially distressed municipalities are struggling to pay their Eskom bills because they simply do not have the money.”

” In short, if Eskom’s electricity is too expensive, the users will go elsewhere for their power, and Eskom will eventually go under.”

Winker also said declining electricity demand over the past five years had contributed — alongside better maintenance — to Eskom’s improved ability to avoid load-shedding. This was contrary to earlier expectations that electricity demand would steadily increase as the population and economy grew.