Hikes on cards as Nersa and Eskom appeal is upheld
The Supreme Court of Appeal on Tuesday upheld an appeal by the National Energy Regulator of SA (Nersa) and power utility Eskom, opening the door for the approval of further electricity tariff increases.
Eskom’s direct and municipal customers could be affected as the regulator is now able to process claims by Eskom to recover retrospective revenue, over and above price increases agreed upon through a multi-year tariff calculation system. Eskom is able to apply for tariff increases to accumulate through regulatory clearing account (RCA) applications.
The validity of RCA applications were called into question by the High Court in Pretoria in 2016, when it set aside such a decision by Nersa in March 2016 to approve a 1.4% additional increase, approved on top of the annual 8% initially allowed.
Energy expert Chris Yelland said the judgment may have serious implications for the cost of electricity, as Nersa will now be able to process RCA applications by Eskom to recover about R42bn through tariff increases.
"There are a number of RCA applications by Eskom to Nersa that have been put on hold pending the outcome of this judgment. The judgment rules in favour of Nersa and Eskom, which means these claims will be processed," Yelland said.
"This will be over and above the [proposed] 20% increase [reported on this week]."
It emerged this week in a confidential draft revenue application, sent to the Treasury and the South African Local Government Association (Salga) in April, that Eskom planned to charge its clients an average 19.9% more in tariffs. Municipalities could pay 27.3% more for bulk electricity purchases.
Eskom on Tuesday said the Supreme Court of Appeal ruling was a positive outcome.
"Eskom welcomes the judgment in that it creates the regulatory certainty in how our tariff is determined, which is a key concern of ratings agencies and investors alike," it said.
Suzanne Daniels, head of legal services, said: "The court considered whether in applying the price adjustment methodology [known as the MYPD], the decision by Nersa was rational and whether the adjudication process and decision was unfair.
"The court held that the development of the methodology does not preclude Nersa from applying reasonable judgment on Eskom’s revenue after due consideration of what may be in the best interests of the South African economy and public," she said.
"Eskom’s interpretation of this ruling means that Nersa, in applying its discretion, may now consider the remaining RCA applications submitted by Eskom for financial years ending 2016 and 2017, which have been pending since the adverse judgment of the high court that was handed down in August 2016."
A statement from the power utility said on Tuesday: "We will await Nersa’s guidance in this regard."