Picture: African News Agency (ANA)
Picture: African News Agency (ANA)

Eskom wins power hike war

By Baldwin Ndaba Time of article published Mar 11, 2020

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Johannesburg - Eskom will ask the National Energy Regulator of South Africa (Nersa) to allow it to implement an electricity tariff increase of 18.9% for the 2018/2019 financial year following a North Gauteng High Court ruling in its favour.

On Tuesday, Judge Jody Kollapen set aside Nersa's decision to grant Eskom an electricity tariff increase of 5.2% for the 2018/2019 financial year instead of its requested 18.9% increase.

Kollapen ruled that Nersa's decision was procedurally unfair, irrational and unreasonable.

Judge Killapen also found that Nersa had failed to allow the power utility to make representations before the energy regulator prior to making its decision, adding the verdict had “effectively deducted billions from Eskom's projected revenue”.

“Eskom is granted leave to apply to Nersa within 60 days of this court order or the final 2018/2019 Regulatory Clearing Account (RCA) decision, whichever is the later, to make a supplementary tariff determination granting Eskom any additional amounts which it has expended in the 2018/2019 tariff year and to which it would have been entitled had the original tariff determination been made lawfully, in accordance with the principles established by this court’s judgment,” Judge Kollapen said.

The court agreed with Eskom that Nersa had also failed to properly calculate the costs of coal, including its transportation to the different power stations in the country using its traditional multi-year pricing determination.

Eskom, in turn, on Tuesday argued that Nersa only used data from a single year to arrive at the 5.2% electricity tariff increase.

In setting aside Nersa's decision, Judge Kollapen said the regulator's treatment of the coal costs and employee costs resulted in the deduction of billions from Eskom's projected revenue.

He said as “demonstrated the decision arrived at and the rationale for them appear problematic.

“Not only do they constitute a departure from the multi-year price determination, of which Eskom was not informed, but they also represent decisions taken by alternate methodologies that Eskom was not privy to nor invited to participate in,” Judge Kollapen said.

In his ruling, he said Nersa's failure to consult with Eskom had rendered its decision-making processes “unfair, irrational and unreasonable”.

Reacting to the ruling, Eskom spokesperson Sikonathi Mantshantsha said the power utility welcomed the court's ruling.

Mantshantsha said they would be ready in due course to make submissions to Nersa as directed by the court.

Nersa spokesperson Charles Hlebela said the energy regulator's management was still studying the judgment and will react in due course.

The trouble between the two entities began in 2018 when Eskom applied for an allowable revenue of R219.5 billion for the 2018/2019 financial year.

Eskom wanted an electricity tariff increase of 18.9%.

But Nersa only approved an allowable revenue of R190.348bn - 5.23% tariff increase.

The energy regulator in its court argument said the decision on the basis that the R22.9bn difference between 5.2% increase and 18.9% increase in standard tariffs, could be made up by Eskom if it saves on its operating expenditure, savings of primary energy costs, reduce depreciation and free up Independent Power Purchaser.

Eskom, however, disagreed with Nersa during arguments, saying the energy regulator failed to investigate proper measures to determine coal prices.

Political Bureau

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