Court ruling means higher than expected electricity price increases are in store
Electricity tariffs may be increased by 10% next year instead of the 5.22% approved by the National Energy Regulator of SA (Nersa) after a court ruling against the regulator.
The issue dates back to government's R23bn per annum bailout for Eskom which the regulator had subtracted from the tariff determination, in effect subsidising consumers, said energy expert Anton Eberhard.
“Combined with other court decisions, we’re in for steep tariff hikes,” he said.
Another expert, Chris Yelland cautioned the ruling paved the way for “massive” increases for at least the next three years.
Nersa spokesperson Charles Hlebela said the regulator “is currently studying the judgment and will advise on the way forward in due course'.
Tuesday's judgment follows Nersa's acknowledgment of procedural unfairness in Eskom’s fourth Multi-Year Price Determination (MYPD4) for the 2019/20, 2020/21 and 2021/22 financial years concerning the inclusion of the R23bn government grant without allowing Eskom to submit its representation in line with the National Energy Regulator Act, read with the Promotion of Administrative Justice Act, Hlebela said.
“Nersa notes, with serious concern, that the judgment has gone beyond Nersa's acknowledgment of procedural unfairness, and the unsuccessful consultations between Nersa and Eskom, by pronouncing on the MYPD4 tariff application.
“The judgment, if left uncontested, will not only disrupt the industry, but will further suppress economic recovery, considering the current threat the country’s economy is facing.
“This case was not merely a case between Eskom and Nersa, but rather a case of Eskom versus the SA economy and electricity consumers.”
The High Court in Gauteng on Tuesday set aside the decision taken by Nersa in March last year over the Eskom allowable revenue and tariffs for the years 2019/2020 to 2021/22. It said R23bn will be added to the allowable revenue already determined by Nersa for the 2021/2022 financial year.
As a result, the average standard Eskom tariffs approved by Nersa for the 2021/2022 financial year will be increased from 116.72 c/kwh to 128.24 c/kwh, said the court.
“After such time as Nersa has determined the allowable revenue for Eskom in respect of the 2022/23 and 2023/24 financial years, Nersa is directed to add a sum of R23bn to the allowable revenue in respect of each of those years.
“Nersa is precluded from making any adjustment or compensation to offset the R23bn from the allowable revenue determined for these financial years or otherwise to deduct, directly or indirectly, the R23bn equity injection from the allowable revenue for those financial years,” said the court.
Reacting to the 128.24 c/kwh increase, Eberhard said: “That will be Eskom’s average bulk tariff. Municipalities will add their supply costs. South Africans will be paying a lot more for electricity in the years ahead.”
Yesterday's court decision in favour of @Eskom_SA against the National Energy Regulator of South Africa is a big deal: remittal back to the regulator, respecting the separation of powers, was regarded an insufficient remedy; instead the court substituted NERSA's tariff decision— Anton Eberhard (@AntonEberhard) July 29, 2020
Background: the South African government decided a R23bn p.a. bailout for @Eskom_SA but the regulator subtracted this from the tariff determination, in effect subsidizing consumers, perverting cabinet’s intent. Combined with other court decisions, we’re in for steep tariff hikes https://t.co/NZICg7taUI— Anton Eberhard (@AntonEberhard) July 28, 2020