The Pretoria high court has rejected Eskom’s R54bn tariff claw back deal with the National Energy Regulator of South Africa (Nersa), citing a lack of public participation in the out of court settlement agreement which will result in electricity tariff increases nationally.
“The proposition put by Nersa and Eskom, that a major amendment could be made to the tariff decision without public participation, is untenable and offends the principle of transparency enshrined in the act [National Energy Regulator Act] and the Electricity Regulation Act,” said judge Jan Swanepoel, rejecting the confirmation of the settlement by Nersa and Eskom as a court order.
The confirmation of the settlement was vital for Eskom to increase tariffs to make additional income of R54bn in the next two financial years and R18bn of the amount to be recovered after 2027/28.
The agreement by the two entities was reached after Eskom contended that Nersa, the energy regulator which provides oversight on power tariff increases, made a calculation error of about R107bn in determining the 2025/26, 2026/27 and 2027/28 electricity tariffs.
Nersa in January approved a 12.74% tariff increase for 2025/26, 5.36% for 2026/27 and 6.19% for 2027/28.
Eskom submitted its allowable revenue application for the three financial years, and Nersa projected the request proposed 36.15%, 11.81%, and 9.10% tariff increases respectively, and rejected the request.
In July, Nersa conceded it made an error in its calculation and said Eskom was entitled to R44bn additional revenue. Eskom said the amount was R66bn, and the parties settled on R54bn to be recovered through increased tariffs.
Swanepoel said he could not give legal effect to the settlement because there was no public participation before the parties agreed on the amount.
“Decisions made in secret and without public knowledge are anathema to the statutory framework and to our constitutional norms,” he said.
“The notion that this was a matter to be settled between two litigants ignores the broader picture, that the settlement has an impact on every electricity consumer in South Africa.
“The general public had, in my view, the right to submit their views on the proposed settlement, and consequently the decision to settle the matter without public participation deprived the public of its right to participate in the decision.”
He said public participation was central to the determination of electricity tariffs, “and it is not for Eskom or Nersa to decide when to allow public participation and when not”.
Swanepoel also questioned Nersa’s motives to settle out of court with Eskom.
“Nersa was clearly embarrassed by its mistake. Its purpose in entering into the agreement was, at least partially, to avoid public scrutiny of its error. It also wished to avoid judicial scrutiny and a just and equitable order that may not have suited it. Even though it was attempting to correct a mistake, one of its motives was self-serving and improper.”
Swanepoel said he could not confirm the settlement as an order because the R54bn figure seemed to be a thumb-suck and a point of compromise for Nersa, not necessarily based on its application of legal methodologies to determine Eskom’s allowable revenue.
“A further difficulty is that nobody knows what the correct amount is for Eskom’s allowable revenue. When Nersa entered into negotiations with Eskom, its recalculation showed the RAB (regulatory asset base) value had been underestimated by R44bn.”
Eskom took the stance that the value of R66bn was acceptable to it, and the parties agreed to split the difference to a figure of R54bn.
“There is no explanation how the figure was arrived at, save to say it was a compromise. It seems to me Nersa does not know, at this point, what the correct RAB value should be. In my view Nersa has not determined these costs accurately.
“The absence of any explanation as to how the compromise amount of R54bn was arrived at leaves one with the uncomfortable feeling the compromise was thumb-sucked. I decline to make the settlement agreement an order of the court.”
The court set aside Nersa’s decision on Eskom’s allowable revenue application for the three financial years.
“The decision is remitted to Nersa so Nersa can re-determine, after considered submissions [public comments], the value of Eskom RAB and the allowable revenue due to Eskom and then adjust the allowable revenue and Eskom average tariff for the 2026/27 and 2027/28 tariff years accordingly.”
The court ordered any person interested in the re-determination may submit comments to Nersa by January 21.
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