PE com­pa­nies con­tinue their fight against Eskom’s tar­iff hikes

CityPress - - Business - MAX MATAVIRE busi­ness@city­

This week, the Nel­son Man­dela Bay Busi­ness Cham­ber ap­proached the Con­sti­tu­tional Court for leave to ap­peal against the de­ci­sion by a lower court to up­hold elec­tric­ity tar­iff in­creases ap­proved by the Na­tional En­ergy Reg­u­la­tor of SA (Nersa).

A group of Port El­iz­a­beth com­pa­nies – all mem­bers of the busi­ness cham­ber – are lob­by­ing for bet­ter elec­tric­ity tar­iffs. Known as the High En­ergy User Group, the group is the first ap­pli­cant in the case, which dates back to 2013.

“Yes, we have ap­proached the Con­sti­tu­tional Court,” David Mertens, spokesper­son for the group, told City Press. “We launched the re­quest for leave to ap­peal this week and we see our chances of win­ning the case as ex­cel­lent.”

The ap­pli­ca­tion for leave to ap­peal was filed with the Con­sti­tu­tional Court late on Wed­nes­day af­ter­noon. The court is yet to give a date when the case will be heard.

Busi­ness cham­ber spokesper­son Cindy Preller said: “We strongly op­pose the pro­posed un­rea­son­able elec­tric­ity tar­iff in­crease, not only for the sus­tain­abil­ity of busi­ness in the metro, but for all res­i­dents and cit­i­zens of our com­mu­nity.”

Last year, Eskom ap­plied to Nersa to in­crease elec­tric­ity tar­iffs for 2016/17 by 8%. The High En­ergy User Group and the Nel­son Man­dela Bay Busi­ness Cham­ber took the mat­ter to the high court.

In Fe­bru­ary this year, the court ruled that Eskom’s reg­u­la­tory clear­ing ac­count ad­just­ments were “ir­ra­tional, un­fair and un­law­ful”. This ac­count al­lows the pub­lic util­ity to claim un­ex­pected costs. Nersa lim­ited the tar­iff in­crease to 2.2%. Nersa and Eskom then ap­proached the Supreme Court of Ap­peal (SCA), chal­leng­ing the high court judg­ment.

On June 6, the SCA ruled in their favour and set aside the high court de­ci­sion. How­ever, the High En­ergy User Group has vowed to fight on.

The group com­prises busi­nesses that use large amounts of elec­tric­ity and in­cludes Bor­bet SA, PG Group, Crown Chick­ens and Agri Steels SA.

Mertens lashed out at Eskom’s poor gov­er­nance as the rea­son for im­pos­ing ma­jor in­creases in elec­tric­ity tar­iffs.

“Our main ar­gu­ment in this case is that both Nersa and Eskom failed in their du­ties and were poorly gov­ern­ing their af­fairs. For in­stance, Eskom did not fol­low pro­ce­dures in re­port­ing its de­vi­a­tions, and Nersa failed to force Eskom to com­ply with re­port­ing re­quire­ments.

“This was over a pe­riod of two years March 2013 to Novem­ber 2015. Dur­ing this pe­riod, Eskom’s costs went com­pletely out of con­trol and it now just wants to force elec­tric­ity con­sumers to pay for these de­vi­a­tions, an act which, sur­pris­ingly, Nersa con­dones.

“The SCA judg­ment ba­si­cally al­lows Nersa to be its own judge, which, given the is­sues of poor gov­er­nance at Nersa – es­pe­cially its fail­ure to en­force com­pli­ance – is quite odd,” said Mertens.

He said that, if al­lowed, tar­iff in­creases of about 50% could be in­tro­duced – adding that any above-in­fla­tion elec­tric­ity tar­iff in­crease would hurt the econ­omy and have a neg­a­tive ef­fect on em­ploy­ment.

“Eskom is in a vi­cious cir­cle of de­creas­ing sales and in­creas­ing prices. If it in­creases prices fur­ther, sales will de­crease, lead­ing to fur­ther price in­creases,” said Mertens

City Press has seen a copy of the le­gal pa­pers, in which the group ar­gues that Eskom, when ask­ing for the tar­iff in­crease, did not com­ply with the mul­ti­year price de­ter­mi­na­tion (MYPD) method­ol­ogy.

A stan­dard pro­ce­dure, the MYPD sets a level of “al­lowed rev­enue” that gets trans­lated into a tar­iff level ev­ery year, based on ex­pected power sales.

In the pa­pers the group states: “The cen­tral is­sue at stake in this ap­pli­ca­tion is whether Nersa is legally en­ti­tled to adopt and pub­lish the MYPD method­ol­ogy af­ter sig­nif­i­cant pub­lic en­gage­ment – and then with­out warn­ing or ex­pla­na­tion to the peo­ple af­fected thereby, to de­part there­from in sig­nif­i­cant and ma­te­rial re­spects and per­mit Eskom to ben­e­fit un­der that pol­icy in the amount of some R11.2 bil­lion, which Eskom then re­cov­ered from the pub­lic through ret­ro­spec­tively in­flated elec­tric­ity tar­iffs.”

Out­lin­ing the grounds of ap­peal, the ap­pli­cants say they “re­spect­fully” sub­mit that the SCA’s de­ci­sion is nei­ther just nor eq­ui­table and that it should be in the in­ter­ests of jus­tice for the Con­sti­tu­tional Court to grant leave to ap­peal against the de­ci­sion.

The high court found Nersa’s con­duct in this re­gard to be un­law­ful.

In the pa­pers, the group says the SCA up­held the ap­peal by Nersa and Eskom largely on the premise that non­com­pli­ance with the MYPD was not fa­tal to a li­cencee’s con­tin­ued op­er­a­tions or con­di­tions of li­cence.

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