Nersa will appeal Eskom hike ruling

THE NATIONAL Energy Regulator (Nersa) has announced that it will be appealing the North Gauteng High Court judgement that found it erred when the regulator approved Eskom’s multi-year tariff hike earlier in 2016.

In a statement issued yesterday, the regulator said that the August 16 judgement will be appealed on the basis that the decision is flawed.

The High Court set aside a decision by Nersa to increase electricity tariffs by 9.4 percent under a regulatory clearing account (RCA) application for the first year of the third multi-year price determination (MYPD3) period in the 2013/14 financial year.

The MYPD methodology allows for Eskom, after financial year-end, to submit an RCA application based on audited financial statements. The RCA is a regulatory mechanism that reconciles the variance between projected and actual revenue and certain costs.

Eskom wanted to recover R22.8 billion for the 2013/14 financial year, Nersa granted it an additional revenue of R11.2 billion. But following a complaint, the High Court ruled that Nersa’s decision was irrational, unfair and unlawful.

The court said Nersa had not dealt adequately with Eskom’s inefficiencies in its RCA application. It said, contrary to the requirements of the MYDP methodology, Eskom did not submit quarterly financial reports for the 2013/14 financial year. The court criticised Nersa’s failure to alert the public that it intended to deviate from the methodology.

Nersa said the judgement is flawed. “It has also created a hierarchy of issues in the application of the MYPD methodology without considering the objective of the methodology and how the RCA is decided.”

The regulator added it “will be appealing the judgement on the grounds of it being premised on erroneous information, a non-implementable position, as well as its substitution of Nersa’s decision of 2014”.

Nersa said this process should create certainty with regards to the regulatory framework as there will be an approved tariff in place during the appeal process.

It will also allow an opportunity to clarify issues raised in the judgement.

“The option to appeal is considered to be the most effective manner to remedy the situation created by the judgement while ensuring that regulatory certainty is sustained through the most available legal means without violating the contents of law and judgement.”