Electricity tariff decision could be reviewed

Moneyweb has learnt that Eskom is seriously considering challenging energy regulator Nersa’s decision to grant it a mere 5.23% tariff increase, versus the 19.9% it applied for, in court.

Nersa announced the decision in December, granting Eskom R190 billion in revenue: down about R15 billion from the current year and R30 billion less than Eskom applied for.

The increase takes effect on April 1 for Eskom’s direct customers and July 1 for municipalities and are valid for a year.

Eskom’s Khulu Phasiwe said it is waiting for Nersa to disclose the reasons for its decision before it decides on the way forward. Nersa earlier said it hopes to publish the reasons by end January.

Eskom sources however said chances are good that Eskom will proceed with the court review.

Nersa’s decision seems to be a drastic change from the way it dealt with previous applications. This comes as conditions have changed from an energy shortage to a surplus.

It seems Nersa took a stand by telling Eskom to reduce the size of its business in line with declining sales.

However, Eskom is extemely vulnerable. Cash has dried up and funders have closed the taps. It would be impossible for Eskom to reduce its business fast enough to cope with the effective 1.23% tariff increase, which represents a huge drop in revenue, by the start of April.

Eskom is expected to scrutinise Nersa’s decision and ask the high court to determine whether Nersa acted in accordance with the legislation and if this drastic departure from the thinking behind previous decisions complies with the same prescribed methodology.

If not, the high court could set the determination and suspend the decision while referring it back to Nersa to re-assess the application.