Nersa to challenge ‘flawed’ court ruling
THE NATIONAL Energy Regulator of SA (Nersa) yesterday confirmed that it would challenge last week’s “flawed” high court ruling which set aside the regulator’s decision to increase electricity tariffs by 9.4 percent under a regulatory clearing account (RCA) application.
Nersa head of electricity regulation Thembani Bukula said aspects of the court ruling were based on incorrect information. He said the court was wrong to claim the regulator approved the RCA application without re-evaluating the third multi year price determination (MYPD3) application.
RCA is a monitoring and tracking mechanism that compares certain uncontrollable costs and revenues assumed in an MYPD decision – made by Nersa – to actual costs and revenues incurred by Eskom.
Landmark ruling
In a landmark ruling last week, South Gauteng High Court Judge Cynthia Pretorius ruled that Nersa’s determination to allow Eskom to recoup R11.2 billion for the 2013/14 financial year was irrational, unfair and unlawful. Pretorius said Nersa had not dealt adequately with Eskom’s inefficiencies in its RCA application.
Nersa is required to test the prudence of Eskom’s costs when it evaluates the RCA application.
Pretorius made the assertion in her dismissal of Nersa and Eskom’s argument that it could not set aside the RCA tariff increase as it was indivisible from the tariff Nersa approved under MYPD3, which covers April 1, 2013, to March 31, 2018.
Bukula challenged the court’s claims that the regulator did not adequately test Eskom’s costs.
He said the regulator had disagreed with Eskom’s use of the expensive open-cycle gas turbine (OCGT) plants.
In its application, Eskom wanted to recoup R8bn for diesel costs incurred for using the OCGT plants. The utility used the plants to supplement power supply.
In its ruling, Eskom said the OCGT plants were not the least cost option. So, instead of the R8bn, Nersa granted Eskom R674 million for the OCGT costs. Bukula said Nersa had punished Eskom for using the OCGTs.
Pretorius said Nersa had breached the MYPD methodology by not insisting that Eskom submit quarterly reports which would have price signals to electricity users.
The regulator said the appeal would create certainty with regard to the regulatory framework as there would be an approved tariff in place during the appeal process.
“It will also allow an opportunity to clarify issues raised in the judgment. The option to appeal is considered to be the most effective manner to remedy the situation created by the judgment while ensuring that regulatory certainty is sustained through the most available legal means without violating the contents of law and judgment.”