Nersa’s decision welcomed
THROUGH these turbulent times in South Africa as a result of persistent loadshedding, there has been a renewed unity amongst fellow South Africans as a result of Nersa’s recent decision not to grant Eskom its proposed tariff hike.
As Project 90 by 2030 (Project 90), we are profoundly humbled by the scenes of solidarity that we observed prior and during the hearings. The hearings were truly one of the few times where all sectors of society agreed and stood united against an injustice.
The primary reason for Nersa’s decision not to grant Eskom their tariff hike was due to a lack of sufficient information provided by the utility. The Multi-Year Price Determination (MYPD) methodology provides a comprehensive list of the reasons required for requesting a tariff increase, and Eskom had failed to provide all of the required information for Nersa to grant them the increase.
Eskom failed to provide information on the per kilowatt (/KWh) price they will be paying for the Short Term Power Purchase Programme (STPPP); insufficient information was provided on how Eskom will be making use of the R23 billion approved by the appropriation bill, which they received in 2015, together with the R60 billion debt which will be converted to equity.
Limited information was provided on the savings associated with Kusile, Medupi and Ingula new build programmes, as well as savings associated with the low load factors of the existing Eskom power plant fleet.
In addition, with the approved injection from the government, no information was provided on what the economic impacts will be for the country and what the effects of tariff hikes will be on the consumers.
Simply stated, Eskom knew what kind of information it had to present in the application, and they failed to deliver these documents.
Futhermore, according to Jacob Modise, Nersa Chairperson, Eskom’s application did not meet the regulations set out in Section 28(6) of the Municipal Finance Management Act (MFMA), which states that a tariff increase may not be increased during a financial year. The application also did not adhere to the Municipal Services Act of 2000 (MSA), in which SALGA and the national treasury was not given its lawfully required 30 days for comment.
As Project 90, we welcome Nersa’s decision, but would like to stress that the lack of trans- parency on the part of Eskom should not go unnoticed. Thus, we recommend Nersa to stipulate that Eskom must furnish all the information that was requested by civil society and organisations in the utility’s application to Nersa regarding the proposed tariff hikes.
One can deduce that Nersa’s decision to reject the application by Eskom is more in line with the utility’s failure to comply with the procedural requirement. There is still a high likelihood that South African consumers will face a secondary tariff increase in the near future, which could be as early as at the beginning of the next financial year.
Project 90 understands that Eskom will still receive the 2013 determined tariff increases; however we would insist that a thorough tariff redetermination should be carried out – this must be a process akin to the MYPD3 process of 20122013. Furthermore, the regulator must not make a habit of locating public hearings in single or isolated areas, as this does not constitute a fair and just administrative process. Nersa has the mandate to conduct public hearings and to set up consumer forums, and it is time Nersa exercises the full extent of its functions.
We are encouraged and reassured by Nersa’s recent decision, and we sincerely hope Nersa can continue to uphold its independence and support the facilitation of stakeholder engagement – shedding light on these darker times.