High Court reserves judgment in Eskom-Nersa battle over tariffs

JUDGMENT in the matter between Eskom and the Energy Regulator of South Africa (Nersa) has been reserved after both parties presented their arguments at the North Gauteng High Court yesterday.

Eskom is asking the court to review and set aside last year’s decision by Nersa refusing to grant the struggling power utility permission to impose a tariff hike on municipalities, which would increase electricity costs by up to 17 percent from March this year for the three financial years ending in 2021/2022. In 2018, Nersa approved Eskom’s allowable revenue of R206.380 billion for financial year 2019/20, R221.843bn for financial year 2020/21 and R233.078bn for financial year 2021/22. This would result in an average rise of 9.41 percent tariff increase for the 2019/20 year, 8.1 percent and 5.2 percent in the successive years, less than the 16.7 percent Eskom had applied for.

Nersa spokesperson Charles Hlebela confirmed that the energy regulator had presented arguments opposing Eskom’s application, but did not go into details of the case.

“Today’s court proceedings have been concluded and the judge indicated judgment will be made soon. Both Eskom and Nersa made their presentations today,” Hlebela said.

Eskom wants to claw back a total of R69bn equity injection from the government over a three-year period, which the current tariff determination by Nersa deducted.

It argued that the allowable revenue was R173bn short of the R834bn it needed, considering the R23bn-a-year cash injection that Eskom received from the National Treasury last year.

Eskom contends that it is entitled to the relief, because the alleged inadequate tariff increase provided for in Nersa’s decision would spell doom for its solvency.

Advocate Matthew Chaskalson, SC, of Victoria Mxenge group of advocates, also confirmed that judgment had been reserved, and that they would hear from the judge when he was ready to deliver it.

In court, Chaskalson argued that Eskom’s liquidity challenge was a risk that would cause catastrophic harm, not only to the power utility, but to the whole economy. He argued that this was based on the historic electricity prices in the country which were maintained at an “artificially low level” without adequately accounting for the cost of generating, transmitting and distributing electricity.

“Genuinely, it is a national crisis. We will submit to you, your worship, that there is a very real risk that if we have to wait until the start of 2021/2022 financial year, the country may have collapsed by then,” Chaskalson said.

In its answering affidavit, Nersa’s executive manager for piped gas regulation, Nomfundo Maseti, said it had become apparent that allowing Eskom the full weighted average cost of electricity by inclusion of the R23bn equity injection would have resulted in a 53 percent increase in electricity prices. Maseti said that Nersa’s decision was “rational”.

“A 53 percent increase in electricity prices would evidently have been unaffordable to the economy relative to Nersa’s MYPD4 decision,” Maseti said.

In considering the revenue determination application, Nersa has to perform a balancing act of taking the various needs of electricity consumers and electricity providers into account.

This includes competing interests, being the affordability of electricity for the consumers and sustainability of Eskom.