Eskom accuses Nersa of hiding behind Covid-19 lockdown

In newly-filed court papers Eskom is accusing energy regulator Nersa of retrofitting the reasons for its decision on the tariffs South Africans are currently paying for electricity and using the Covid-19 lockdown as an excuse to hide this.

These accusations are made in a supplementary affidavit by Eskom CFO Calib Cassim in support of Eskom’s application to have Nersa’s tariff determination for the three years ending March 31, 2022, reviewed in court and set aside.

Its gripe relates to the R69 billion Nersa deducted from Eskom’s allowable revenue for the period in lieu of government assistance to the same amount.

Judge Jody Kollapen in January dismissed an urgent application from Eskom in the High Court in Pretoria to recover this amount from electricity tariffs on the basis that it was not urgent. In doing so, he indicated that there seemed to be merits in Eskom’s case.

The application will now be heard on June 23.

If Eskom succeeds, the decision will be remitted to Nersa to reconsider it.

Eskom initially applied for revenue of R219 billion, R252 billion and R291 billion for the three respective years, which would have resulted in tariff increases of 15% per annum.

Nersa only granted R206 billion, R221 billion and R233 billion, which translated to increases of 9.41%, 8.1% and 5.22%.

Incomplete record

Cassim’s latest affidavit comes after Eskom obtained what it alleges is an incomplete record of Nersa’s deliberations leading up to and relating to the decision.

According to Cassim, Nersa’s disclosure, which was made in terms of the rules of court, comprises 1 635 pages, about a third of which is totally irrelevant.

The documents Eskom did obtain show that up to March 6, 2019, the day before Nersa took its decision, it was considering revenue allocations of R225 billion, R241 billion and R253 billion.

That would have resulted in tariff increases of 20.12%, 7.82% and 5.3% and given Eskom R719 billion in total over the three years. That is R59 billion more than Nersa’s final decision.

Up to that meeting, the record makes absolutely no mention of the R69 billion equity injection from government, Cassim says.

On the morning of March 7, Nersa’s electricity subcommittee met and made a recommendation that was later that morning approved by the regulator and announced publicly.

While the total allowed revenue that was announced shows the R59 billion reduction from the amount contemplated during the meeting the previous day, the announcement does not show the line items that make up the new totals.

This, Cassim says, would have disclosed the treatment of the R69 billion, and at previous times the line items were included.

The minutes of these two meetings are missing from the records Nersa provided to Eskom and the first time the R69 billion is mentioned in the records is during a meeting almost a month after Nersa made its decision on April 2.

Cassim says that when Eskom recently asked Nersa for the outstanding minutes, Nersa failed to provide the document, citing in a letter dated March 24 the nationwide Covid-19 lockdown as the reason for not being able to do so.

Lockdown had not yet begun

That was however three days before the lockdown started and the records could easily have been forwarded electronically, Cassim argues.

He also points to a letter from Nersa CEO Chris Forlee a few days earlier, stating that Nersa officials would be working from home. (Forlee has since been suspended, apparently around unrelated events.)

Eskom argues that in the absence of the documents that reflect Nersa’s full deliberations that would show who raised the R69 billion and when it was done, the only conclusion is that the decision was made and the reasons retrofitted to justify it after the fact.

That would be contrary to the requirements of the Promotion of Administrative Justice Act (Paja) and therefore unlawful, Cassim argues.

Eskom has also filed a new application against Nersa, which brings its court challenges to four, attacking a total of six Nersa decisions.

These are:

1. To have the 2018/19 tariff determination reviewed and set aside. Eskom succeeded and the decision was remitted to Nersa. It is still to be reconsidered. The amount that Eskom targets will only be clear once Nersa announces its imminent decision on the Regulatory Clearing Account (RCA) balance for that year.
2. To have the RCA decisions of 2014/, 2015/16 and 2016/17 reviewed and set aside. Eskom is disputing R22 billion. The matter is still to be heard in court.
3. To have the RCA decision of 2017/18 reviewed and set aside. This is a new application that Eskom has recently filed. Eskom is disputing R14 billion. No court date has yet been set.
4. To have the part of the tariff determination for 2019/20-2021/22 relating to the deduction of R69 billion in lieu of government’s equity injection to the same value reviewed and set aside. The first part failed due to lack of urgency. Part B is to be heard on June 23.

If Eskom succeeds in its court challenges and Nersa does grant it the disputed amounts, electricity tariffs could increase sharply.

To get a sense of scale, the known disputed amounts total R105 billion, which, if recovered all at once next year, would result in a tariff increase of 48%.

It is however doubtful that all the challenges will have been concluded in time and Nersa could phase in any additional amounts granted to Eskom over an extended period.

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