Eskom to fight in High Court for higher tariffs

Eskom chairman Jabu Mabuza was almost apologetic on Thursday when he told journalists that the utility is proceeding with a court review of energy regulator Nersa’s decision to grant it a mere 5.23% tariff increase for 2018/19.

Eskom applied for 19.9%.

The increase has already taken effect and comes as Nersa concluded its public hearings in relation to Eskom’s application for further tariff increases to cover the R66 billion it hopes to recover for under-recovery in past years.

Nersa is expected to announce its decision in this regard on June 21. If granted, this would in itself add 2-3% per year for several years to the annual Eskom tariff determination.

Mabuza said Eskom does not consider the 5.23% increase granted for 2018/19 to be cost reflective and will proceed with the legal action “in the next ten days”.

In the meantime, the sheriff delivered the summons to Nersa that very morning, Moneyweb has learnt.

Mabuza almost made it sound as if Eskom has convinced Nersa that it was wrong, but could not revise its own decision. Court action would, therefore, be the only way to address the small tariff increase, he explained.

There are “no hard feelings”, Mabuza said, and Nersa “doesn’t take it personally”.

Whether Nersa and Eskom really are on the same page will only become clear when Nersa indicates whether it will defend the action.

Eskom was, however, far less conciliatory when it addressed the Parliamentary Portfolio Committee on Energy on March 28.

Eskom then pointed out that three percentage points of the 5.23% increase will pass right through Eskom’s books to independent power producers from which Eskom is obliged to buy renewable energy. Only 2.23 percentage points of the increase would, therefore, be for the utility’s own benefit.

Eskom further indicated that the Nersa decision contained numerous mistakes and inconsistencies.

It criticised Nersa for assuming that it could close two power stations overnight and save the associated coal and staff costs. In fact, Nersa announced its decision, with the recommendation to close two power stations, in December and assumed the cost savings from that would be realised in the financial year that started four months later in April.

That is unrealistic, Eskom explained. There are legislative processes to follow before this can be done.

Eskom further stated that contrary to its own methodology, Nersa used different reference points for different cost items. Some of these reference points date as far back as 2008.

It also pointed to some blatant mistakes Nersa allegedly made.

Mabuza said if successful, Eskom expects the court to send the matter back to Nersa to determine the correct tariff increase afresh.

It is unclear how long the review could take and, if it comes to that, what process Nersa would follow to redetermine the tariffs.

This move by Eskom is expected to once again increase the uncertainty among electricity users about the tariff path, something business has been complaining about and which is contrary to the very purpose of the Nersa methodology to determine tariffs.

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