Outa in bid to halt electricity tariff hike

Eskom will on Thursday face a last-minute bid to halt the implementation of its 9.4% tariff increase effective the next day, on April 1.

The former e-toll protest group Outa, that has now spread its wings and changed its name to the Organisation Uniting against Tax Abuse (Outa), will on Thursday ask the North Gauteng High Court in Pretoria to suspend the increase until it has received the reasons behind the increase from national energy regulator Nersa and Outa has had time to study and respond to it.

Outa will also ask for a declaratory order stating that s.10(2) of the National Energy Regulator Act requires Nersa to provide the reasons for tariff decisions timely, before the decisions are implemented.

Nersa on March 1 announced its decision to grant Eskom an average increase of 9.4% for 2015/16, instead of the more-than-16% Eskom applied for. The increase would apply from April 1 for Eskom customers and July 1 for municipal customers.

At the time, Nersa said it would publish the reasons for its decision in due course, after Eskom had had an opportunity to indicate the commercially-sensitive information in the document to be removed before publication.

Advocate Ivan Herselman acting for Outa, told Moneyweb the organisation has been warning Nersa since February that the timeline is too tight to study the reasons for the decision and respond to it before the tariffs take effect.

He said even if Nersa publishes the reasons now, Outa would proceed with an amended application as it would not give Outa enough time to study the reasons and respond before the tariffs become a reality.

Eskom clients would suffer irreparable harm if the tariffs are implemented on Friday and therefore the court should intervene urgently, he said. If not, a review application would only be heard late in the year and it would be virtually impossible “to unscramble the egg”.

Herselman says it is not as simple as crediting all Eskom clients’ accounts, should the court at a later stage set the tariffs aside. Electricity tariffs are integrated in the economy; they have tax implications and are passed on to consumers at municipal level as well as by businesses.

Eskom bulk tariffs inform the tariffs municipalities charge their customers. “We don’t have confidence in especially smaller municipalities’ ability to correctly credit consumer accounts, should the Eskom increase be set aside at a later date,” he says. Municipal electricity bills are in certain circumstances consolidated with rates bills. They are not alone standing bills that can be easily adjusted, he says.

Legal expert Professor Marinus Wiechers says the legal requirement for reasons upon which administrative action, such as the Nersa decision, is based implies reasonable time to study and respond to such reasons.

He says the argument about irreparable harm is strong. Nersa and Eskom might argue that suspending the increase could be very disruptive for Eskom and the court would have to find a balance between these two arguments, he says.

Eskom spokesperson Khulu Phasiwe said Eskom sent the documentation containing the reasons back to Nersa about two weeks ago and it is now in the regulator’s hands. He said Eskom would prepare its response on Tuesday to Outa’s challenge.

Alderman Ian Neilson, executive deputy mayor of Cape Town and member of the mayoral committee for finance, told Moneyweb the average Eskom tariff increase of 9.4% translates into a 7.8% increase in the bulk tariff for municipalities.

He said this number was only given to municipalities in the last two weeks, to finalise their budgets for tabling before the end of March.

Neilson said if Outa succeeds in having the increases suspended, municipalities would have to await a new tariff from Nersa. If they pass their budgets on the assumption of a 7.8% increase, they would be able to decrease tariffs later, but are in terms of legislation only allowed to increase tariffs once a year on July 1.

Neilson says delays in finalising Eskom’s tariffs put pressure on municipalities to finalise their budgets in a rush. “Cape Town has systems in place, but not all municipalities are in a position to cope with that kind of pressure,” he says.

Changes in Eskom tariffs impact municipalities as distributers and consumers of electricity, and affect the surplus electricity revenue utilised to supplement rates income, as well as the cost of free basic electricity, he said. “It is quite a complex picture.”

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