Why Eskom fought for electricity tariff hikes

Last year, the National Energy Regulator of SA (Nersa) effectively refused Eskom’s proposed tariff increases – of around 15% – for each of the 2019-2021, 2020-2021 and 2021-2022 financial years.

The regulator found these increases would have made electricity unaffordable in the long term and, instead, approved increases of only between 5.22% and 9.41%.

This prompted Eskom to approach the court, with an application to review and set aside Nersa’s decision. At the heart of Eskom’s case was Nersa’s deduction of a controversial R69 billion government bailout from the total amount the power utility had indicated it needed for the three years in question – in tranches of R23 billion a year.

For details on how this court judgement will affect you, and how it could come back to hurt Eskom, read more in Premium: Eskom about to put the screws on consumers’ pockets

In “misappropriating” these funds, Eskom chief financial officer Calib Cassim said in the papers: “Nersa unreasonably ignored the goal of government policy… to progress towards a position in which Eskom is able to ensure a reasonable return.”

The energy regulator has since acknowledged what the regulator labelled “procedural unfairness” on its part but was unhappy with the ruling handed down on Tuesday, in which Judge Fayeeza Kathree-Setiloane effectively ordered the R69 billion be re-added and hiked up the 2021-2022 tariffs – from 116.72 c/kWh to 128.24 c/ kWh.

“Eskom argues that by restoring the three amounts of R23 billion unlawfully deducted, this court will not be trespassing on any expert regulatory function of Nersa, but that the court will be merely correcting Nersa’s unlawful removal of R23 billion per annum from Eskom’s allowable revenue,” Judge Kathree-Setiloane said in her judgment.

“Nersa, on the other hand, argues that the doctrine of separation of powers demands that the court should remit the decision to Nersa for redetermination because, as the regulator, is it best placed to deal with it.”

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