The National Energy Regulator of SA (Nersa) has been ordered, in the latest round of legal action, to process Eskom’s three-year price plan to 2025, according to the prevailing methodology.
The price plan outlines how much the indebted power utility can charge for electricity.
In September Nersa called for a pricing methodology review and discarded the Multi-Year Price Determination (MYPD) methodology — introduced in 2016 to assess the revenue application of Eskom, which is unprofitable, and struggles under about R400bn of debt.
According to Nersa, the MYPD methodology was developed for the regulation of Eskom’s required revenues. It formed the basis on which the energy watchdog would evaluate price adjustment applications received from Eskom. However, it is on a mission to change these rules.
Nersa rejected Eskom’s latest tariff application and wanted the utility to submit a new one according to new principles. Eskom had initially made the revenue application in accordance with the prevailing methodology, the MYPD.
The utility rarely gets tariffs approved in line with its requests.
On Friday, the high court in Pretoria made an interim order, after an urgent application by Eskom to overturn the regulator’s decision to reject its revenue application. The court ordered Nersa to process Eskom’s tariff applications according to existing rules.
In the judgment, judge Jody Kollapen has confirmed that the MYPD methodology remains valid, until replaced by an alternative process.
The two entities had disagreed on the process, timeline and methodology for determining the 2022/23 tariff. Eskom also contended that Nersa did not have a new methodology in place yet to replace the MYPD.
This means Nersa has to make a revenue decision for the 2023 financial year, which starts in April 2022. Nersa’s revenue decision will be based on an application made by Eskom to Nersa on June 2.
Once determined, the revised tariffs and prices will be implemented from the start of April 2022 for non-municipal customers and in July for municipal customers.
Nersa is working to have its new rules implemented from the 2024 financial year onwards, and this is likely to result in more legal action.
“The decision by the high court comes as a relief as it will contribute to the stability of the electricity industry and thereby the economy of the country,” Hasha Tlhotlhalemaje, Eskom’s GM for regulation, said in a statement.
This victory for Eskom relates to the first part of its case. The second part — yet to be heard — seeks an order reviewing and setting aside Nersa’s decision to reject Eskom’s tariff application for the years 2024 and 2025 financial years. The regulator and Eskom have brought a number of disputes to court over what the company can charge for electricity.
Over the past two years, Eskom has found fault with Nersa’s determinations when it comes to pricing, successfully challenging the regulator through a number of court cases during that time.
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