The ongoing issues between Eskom and Nersa could see consumers forking out more to keep the lights on, according to an energy expert.
ESKOM has welcomed the North Gauteng High Court ruling setting aside the National Energy Regulator of South Africa’s (Nersa) determination regarding the regulatory clearing account for three financial years.
Eskom will now be in a position to recover the costs that were incurred in those financial years, including higher tariffs.
This will pile more pressure on already cash-strapped households and businesses buckling under the impact of the Covid-19 pandemic, but will be a relief for Eskom, which is mired in a financial crisis and has long said the regulator has treated it unfairly.
On Tuesday night energy expert Ted Blom warned that with the “war” between Eskom and Nersa, consumers should brace themselves for stiff tariff increases.
“Especially as Eskom in its current form will require more than 25% per annum tariff increases while it is still corrupted,” he said.
The court set aside Nersa’s calculation of R32.69 billion for 2015 to 2017 and the regulator now has to come up with a new figure, which pertains to the amount of money the power utility can seek to recover from consumers in new tariff applications due to differences between its revenue projections and, on the other hand, costs and collections.
The ruling faulted the regulator for not allowing Eskom to factor in expenditure in terms of coal, infrastructure and independent power suppliers, a step the power utility described as poor and unlawful decision-making.
“This judgment means that Eskom will now be in a position to recover prudent and efficient costs that were incurred in these financial years,” the power utility said.
Eskom had applied for a clearing account balance of R67 billion and went to court after the regulator arrived at a sum of less than half of that.
“It is hoped that Nersa will undertake its mandate by ensuring that Eskom is allowed to recover its costs,” Eskom said, adding that it hoped the regulator “in future applies and abides by the rules when making determinations on Eskom’s revenue applications”.
It added that this was essential for the regulatory certainty sought by investors and ratings agencies.
“More importantly, the correction of the unlawful and poor decisions made by Nersa will assist Eskom in paving the way forward towards financial sustainability and in ensuring the migration towards cost-reflective tariffs.”
Nersa initially opposed Eskom’s application but later informed the court that it would no longer do so.
Eskom also claims that Nersa incorrectly deducted R69 billion in equity injections from the government in its calculations.
Commenting on the judgment, Blom said he believed Nersa had thrown in the towel as part of its reconciliatory effort, by neglecting to file its replying affidavits after it was agreed between both parties that it would be better to sort out their differences outside the courts.
“Instead of insisting that Eskom withdraw its action, Nersa gave Eskom ‘victory’. In layman’s terms, this means the cases will be referred back to Nersa to reconsider as they are the only specialist body equipped to sort out the dispute,” Blom said.
He added that the judgment would only lead to higher tariffs if Nersa conceded, during the review, that Eskom’s claims were legitimate.
If Nersa did not concede, tariffs would remain as they were. If Eskom won, tariffs would increase by more than 50%, he said.
“If Eskom wins all the applications and gets what it claims, the total will be split up over a number of years in accordance with a ‘liquidation account’ agreed with Nersa.
“Bottom line is that tariffs will in such an event increase sharply by more than 50% spread over the agreed period. This will be on top of agreed current tariff increases,” Blom said.
Nersa spokesperson Charles Hlebela said they were studying the judgment and would consult with its stakeholders in due course.
“Nersa remains committed to its regulatory principle of being transparent in its decision-making process and assures all stakeholders and the public that its decisions are made in accordance with the law and in an effort to strike a fair balance between the interests of customers, end-users, licensees and investors in the electricity supply industry,” Hlebela said.
– Additional reporting Reuters