Eskom tariff war is back in court

Eskom has applied for three annual hikes of power prices of 15% each for its 2020, 2021 and 2022 financial years for total revenue of R762 billion
Eskom has applied for three annual hikes of power prices of 15% each for its 2020, 2021 and 2022 financial years for total revenue of R762 billion

Eskom and the National Energy Regulator of SA (Nersa) will again cross swords over electricity tariffs in the Pretoria High Court on Monday, less than two weeks since their last court hearing.

Eskom will try to convince Judge Jody Kollapen to set aside Nersa’s decision allowing Eskom an increase in electricity tariffs of only 5.23% in 2018/19, and will try to get the matter referred back to the regulator for reconsideration.

Eskom had originally asked for a tariff increase of 19.9%, which would have provided the power utility with a tariff income of R219.5 billion. Nersa allowed just 5.23%, amounting to a tariff income of R190.3 billion.

If successful, Eskom also wants the additional amount that Nersa allows after reconsideration to be added to the tariffs as soon as possible.

This could be costly for consumers, especially in light of a previous urgent court battle between Eskom and Nersa, in which judgment will be delivered soon.

If the previous application succeeds, electricity tariffs will increase by 16% this year and the following year, instead of 8.1% this year and 5.22% next year.

If Monday’s application is also successful, this will have a further effect on next year’s tariffs.

Eskom also wants to recover an additional R27 billion in tariffs in respect of the 2018/19 financial year from Nersa’s regulatory clearing account.

Nersa is set to begin public hearings about the application next week.

The clearing account is a risk-mitigation mechanism to allow adjustments to electricity tariffs, when assumptions on which Nersa’s decisions are based are not realised and result in under- or over-recovery of revenue.

In court papers, Calib Cassim, Eskom’s chief financial officer, said that Nersa did not follow the prescribed methodology when it permitted only the 5.23% increase.

In her answering affidavit, Nomfundu Maseti, Nersa’s acting member for electricity, said Eskom’s application was premature, as the power utility’s current clearing account application had to be finalised first, before the tariff decision could be reviewed.

In February, Kollapen is expected to hear a third case, in which Eskom wants a further three tariff decisions made by Nersa set aside.

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