Victory for Eskom as court orders Nersa to decide on 2022/23 tariff application

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  • The National Energy Regulator must adjudicate on Eskom’s 2022/23 electricity tariff application by 25 February, the North Gauteng High Court in Pretoria has ordered.
  • While the regulator argued Eskom’s application was noncompliant because it was based on an outdated methodology, there is no new methodology to replace it.
  • This is the latest victory for Eskom in a string of legal challenges it has brought against the regulator over the past two years.

In yet another legal victory for Eskom against the country's energy regulator, the North Gauteng High Court sitting in Pretoria has ordered that a decision be made on utility’s latest tariff application by February next year and to do so in line with a 2016 methodology.

The judgment, handed down by Judge Jody Kollapen on Friday, granted Eskom the relief it sought in terms of "Part A" of its court application.

That is, that the court direct the National Energy Regulator of SA (Nersa) to decide on the utility’s application for an electricity tariff for 2022/23 by 25 February next year  – and that the tariff application be dealt with in terms of the Multi-Year Price Determination (MYPD) methodology published by Nersa in 2016.

"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 general manager for regulation, said in a statement.

As the regulator, Nersa is responsible for determining what tariffs electricity licensees like Eskom receive. It does so in line with its MYPD methodology.

The debt-riddled Eskom has, however, found fault with Nersa’s determinations of late and has successfully challenged the regulator through a number of courts cases over the past two years.

Disagreed on tariff

In the matter before Kollapen, Eskom and Nersa disagreed on the process, timeline and methodology for determining the 2022/23 tariff.

Eskom said it submitted a draft of that application to Nersa in March and a final application in June but at no stage was it advised that its application was not compliant.

Yet, in September, Nersa informed Eskom as much on the basis that the MYPD methodology the utility had aligned its tariff application with, was no longer valid.

Rather, Nersa said it is in the process of developing new tariff principles to accord with the changes in the electricity sector which will inform the development of a new methodology. For now, it requires Eskom to submit a tariff application based on the new principles it has developed.

Eskom, however, countered that the MYPD4 was not time-bound and that, in the absence of a new methodology to replace it, it continues to endure as it provides the only basis for a tariff application to be made. As such, Eskom said it was within its rights to submit its application for 2022/23 on the basis of MYPD4 and that Nersa acted unlawfully in rejecting it. For a tariff application to be prepared and submitted absent of a mythology was unlawful and impractical, the utility said.

Nersa and Eskom also disagreed over the urgency, as the regulator argued there was still time for Eskom to make a new tariff application and for Nersa to make a determination before 15 March next year which, according to the Municipal Finance Management Act (MFMA), is when a determination needs to be tabled in Parliament.

Nersa based this opinion on its view that section 42(2) of the MFMA – which requires the Nation Treasury and the South African Local Government Association (Salga) be given clear notice of intention to increase electricity prices and an opportunity to comment thereon - could be sidestepped.

Kollapen’s judgment favoured Eskom and granted the utility the relief it sought in terms of the first part of its application.

In Part B of the proceedings, which is yet to be heard, Eskom seeks an order reviewing and setting aside the decision of Nersa to reject its tariff application for the years 2023/24 and 2025.

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