Higher tariffs on the cards after Eskom wins court case

Eskom Source: Google Images

Eskom has won a court case against the National Energy Regulator of South Africa (NERSA), which will allow the power utility to recover R69-billion over a three-year period. This will affect how much consumers pay for tariffs during this period.

In 2019, government allocated Eskom R69-billion to assist in their debt. NERSA deducted this amount in its calculation of Eskom’s allowable revenue for the period of 2019-2022.

On Tuesday, July 28 the Johannesburg High Court found that NERSA acted unlawfully in doing this.

The money must now be reinstated to the company’s allowable revenue in a phased manner over a period of three years. The average standard tariffs approved by NERSA will be increased from 116.72 c/kWH to 128.24 c/kWh in the 2021/2022 financial year.

This decision will affect how much consumers pay for electricity over the next three years. Residents may pay up to 10% higher electricity tariffs, according to Business DayMy Broadband reports Eskom confirmed to them that they are looking at a 15% tariff hike, which will take affect from April 1, 2021.

In a statement, the power company said they welcome the decision, saying it will help the power utility become more self-sufficient.

“Eskom welcomes this decision which allows for Eskom to migrate towards a situation where it could become more self-sufficient and be in a position to recover efficient costs and reduce its dependence for further equity support from the Government,” reads the statement.

“The judgement that has been delivered is very encouraging,” adds Calib Cassim, Eskom’s Chief Financial Officer. “It aids in instilling confidence in the regulatory regime within the country, by ensuring that the NERSA methodology is adhered to.  This judgement will assist Eskom in paving the way forward towards financial sustainability.”

“It is understood that certain vulnerable sectors of the economy – poor residential customers and certain industrial sectors will require special consideration. Various measures are already in place to protect the poor. In addition, Eskom has been participating, under the leadership of the Department of Mineral Resources and Energy (DMRE), in proposals where certain vulnerable economic sectors would be considered for targeted support,” adds Eskom.

“Eskom will work with NERSA in implementing the outcome of the Court decision.”

In a statement, NERSA expressed concern over this ruling, saying it will heavily impact on economic recovery.

“NERSA notes, with serious concern, that the judgement has gone beyond NERSA’s acknowledgment of procedural unfairness, and the unsuccessful consultations between NERSA and Eskom, by pronouncing on the MYPD4 tariff application. The judgement, if left uncontested, will not only disrupt the industry, but will further suppress economic recovery, considering the current threat that the country’s economy is facing.

“This case was not merely a case between Eskom and NERSA, but rather a case of Eskom versus the South African economy and electricity consumers. NERSA is currently studying the judgement and will advise on the way forward in due course.”