Eskom will head to court to challenge Nersa on 'inadequate price increases'

Eskom plans to go to court urgently to challenge Nersa's price increase decision which it says will leave the power utility with a shortfall of R102bn.
Eskom plans to go to court urgently to challenge Nersa's price increase decision which it says will leave the power utility with a shortfall of R102bn.
Image: Eskom

Eskom says it will go to court to challenge the National Energy Regulator of SA’s (Nersa's) decision in March which allowed for tariff increases well below what the power utility had applied for.

Eskom, in terms of the fourth multi-year price determination (MYPD4) period, had applied to Nersa for an allowable revenue of R219bn for 2019/20, R252bn for 2020/21 and R291bn for 2021/22.

However, Nersa chairperson Jacob Modise said in March this year that the regulator granted Eskom an allowable revenue of R206bn in 2019/20, R221bn for financial year 2020/21 and R233bn for financial year 2021/22.

This left Eskom with a shortfall of about R102bn, compared with what it applied for.

Eskom said the key reason for this shortfall was Nersa’s decision to offset the envisaged government support of R23bn a year, which was referred to in minister of finance Tito Mboweni’s budget speech, against the return on assets.

The power utility said this had resulted in the return on assets in the decision being approximately -1% for each of the financial years.

It said this was far below a reasonable return and worsened Eskom’s financial sustainability. 

“Consequently, we have put in an application for urgent interim relief, which is necessary to avoid financial disaster for Eskom. We are seeking an order to address this shortfall in a phased manner,” said Eskom CFO Calib Cassim.

Cassim said that, in addition, Eskom wanted the court to review and set aside Nersa’s MYPD4 revenue decision and remit that decision to the regulator for reconsideration.

“It is our understanding from Nersa’s reasons for the decision that the rules and principles of the Electricity Regulation Act as well as the MYPD methodology have not been duly considered by Nersa  in arriving at the decision made in terms of our revenue application,” Cassim said.

He said the MYPD methodology did not allow for equity investment by the government to be included as a return on assets.

Cassim said Nersa’s deduction of the financial support announced by the finance minister defeated the whole purpose of government support.  


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