Wednesday, 17 February 2021 08:01

Staff Reporter.

The North Gauteng High Court ruled that Eskom Holdings SOC Ltd can recover R10 billion ($681 million) from consumers, enabling the state power utility to raise electricity tariffs by 16%.

The ruling comes after Eskom and the National Energy Regulator of South Africa reached an agreement on the matter, the regulator said in an emailed statement Tuesday.

It comes as Nersa appeals a ruling in July 2020 that enables Eskom to boost revenue by R69 billion over the next three years.

The court order allows Eskom to recover costs incurred for the production of electricity, the utility said in a statement. It allows the tariff increase to be implemented from April 1, it said.

Raising prices "will place further pressure on the disposable income of especially the middle-income groups, but it will also result in more pain for industrial and retail businesses," said Elize Kruger, an independent economist.

Eskom is struggling under R464 billion of debt and has repeatedly said that electricity tariffs do not reflect its costs. The utility and the regulator, which sets electricity prices, have taken multiple disputes to court.

Meanwhile, the power utility Eskom has taken note of the court order.

"This order will result in an average price increase of approximately 15% in the electricity tariff for standard tariff customers starting on 1 April 2021. This court decision allows Eskom to recover efficiently incurred costs for the production of electricity," said the power utility in a statement on Tuesday.

The power utility said the order contributes to the "user pay" principle and is likely to lessen the financial burden of "supporting Eskom on the government, releasing the government to focus on other priorities."

Eskom said the implementation of the order will allow it to move towards addressing some of the revenue shortfalls and enable it to recover prudently incurred costs for the production of electricity, which will help to improve Eskom’s financial sustainability.”

The utility’s Chief Financial Officer Calib Cassim welcomed the decision, and stressed that poor residential customers will continue to be supported through the free basic electricity programme, as well as affordability subsidies provided for in the NERSA tariff decision.

Identified vulnerable industrial sectors will be considered by NERSA in terms of the short-term and long-term negotiated pricing agreements promulgated recently by the Department of Mineral Resources and Energy.

The court order is in response to Eskom requesting the execution of a High Court decision that allowed the recovery of incorrectly deducted Government equity support for the financial year 2021/22.

"Since Eskom made this urgent application to the High Court, the NERSA had made additional decisions related to recovery of efficient costs from previous years. The high court order allows a further 5.44c/kWh increase," said Eskom.