By Lehlohonolo Lehana.
The North Gauteng High Court sitting in Pretoria has ordered that a decision be made on Eskom’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.
The ruling follows Eskom’s application to have Nersa’s decision to reject the utility’s revenue application set aside as unlawful.
Eskom formally lodged its MYPD5 application on June 2, but the Energy Regulator rejected it on September 30 on the basis that it was prepared using a methodology that it deemed to have expired.
Nersa is responsible for determining what tariffs electricity licensees like Eskom receive. It does so in line with its MYPD methodology.
The embattled 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.
Eskom applied for a tariff increase of about 20%, which includes amounts clawed back in relations to under-recovery in previous years as well as earlier court rulings in favour of Eskom.
In his judgment, published with reasons on December 3, Kollapen ruled that Nersa’s proposed option for determining the tariff was “both unlawful as well as impractical”.
“It is unlawful in that it proposes a route directly in conflict with the obligation created for Eskom by Section 42(2) of the Municipal Finance Management Act (MFMA) and it is impractical in that it proposes a tariff determination be submitted and decided upon, including public comment thereon, on the back of a non-existent methodology.”
“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.
Advocate Patrick Ellis SC on behalf of Nersa maintained that the latest version of the MYPD has lapsed and admitted after being questioned by Kollapen, that Nersa has left a vacuum by not approving a new methodology timeously.
He however asked the court to allow Nersa to order Eskom to submit a revised tariff application in accordance with three principles Nersa adopted this week namely:
- Distinguishing between Eskom’s different activities: namely generation, transmission and distribution,
- Distinguishing between the way consumers use electricity, for example for consumption during peak-time only; baseload which is consistent consumption day and night; and mid-merit consumption which is adjustable during the day.
- Using a merit order dispatch approach (least cost first determination to set tariffs for each type of load), i.e. using the generation plant that operates at lowest cost, first.
Representing Eskom, Advocate Matthew Chaskalson SC pointed out that Nersa has not yet communicated this decision to Eskom and it has no detail about how it should go about to prepare a tariff application following with these principles.
The judgment also rejected Nersa’s assertion that the MYPD4 methodology was timebound, arguing that history points to the fact that the methodology endures until it is changed or replaced.
According to Eskom it is legally obliged to give National Treasury and the local government association Salga 40 days to study its tariff application before submission to Nersa and, taking that into account, there is simply not enough time to prepare a new application and have Nersa process it before the March 15 deadline to table the tariffs in parliament.
In his order, Kollapen also set out a timetable for the determination of the 2023/23 tariff, which states that:
- Eskom’s revenue application submitted on June 2, 2021 be published on December 8, 2021;
- the public have until January 14, 2022, to make representations on the content of Eskom’s application;
- public hearings on the merits of Eskom’s revenue application be held between January 17 and 21, 2022; and
- that Nersa shall make a final decision on Eskom’s application by February 25, 2022.
The timetable is in line with the requirement to table a final determination in Parliament before March 15, 2022, in accordance with the requirements of the MFMA
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.
Meanwhile Eskom has been hit by a wave of illegal activity, which has triggered power outages.
“The fight against theft and vandalism is ongoing and it requires partnership with more stakeholders, especially the communities,” Eskom said in a statement issued on Friday.
Eskom said it will continue to investigate and implement alternative measures that will assist in preventing theft and vandalism of its electricity infrastructure.