Expect to pay much more for electricity after R69-billion blunder by Nersa – Report

Procedural mistakes by the National Energy Regulator of South Africa (Nersa) have opened the door for Eskom to significantly increase electricity prices.

This is according to an article in Rapport, which said Nersa withdraw its opposition to two court applications from Eskom.

The first application relates to a R69-billion Eskom bailout by the government (R23 billion x 3) which Nersa considered as revenue.

Eskom wants to recover part of this money, in addition to other costs, through electricity price increases of 16.6% and 16.7% in 2020/21 and 2021/22.

Nersa, however, only granted Eskom price increases of 9.41% and 8.10% in 2020/21 and 2021/22 respectively.

Eskom said these lower price increases have left it with a R102-billion shortfall, of which the R69 billion made up a significant portion.

In late 2019, Eskom applied for urgent interim relief pending a full judicial review of Nersa’s multi-year price determination.

Rapport has now revealed that Nersa admitted it did not follow the prescribed procedures to determine Eskom’s new tariffs.

Nersa subsequently asked the judge to refer the case back to it to fix its mistake, which paves the way for bigger electricity price increases.

The second case involves R22 billion in revenue which Eskom was not allowed to recover because Nersa did not accept the utility’s calculation. It is also likely to be referred back to Nersa.

According to Rapport, Nersa will have to reconsider the application by Eskom to recover this money in accordance with guidelines stipulated by the court.

Court action and previous ruling

The two issues mentioned above relate to various court applications where Eskom is seeking to claw back additional revenue from electricity customers via tariffs.

These tariffs are over and above the normal annual electricity price increases which have been approved by Nersa.

Eskom insists that its electricity prices are not cost-reflective and that they need to rise by 30% to become cost-reflective.

Thereafter, Eskom says electricity prices in South Africa would stabilise, with only inflationary increases in subsequent years.

In its court actions, Eskom is challenging a number of previous Nersa determinations.

  • Eskom is seeking to recover R69 billion through a review of Nersa’s fourth multi-year price determination (the case discussed above).
  • Eskom is seeking a full judicial review of Nersa’s regulatory clearing account (RCA) determination for the 2014/15, 2015/16, and 2016/17 financial years. Eskom applied to claw back R67 billion, but only R32 billion was permitted.
  • Eskom has sought a review of Nersa’s revenue and price determination for the 2018/19 financial year.

The last application was heard in court, and in March 2020 the judge ruled in favour of Eskom.

The judgement declared Nersa’s revenue and price determination for the 2018/19 financial year as irrational and un-procedural and sent the determination back to Nersa for rework.

Through its court actions, Eskom is challenging Nersa determinations dating back to 2014 that resulted in revenue shortfalls totalling R166 billion.

Eskom is also seeking to claw back an additional R27.3 billion from electricity customers in an RCA application to Nersa for the 2018/19 financial year.

Should Eskom be successful, South Africans can expect significantly higher electricity prices over the next few years.

Now read: Eskom fights for massive price increases

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Expect to pay much more for electricity after R69-billion blunder by Nersa – Report