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Court allows Eskom to claw back R69bn over three years

In the form of higher electricity tariffs.
Image: Moneyweb

A High Court on Tuesday allowed Eskom to claw back R69 billion over the next three years from customers in the form of higher electricity tariffs.

Higher tariffs would pile more pressure on cash-strapped households and business buckling under the impact of the Covid-19 pandemic, but they would be a relief for the state utility, which is mired in financial crisis and has long said the regulator has treated it unfairly.

Eskom was disputing a decision by energy regulator Nersa to deduct the R69 billion equity injection given to it by the government in its allowable revenue method for the 2019/20, 2020/21 and 2021/22 financial years.

The government made the equity injection to help the struggling utility service its high debt.

In the judgment, judge Fayeeza Kathree-Setiloane ruled that Nersa “got it horribly wrong” and acted unlawfully by including the equity injection in its calculation of Eskom’s allowable revenue for 2019 to 2022.

Kathree-Setiloane said a sum of R23 billion would be recouped annually by Eskom over the next three years in electricity tariffs. This means Eskom tariffs for the 2021/2022 financial year will increase to 128.24 cents per kilowatt hour from 116.72 cents.

Eskom said it welcomed the decision which would allow it to be more self-sufficient and be in a position to recover costs and reduce its dependence on further equity support from the government.

It said measures were already in place to protect the poor from the rising tariffs, without giving details.

Nersa said it was studying the judgement and would advise on the way forward in due course.

“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,” it said in a statement..

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The whole justice system is as corrupt as the scourge called the ANC.

Example.

All Julius Malema’s cases? Some dating back to 2014. Six years no outcome??????HU?? And they will try and defend that?

The judge supposed to deal with the BAT case just ups and go on leave ignoring the fact that the case is of great public interest? 11 million smokers. I don’t smoke but I am interested. So make it 11 million and one persons.

This country is going one way fast now.

Agreed-the judiciary is completely captured

Yes.

In the meantime CR is shocked and consulting.

Madam at the NPA is building capacity.

Some judges are doing the memorial lecture circuit while others are on leave.

The police force are running after tobacco smokers and a few pineapple brewers.

Guess we should not expect too much.

I find the resultant electricity price increase as unpalatable as the next guy but – before we start ranting and raving about “captured” judges – perhaps we should engage our brains, hmmm? The result of the decision is very unwelcome to all of us, but the decision itself is absolutely correct. Nersa tried to treat a once-off capital injection (bailout) to Eskom as a revenue item, which it never was and never could have been. This always was daft, and so it was correctly struck down. The problem is not with the judge, but with those who looted Eskom over the years and with the ANC who failed, for more than a decade, to right the listing ship.

South African municipalities have a habit of applying the Eskom percentage increase to their selling price. So in my case my average total cost is 264c/kWh and my council total average cost is 117c/kWh. Profit of 147c/kWh which in itself is in breach of NERSA and Energy Regulation Act, but leave that aside.

So take three years of 15% Eskom increases. My cost breaches R4/kWh. Their cost reaches 177. Their margin is an eye watering 233c/kWh.

That is nonsense. The profit they make on electricity is supposed to help cover their expenses (electricity and other). These increases have no impact on their other expenses. If their other expenses increase 4% then the margin should only increase 4% which would make selling price 342 instead of 402.

Time to relook taking a big slice of the factory off-grid. At 400c / kWh I may as well run diesel and be rid of loadshedding.

Eskom may believe that this is the way to sort their financial problems, but it is a long term failure strategy. As the price goes up, more and more customers will install solar solutions and migrate to self-provision. Strong municipalities will do the same.
Only solution is to fix their cost structure.

Only the facts, please! In this case NERSA made a mistake. They admitted their mistake and did not even oppose the Eskom application in court. The court did what it has to do. No corruption, no capture!
Both Eskom and municipal tariffs are approved annually by NERSA. For the nearly 20 years I worked with tariff applications, the NERSA approved municipal price increase was always lower than the Eskom increase. Before 2008 Eskom was very proud of the fact that their increase was always lower than inflation, thus municipal increase was also lower than inflation. After 2008, Eskom increases were way above inflation, for reasons we all know by now. NERSA then calculated a weighted average of the Eskom increase and the inflation of the other municipal cost factors, to determine the municipal increase, which in some years resulted in a considerable lower increase for municipalities. I kept record of this and still have all the annual NERSA letters to confirm it.

Auretha:

Do you still have senior contacts at NERSA? I lodged a request that they resolve a tariff dispute with my council but have not heard anything for seven months. It relates to a new municipal tariff that breaches Energy Regulation Act, EPP and NERSA guidelines. Their selling price on users within the tariff is more than double their cost. If you can help, moneyweb has my details

My cost is 270c/kWh. Soweto alone owes Eskom about R20 billion and eskom and the ANC are doing nothing about it.

End of comments.

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