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Dear Nersa, see you in court – Eskom

Urgent order sought to ensure lawful tariffs from April 2022.
There is ‘a risk of catastrophic harm to Eskom and South Africa’ if the order is not granted – Eskom CFO. Image: Shutterstock

Eskom has filed an urgent application in the Gauteng High Court to prevent a situation where it will be unable to generate any revenue from April 1 next year due to a decision made by energy regulator Nersa that 50% of its voting board members opposed.

It was only the casting vote of the acting chair, Advocate Fungai Sibanda, that tipped the scale towards the rejection of Eskom’s latest tariff application “in favour of a fanciful tariff determination process that is simply incapable of lawful completion in time for the 15 March 2022 deadline”, says Eskom CFO Calib Cassim in an affidavit filed in support of the application.

Cassim explains that this may leave the power company without any lawful way to charge tariffs and generate revenue, which will require government to cough up as much as R300 billion to keep Eskom going for the next financial year.

Current rules followed

Eskom submitted its tariff application for the period April 1, 2022 to March 31, 2025 on June 2 this year, says Cassim. That was done in terms of the current set of rules that has been used before, which will only be invalidated when Nersa publishes new rules after duly consulting with stakeholders.

The submission was done timeously to give Nersa ample opportunity to allow for public participation, including conducting public hearings and deliberating on the application and stakeholder comments before making a determination in time for the tabling in parliament.

In terms of the rules of its own Minimum Information Requirements for Tariff Applications, Nersa is supposed to return an application to Eskom within 14 days should it be found to be non-compliant. This did not happen.

In fact, Nersa failed to process the application and the first formal step to deal with it came on September 30 when the energy regulator decided to reject it and invite Eskom to prepare a new application in accordance with a future method that still has to be determined.

Read: Nersa proposes complete overhaul of Eskom price determination

It had published a consultation paper about the principles underlying such a new method a few days before the Nersa board meeting.

‘Interim methodology’

Realising that the new methodology would not be ready in time for the 2022/23 tariff determination, Nersa decided that Eskom’s new application for that year should be done in terms of an interim methodology based on the consultation paper.

“Nersa has seemingly come up with the idea of an interim arrangement, in terms of which, as reflected in the 30 September media statement, it seems to expect Eskom to begin now to prepare an interim application in terms of unspecified ‘principles of a new approach that is under consideration’,” says Cassim.

“It has given no guidance as to what those principles might be. It has simply informed Eskom by letter dated 5 October 2021 that it ‘Is requesting Eskom to submit a new application in line with the revised principles which are to be approved once the consultation and internal Nersa approval processes are finalised’.

“Eskom has no way of knowing what methodology will govern its tariff application and therefore is unable to identify what issues to address in its application,” says Cassim.

To add insult to injury the Department of Mineral Resources and Energy has indicated that it is reviewing the Electricity Regulation Act (ERA) and the Electricity Pricing Policy (EPP) that the methodology derives from. Cassim says it does not make sense to change the methodology before there is clarity about any changes that may follow in this regard.

Read: Same old funding model can’t keep South African cities going or serve resident

Cassim says “the logical place to start, and indeed the only lawful place to start, is with the amendment of the ERA and EPP to give effect to the new approach”.

“This would then guide the making of future subordinate legislation.”

The Nersa decision was irrational, procedurally unfair and unlawful, argues Cassim.

“The new methodology consultation paper is not particularly clear, but the one feature of it that is clear is that it proposes to reject the current approach of using ‘allowable revenue’ to determine Eskom tariffs,” says Cassim.

The R50bn issue

Several earlier court orders and Nersa decisions however provide for a total of about R50 billion due to Eskom because of flawed Nersa decisions.

This must be added to its allowable revenue and a move away from the concept of allowable revenue will make these orders incapable of being implemented and deprive Eskom of these amounts.

Cassim says “it is no exaggeration to say that, for the reasons given above, there is a risk of catastrophic harm to Eskom and South Africa” unless the urgent order to set aside Nersa’s rejection and compel it to process the rejected application in terms of the current methodology is granted.

This would be in line with the alternative proposal supported by half of the voting Nersa board.

Of ‘national importance’

It is of “national importance because without a validly determined tariff for 2022/23, Eskom will be financially unsustainable”.

“Eskom will have zero revenue for the FY 2022/23. The required revenue to allow Eskom to continue operating will be more than the total allowable revenue for the 2021/22 financial year of over R260 billion,” says Cassim.

“Moreover, because more than R350 billion worth of Eskom debt is linked to over R900 million in interlinked national government guarantees, if Eskom’s finances collapse, the finances of the entire National Government are at risk.”

Eskom will approach the Deputy Judge President with a request to schedule the hearing of the urgent application before December 1, assuming that a ruling will be forthcoming within two weeks thereafter to ensure the completion of the tariff determination in time for the tabling in parliament by March 15.

Nersa will be hosting virtual stakeholder workshops about its new proposals on October 18 and 22.

Read: Electricity: Who pays more?

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List Eskom on the JSE. This is nonsense! The place to raise capital is on the JSE, not from taxpayers or government or consumers!

Eskom has every right to go to court, on this matter and I hope they are successful.

Eskom deserves the support of every South African, after all the successful changes, that were made over the last 3 years.

The Eskom today, is very different from the Eskom from 2 or 3 years ago.

The Eskom executive team has been replaced and they now have a competent CEO. Incompetent managers have resigned, been replaced or terminated.

They have improved their supply chain management and in so doing, reduced costs.

They have actively attempted to recover bad debts from non-paying municipalities and the debtors age analysis, is much healthier.

They have also reduced their debt and are in a significantly better financial position.

We should be all be grateful to Eskom, for keeping the lights on under difficult circumstances.

Before you go and sing their prayers # 1 This took a LONG time to fester # 2 These actions were forced. # 3 Who’s to say it’s going to work now??? Just think of a;; the petrol/diesel generators they have been running ???????Elections have consequences & decisions have costs!

We should be grateful that sanity once again prevails at Eskom, however, unfortunately it’s impossible to make a silk purse from a sows ear!
No matter how competent the new CEO and management is, the previous administrations destruction and lack of attention to this SOE has resulted in a catastrophic failure.
Perhaps the only choice is partial privatization like with SAA whereby the Gov shares ownership and denationalized Eskom? Not sure who would take up the balance of this catastrophe but I’m sure the Chinese or Russians would jump at the chance…after all, the Indians tried and failed!

We should be grateful? Your argument is basically this: Even though R100 was stolen / wasted, we should all be grateful that R10 has been saved / recovered.

Between Eskom load shedding (rolling blackouts) and failing municipal infrastructure, I’ve definitely not experienced this “for keeping the lights on” that you speak of.

Even though private electricity generation has increased significantly and peak demand has decreased over the last decade, Eskom is still not able to generate the required power to avoid load shedding.

I take my hat off to de Ruyter for attempting to turn Eskom around, though in my opinion the political will is still not there to do this, i.e. de Ruyter stating the obvious that Eskom needs to transition to a more sustainable future and that this is the most opportune moment start this process. Mantashe then comes the next day and says that coal is the way to go?!?!?

LOL – A state owned entity taking a state department to court over its incompetence.
Buy popcorn !!!

It shows that the ANC cannot rule, and we now have absolutely everything by proxy, including electric tarrifs!

Well with a 175 % increase over 10 years and WE STILL HAVE POWER OUTAGE’S one can only wonder what MORE money will bring us??????????

More BMW’s and expensive holidays and weddings for F&F – Family & Friends in the cadre collective.

Eskom is proposing two 20% increases.

I am at 318c/kWh counting availability admin and energy fees. Two 20% increases puts me at 460c/kWh.

That means I can run on diesel cheaper than grid as I anyway have gennies for grid unreliability. Throw in solar without batteries and I can run MUCH cheaper than grid. That is after considering that half my diesel cost is RAF and road taxes that should be irrelevant to my wheel-less generators.

I would like Eskom to explain to a court how a private consumer of 1MW scale can generate energy cheaper than Eskom can at 40,000MW scale.

That’s easy, you have no staff =)

You don’t have excess staff paid at above the going rate and you don’t have to fund interest on moneys borrowed to fund ANC cadres and the ANC.

I enjoy the comments of Eff Commisioner. Of course most of what he says is incorrect. But it is a breath of fresh air and he never offends other commentators.

I always skip straight to the comments to see if Sensei (an uncertified genius) has commented. Recently I also look for the Eff dude’s comments. Like I say, it’s non ofeensive and a breath of fresh air albeit ideological and often illogical

If you need to be entertained, go buy the huisgenoot.

Comment of the month! Bwahahahaaa!!!

There was a time, 100 years ago, when the Afrikaners identified with communism. This was during the times of the Rand Rebellion that was violently crushed by Jan Smuts.

I can understand why some people support socialism and communism. If you don’t own property, and your ancestors never owned property, and there are very few prospects of you ever owning property, then it is natural to support policies that redistribute other people’s property to you.

They say that if you are not a socialist by the age of 20, you haven’t got a heart. If you are still a socialist by the age of 25, you haven’t got a brain.

Sensei, you are incorrect – Afrikaners never identified with communism !

They were in effect what would be called ‘Libertarians’ today [ probably the best ideology of human nature that should exist, yet many confuse Libertarian and Communism, despite the fact that the 2 are diametrically opposed ]

Hence the Afrikaans alignment with Weimar Germany and side of the Germans in WW2, as Hitler was totally anti-communist and thus his whole precept for the Eastern Front war.

Realitybites, Afrikaners were mostly libertarian and their lifestyle of independence confirmed this. They are true libertarians who lived the attributes of independence, accountability, individualism, freedom of choice, ethical behaviour, and property rights. Afrikaners were left destitute after the Anglo-Boer war and the mines offered the only employment opportunities for many. These workers were unskilled and poor and they arranged themselves into a labour union to further their own interests. The black and Chinese miners posed a threat to the interests of the Afrikaner miners.

Between February and December 1920, gold nose-dived from 130 shillings an ounce to 95 shillings an ounce. The mining houses planned to discharge 10 000 white mineworkers to cut costs. The miners united under the banner of the “Federation of Labour.’ Labour Unions are communist, per definition and these workers also moved under the banner of communism. Their leader was also the leader of the communist party.

Therefore, I confirm my initial statement.

Fire the “duplicates” ie the 20000 extras on set and you will save R14 billion a year…………

When ever I see an Eskom cruiser with the driver in sunnies I always wonder if he is a duplicate or one that can.

PWGG, the odd’s are well and truly stacked in favour of the duplicate option, seems like there are very few “can’s” in the mix!

Eskom’s cost base needs to be urgently tackled. Too many heads at too high salaries.

Eskom must understand that others are not going to be help liable for their devastating legacy of corruption and incompetence.

that’s what they said about SAA…

Once Eskom proves that it is an efficient and highly reliable and productive organization optimizing every cent in its operating costs, then we can review the tariff increases.
This SOE is so bloated unreliable and inefficient in terms of service delivery that just demanding crazy increases year on year is not the way to go.
Eskom has to be re-engineered and needs to work backwards from an acceptable tariff back to what margin is required and then match their operation to what remains.
This is a pipe dream, unfortunately!

NERSA is very ineffective in protecting the consumer against huge increases by Eskom. I thought that was part of their mandate?

TaxBusta:

I have to come up for NERSA. I have a dispute with my council and it did take long, but NERSA did persevere and push back the abusive tariff.

End of comments.

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