Eskom to fight in High Court for higher tariffs

Takes Nersa 5.23% determination on review.

Eskom chairman Jabu Mabuza was almost apologetic on Thursday when he told journalists that the utility is proceeding with a court review of energy regulator Nersa’s decision to grant it a mere 5.23% tariff increase for 2018/19.

Eskom applied for 19.9%.

The increase has already taken effect and comes as Nersa concluded its public hearings in relation to Eskom’s application for further tariff increases to cover the R66 billion it hopes to recover for under-recovery in past years.

Nersa is expected to announce its decision in this regard on June 21. If granted, this would in itself add 2-3% per year for several years to the annual Eskom tariff determination.

Mabuza said Eskom does not consider the 5.23% increase granted for 2018/19 to be cost reflective and will proceed with the legal action “in the next ten days”.

In the meantime, the sheriff delivered the summons to Nersa that very morning, Moneyweb has learnt.

Mabuza almost made it sound as if Eskom has convinced Nersa that it was wrong, but could not revise its own decision. Court action would therefore be the only way to address the small tariff increase, he explained.

There are “no hard feelings”, Mabuza said, and Nersa “doesn’t take it personally”.

Whether Nersa and Eskom really are on the same page will only become clear when Nersa indicates whether it will defend the action.

Eskom was, however, far less conciliatory when it addressed the Parliamentary Portfolio Committee on Energy on March 28.

Eskom then pointed out that three percentage points of the 5.23% increase will pass right through Eskom’s books to independent power producers from which Eskom is obliged to buy renewable energy. Only 2.23 percentage points of the increase would therefore be for the utility’s own benefit.

Eskom further indicated that the Nersa decision contained numerous mistakes and inconsistencies.

It criticised Nersa for assuming that it could close two power stations overnight and save the associated coal and staff costs. In fact, Nersa announced its decision, with the recommendation to close two power stations, in December and assumed the cost savings from that would be realised in the financial year that started four months later in April.

That is unrealistic, Eskom explained. There are legislative processes to follow before this can be done.

Eskom further stated that contrary to its own methodology, Nersa used different reference points for different cost items. Some of these reference points date as far back as 2008.

It also pointed to some blatant mistakes Nersa allegedly made.

Mabuza said if successful, Eskom expects the court to send the matter back to Nersa to determine the correct tariff increase afresh.

It is unclear how long the review could take and, if it comes to that, what process Nersa would follow to redetermine the tariffs.

This move by Eskom is expected to once again increase the uncertainty among electricity users about the tariff path, something business has been complaining about and which is contrary to the very purpose of the Nersa methodology to determine tariffs.

Listen to the podcast: Eskom wage offer a ‘declaration of war against workers’ – NUM

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If Eskom want a + 19% increase what is their basis for the increase. This is a typical example of a monopoly gone rogue and will soon conscript itself to that of the dodo. This operation knows absolutely nothing about efficiency or productivity. If they want an example of their fate they have only to look at the Post Office for an example of extinction

it would be criminal towards public to increase Eskom charges and levies – acting as a looting and stealing station having double the required personel and paying the double the reasonable salaries, Eskom charges should be cut by 40% – court should not take part in this criminal process

ESCOM are 160000 overstaffed, they can start there first.

If the courts agree to any further increase then the justice system has collapsed.

That’s too bad, because the justice system collapsed years ago: it now exists mainly to benefit its practitioners.

In a free-market system the consumer decides what he can afford, and then buys from the company that delivers the best product and service at the lowest price. It forces companies to employ individuals that offer human capital of the highest value.

In a socialist economy the management and employees of the company decide what they want to earn, how little work they can get away with, how much incompetence and criminality they can add onto the system, and then they force that price down on the consumer. This is why the worst people rise to the top in a socialist society. The system incentivizes and enables the criminals of the lowest mental capability to rise to the top. People with a deficit of human capital rise to the top in a socialist society. Just look at the SOe’s and Luthuli House.

They can legislate the price of electricity but they can’t force me to buy it.
Go solar.

We have had a substantial body of commentary from suitably qualified people knowledgeable about the power generation industry, who have pointed out the Eskom is grossly overstaffed. If this is so why is there no move to get staffing down to economic levels and thereby producing more affordable electricity. Is it due to a plethora of ill qualified staff who can’t cut it, or just to gross mismanagement? Either way some sensible decisions need to be taken and the situation rectified. The ongoing demand for higher and higher tariffs will result in higher and higher inflationary pressures and more demands on the public purse already stretched beyond belief. Between Eskom and SAA we are pouring money into a bottomless pit from which it will take decades to recover if at all.

Perhaps if Eskom focused on improving its efficiencies and becoming a world class organization it would not need to mask its incompetence through consistently above inflation price increases

Eskom is the SOE with the largest impact on the economy and hence social stability. It simply can’t be inefficient. The first entity that needs radical changes.

End of comments.

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