State-owned utility Eskom says the rejection, by the Energy Regulator, of its latest allowable-revenue application has created a regulatory vacuum for the electricity supply industry.

“Eskom is accordingly considering how to proceed, and is taking advice on its position following the National Energy Regulator of South Africa (Nersa) decision,” the utility said in a statement on Friday.

On September 30, the Energy Regulator rejected Eskom’s fifth multiyear price determination (MYPD5) submission for the three financial years from 2022/23 to 2024/25.

Nersa, which launched a consultation process on September 24 to review the price determination methodology, argued that the application was based on the MYPD4 methodology, “whose applicable control period is ending on 31 March 2022”.

“After due consideration of the rationality and legality of applying an expired MYPD4 methodology and whether this was in the public interest, the Energy Regulator rejected Eskom’s MYPD5 application.”

The Energy Regulator will request Eskom to submit a one-year interim application for the 2022/23 financial year, “preferably based on the principles of a new approach that is under consideration”.

Nersa has published a consultation paper on a new price determination methodology and set October 22 as the closing date for written submissions, with public hearings to follow from October 25 to 29.

Eskom, which submitted its MYPD5 application on June 2, argues that the prevailing methodology remains valid, until replaced.

It argues further that, even if a new methodology were to be developed in time, Eskom would not be able to make a new price application for implementation by April 1, 2022, until full statutory compliance, due process and legislative consultation have been complied with.

“The required timelines for approving a new methodology, and for Eskom submitting a new application in accordance with the new methodology, are exceptionally short, and create the real risk that a new tariff will not be in place by 1 April 2022.

“Eskom also cannot, as suggested in the Nersa communication, submit an application on a methodology which is as yet unknown.

“A noncompliant application and subsequent determination will leave the resulting tariff decision open to legal challenge, thereby creating substantial risk not only for Eskom, but also for municipalities and other buyers of electricity,” the utility said in a statement.

“Nersa’s rejection of Eskom’s MYPD5 application has created a regulatory vacuum for the electricity supply industry in South Africa,” it warned.