Judge Jody Kollapen has ordered that Eskom’s revenue application for the 2022/23 financial year be decided by the National Energy Regulator of South Africa (Nersa) by February 25 and that it be adjudicated in line with the multiyear pricing determination (MYPD) methodology published in 2016.
The ruling follows Eskom’s application to have Nersa’s decision to reject the utility’s revenue application set aside as unlawful.
Eskom formally lodged its MYPD5 application on June 2, but the Energy Regulator rejected it on September 30 on the basis that it was prepared using a methodology that it deemed to have expired.
No replacement methodology was in place, however, with Nersa instead initiating public consultations on the “principles” that should govern any new methodology.
To ensure a tariff decision was made in time for implementation on April 1, 2022, Nersa proposed that Eskom prepare a new application incorporating those principles, which were finalised on November 25, but which had not yet been formally communicated to Eskom by the date of the court hearing on December 1.
In his judgment, published with reasons on December 3, Kollapen ruled that Nersa’s proposed option for determining the tariff was “both unlawful as well as impractical”.
“It is unlawful in that it proposes a route directly in conflict with the obligation created for Eskom by Section 42(2) of the Municipal Finance Management Act (MFMA) and it is impractical in that it proposes a tariff determination be submitted and decided upon, including public comment thereon, on the back of a non-existent methodology.”
The MFMA section referred to compels Eskom to give the National Treasury and the South Africa Local Government Association clear notice of an intention to increase the price of electricity and the opportunity to comment thereon – a process that typically take 40 days.
The judgment also rejected Nersa’s assertion that the MYPD4 methodology was timebound, arguing that history points to the fact that the methodology endures until it is changed or replaced.
“Given the need to at all times have a methodology in place for the reasons already given, Nersa’s suggestion that MYPD4 is timebound is not sustainable.
“It does not make any business sense, it is impractical and leads to a legal lacuna.”
Kollapen also states that Eskom has made a prima facie case “that it is not only entitled to but obliged to apply for a tariff determination for 2022/23 and further, that it was justified in doing so on the basis of MYPD4”.
“Whatever the merits of the Eskom' tariff application may be it must follow that if the application is not dealt with legally and in accordance with the prescribed procedures there must be a real risk of irreparable harm to Eskom in their attempts to secure a tariff that accords with the principles set out in the Electricity Regulation Act.
“This is turn has consequences for the viability of Eskom’s operations as well as its liquidity.”
In his order, Kollapen also set out a timetable for the determination of the 2023/23 tariff, which states that:
- Eskom’s revenue application submitted on June 2, 2021 be published on December 8, 2021;
- the public have until January 14, 2022, to make representations on the content of Eskom’s application;
- public hearings on the merits of Eskom’s revenue application be held between January 17 and 21, 2022; and
- that Nersa shall make a final decision on Eskom’s application by February 25, 2022.
The timetable is in line with the requirement to table a final determination in Parliament before March 15, 2022, in accordance with the requirements of the MFMA.
While the contents of Eskom’s 2022/23 application have not yet been made public it has been reported that the utility would be seeking a tariff increase of about 20% for the coming year. However, the utility rarely receives a tariff in line with its request.
“The decision by the High Court comes as a relief as it will contribute to the stability of the electricity industry and thereby the economy of the country,” Eskom GM for regulation Hasha Tlhotlhalemaje said in response to the judgment.