D-day for Eskom price hikes

NERSA TO DECIDE TOMORROW

National energy regulator meets to discuss ruling setting aside interim tariff increase.

The national energy regulator Nersa will at a special meeting tomorrow discuss the recent court ruling setting aside the interim tariff increase it granted Eskom on March 1 this year.

It says it will also discuss public hearings for pending Eskom Regulatory Clearing Account (RCA) requests for even more interim price hikes to cover losses in 2014/15 and 2015/16. Business leaders are reportedly concerned about what appear to be different interpretations of what exactly Judge Cynthia Pretorius ordered.

At first glance, the order might seem simple:

1. The Nersa decision of March 1 is reviewed, set aside and remitted back to Nersa;

2. All future RCA applications should be submitted and evaluated in accordance with the prescribed methodology;

3. Eskom and Nersa should pay the costs of the litigation jointly and severally.

Eskom spokesperson Khulu Phasiwe in a Facebook post a day after the ruling, criticised media reports when the court cancelled the Nersa price hikes. Many outlets reported the hike regime had been set aside, when the court had ordered it remain in effect until a solution is found, she said.

“The Court did raise concerns though, about the manner in which the RCA process was conducted, and has ordered both Eskom and Nersa to adhere to the MYPD3 regulations.”

Organisation for Undoing Tax Abuse’s (Outa’s) director legal services Ivan Herselman says Judge Pretorius in paragraph 122 referred to the original MYPD determination, that would see Eskom tariffs increase by 3.51% from April 1. In other words if the 9.4% increase is set aside, the 3.51% increase stands, but Nersa has to reconsider the RCA application, he argues.

If Eskom interprets it as if the 2016/17 tariff – which includes the RCA increase – will remain in force, they do not take proper cognisance of the context of that paragraph, Herselman says. But he points out the court did not order Eskom to repay the amounts already collected. Consumers could approach the court for an order in this regard.

The next question is how Nersa can reconsider the RCA decision, in the absence of a cure for the procedural flaws.

The causes for complaint are the absence of quarterly reports and price signals to customers, the absence of notice to consumers that there would be a deviation from the prescribed methodology, the fact that the submission was done out of time and the failure to assess the efficiency of Eskom’s procurement electricity from specific independent power producers (IPPs).

Herselman says Nersa could reassess the efficiency, but the causes are not curable. “I suspect for those reasons Nersa would have to conclude that it cannot consider the submission,” he says. The same defects also affect the new submission for an interim tariff increase for at least 2014/15 and perhaps the 2015/16 financial years, he says.

R11.2 billion in relation to the first RCA application could be lost to Eskom and even more from later applications, Herselman says.