Eskom takes Nersa’s tariff application rejection to court

Eskom CFO Calib Cassim says Nersa’s rejection is irrational, procedurally unfair and unlawful.

Eskom has filed an urgent application in the Gauteng High Court after energy regulator Nersa rejected its initial tariff application for the period 1 April 2022 to 31 March 2025 that was submitted in June.

Nersa rejected the tariff application in September and invited Eskom to prepare a new application in accordance with a future method that still has to be determined.

In an affidavit filed in support of the application, Eskom CFO Calib Cassim said the tariff has been rejected “in favour of a fanciful tariff determination process that is simply incapable of lawful completion in time for the 15 March 2022 deadline”.

He explained that this may leave the power company without any lawful way to charge tariff and generate revenue, which will require the government to pay R300 billion to keep Eskom going for the next financial year.

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’,” Calib said.

He added that Nersa has given Eskom no guidance as to what those principles might be, simply that it has 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,” Calib said.

In addition, 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.

Calib explained that it does not make sense to change the methodology before there is clarity about any changes that may follow in this regard. He said that 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”, which would then guide the making of future subordinate legislation.

The Nersa decision was irrational, procedurally unfair and unlawful, argued Calib.

He explained that it is of “national importance” to set aside Nersa’s rejection, because without a validly determined tariff for 2022/23 Eskom will be financially unsustainable. “Eskom will have zero revenue for the financial year 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.”

Eskom will approach the deputy judge president with a request to schedule the hearing of the urgent application before 1 December, 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 15 March.