Business

‘SA bent over backwards for Eskom’: Nersa heads to court

2020-01-05 13:45

The National Energy Regulator of SA (Nersa) will take on Eskom in court next week over the power utility’s demand for a further R69 billion from the public purse.

Nomfundo Maseti, who is acting as Nersa’s full-time regulator member for electricity, filed opposing papers in the Pretoria High Court two days before Christmas. In her papers, she takes aim at Eskom’s incompetence and maladministration, which the public has been forced to cough up for.

Read: Loadshedding kicks in again but Eskom wants R1.8bn in bonuses

The urgent application relates to the R69 billion bailout that government gave Eskom. Nersa deducted this amount from Eskom’s approved revenue for the current tariff period, which ends on March 31 2022. According to Eskom, this, in effect, negated the bailout.

In her papers, Maseti conceded that Nersa’s approach was unusual. “But nothing about Eskom is normal,” she added.

City Press’ sister publication Rapport has previously reported that Eskom is challenging five Nersa electricity tariff decisions in three separate court cases. If Eskom succeeds in its application next week, electricity prices will rise in April (and in April 2021) by 16% – instead of by the 8.1% increase this year and the 5.22% increase next year that was initially approved by Nersa.

Calib Cassim, Eskom’s chief financial officer, argues in court papers that Nersa’s decision was irrational and unreasonable.

Maseti denies this and contends that the court should not interfere in decisions made by an independent regulator created by legislation. In respect of government’s R69 billion bailout, Maseti also reveals that Nersa found out about the lifeline, along with the rest of South Africa, when it was announced in Parliament. This is despite the legal obligation placed on Eskom to declare “all relevant information” to Nersa.

If Nersa had not deducted the bailout, she explains, it would have meant that Eskom would receive excess returns, and Nersa had already made provision for income required by Eskom to comply with its debt obligations.

Nersa must weigh up the public interest against Eskom’s interests, Maseti goes on to state, and the economy simply cannot afford to pay for Eskom’s bungling.

She explains in her court papers that, according to the prescribed methodology, Eskom is entitled to recover the costs it incurs for providing power through tariffs – as long as the costs are incurred prudently – as well as a reasonable return.

But Eskom is anything but prudent, Maseti implies.

She highlights the fact that Eskom has previously ignored Nersa’s decisions and solutions, choosing instead to follow its own “corporate plan” and borrow money to finance its overexpenditure.

Now Eskom is funding long-term projects with expensive, short-term debt, she argues.

Maseti says the court application by Eskom is simply an effort to escape accountability for its own poor management and procurement noncompliance, and that Eskom is exaggerating the “devastating effect” of Nersa’s tariff decision on its finances.

According to her, Nersa – as well as the public – have already bent over backwards to aid Eskom. In 2008 and 2009, tariffs increased by 27.5% and 31.3%, respectively. In the following tariff period, Nersa approved three consecutive tariff increases of about 25% a year.

The plan was that tariff increases would thereafter be commensurate with inflation. However, in the third year, Eskom asked that it be decreased to 16%. This was where the trouble started. Corruption at Eskom then began to take hold and costs spiralled out of control, argues Maseti.

. The urgent application will be heard on Wednesday. The review application for the 2018/19 tariff determination is set down for the last week of this month. The other review application regarding Eskom’s regulatory clearing account is expected to be heard a month later.

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January 26 2020