Electricity price hikes will ‘suppress economic recovery’ – NERSA on Eskom court ruling

Potential electricity price increases as a result of a Johannesburg high court ruling on Tuesday will “further suppress economic recovery,” the National Energy Regulator of SA (NERSA) has said.

The court ruled against NERSA and in favour of state power utility Eskom. It set aside NERSA’s decision to deduct a R69 billion government bailout from Eskom’s allowable revenue for the 2019/20, 2020/21 and 2021/22 financial years.

Electricity tariffs to increase

The court ordered that the R69 billion should be added to Eskom’s allowable revenue for the three years. In addition, it ruled that the average standard Eskom tariffs approved by NERSA for the 2021/2022 financial year be increased from 116.72 c/kWH to 128.24 c/kWh. 

Writing on Twitter, energy expert Anton Eberhard said municipalities are likely to “add their supply costs” over and above these approved tariffs.

“South Africans will be paying a lot lot more for electricity in the years ahead. We’re beyond the tipping point. Consumers choose alternative options and each year the utility sells less,” he wrote.

In a statement on Tuesday, NERSA also said the case was not merely between it and Eskom, “but rather a case of Eskom versus the South African economy and electricity consumers.”

“The judgment, if left uncontested, will not only disrupt the industry, but will further suppress economic recovery, considering the current threat that the country’s economy is facing,” it added.

Appeal ‘unlikely to succeed’

It said it was studying the judgement and would advise the public on the way forward in due course. Eberhard however noted that any appeal would most likely be unsuccessful.

“This is a very disappointing response from NERSA. They are in self denial. IMHO there is zero chance of an appeal being successful. Their decision to convert government’s bailout of @Eskom_SA to a subsidy for electricity users was clearly an error and subverted Cabinet’s intent,” he tweeted.

Meanwhile, Eskom’s chief financial officer Calib Cassim welcomed the ruling, which he said will pave the way towards the utility’s financial sustainability.

“The Judge was required only to make a decision on the recovery of the equity. Eskom welcomes this decision, which allows for Eskom to migrate towards a situation where it could become more self-sufficient and be in a position to recover efficient costs and reduce its dependence for further equity support from government,” he said in a statement.

Calib however emphasised that Eskom has put in place various measures to “protect the poor.” It is also in discussions with the Department of Mineral Resources and Energy to give special consideration to “certain vulnerable economic sectors.”

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