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AfrElec COMMENTARY AfrElec

Eskom’s legal victory clears

the way for higher tariffs

Eskom can now add an extra 10% onto its tariffs after winning a major legal battle with
NERSA over how government subsidies are handed out, writes Richard Lockhart

SOUTH AFRICA ESKOM has secured a major legal victory over Cash injection
the National Energy Regulator of South Africa The decision shows just how little freedom
WHAT: (NERSA), paving the way for the higher tariffs it Eskom has to set its tariffs, meaning that they are
Eskom wins legal case needs to earn enough cash to pay down its debt. in no way cost-reflective.The arguments rests on
again NERSA, paving way South Africa’s High Court has set aside this how the government’s ZAR69bn ($4.18bn) cash
for higher tariff rises week an earlier decision by NERSA to deduct injection should be given to Eskom.
the government’s ZAR69bn ($4.18bn) subsidy The power regulator NERSA has ruled that
WHY: from Eskom’s allowable revenue for the 2019-22 this cash should be given to Eskom in the form of
The high court ruled that period. The court ruled that Eskom must now be tariff subsidies in a bid to keep bills lower for the
NERSA could not convert allowed to include this revenue in its tariffs for country’s commercial and domestic consumers.
a government subsidy the three-years from 2019. However, Eskom had claimed that these lower
into lower tariffs In a judgment delivered on July 28, the tariffs would lower its income and threaten its
Johannesburg High Court ordered that the first viability as a company.
WHAT NEXT: ZAR23bn ($1.39bn) should be added back into Eskom said that NERSA’s decision to con-
Power bills could rise by the revenue considered allowable for Eskom for vert the government’s ZAR69bn ($4.18bn) into
an extra 10% the 2021/2022 financial year. tariff subsidies was unlawful, and would put its
“There is simply no way for the harm caused finances in jeopardy.
by NERSA’s 2019/22 decision, to be rectified Eskom said that NERSA’s repeated refusal to
other than by reinstating the misappropriated raise tariffs by the rates wanted by Eskom had
ZAR23bn ($1.39bn) in each of the next three left the company unable to generate enough rev-
available financial years,” read the judgment. enues to service its debt.
Meanwhile, the court ordered that the aver- Indeed, the court said in its judgement that
age standard Eskom tariffs approved by NERSA the risk posed by a potential collapse of Eskom’s
for the 2021/2022 financial year would be finances would have a “catastrophic conse-
increased from ZAR1.1672 ($0.07bn) per kWh quences” on the state’s finances.
to ZAR1.2824 ($0.077bn) per kWh. Eskom, which posted a net loss of ZAR20.7bn

P4 www. NEWSBASE .com Week 30 30•July•2020