Eskom extra R54bn from tariffs heads to court – again

Energy regulator Nersa may have to explain to a judge why it decided once again in February this year to grant Eskom an additional R54 billion in revenue – and to push up electricity tariffs to get the money.

This comes after Nersa failed to publish the reasons for its decision, as required by law.

In what could be described as a comedy of errors, AfriForum is heading back to court to have Nersa’s February redetermination of Eskom Generation’s Regulatory Asset Base and allowable revenue for the three financial years ending 31 March 2028 reviewed and set aside.

It is, however, no joke for consumers, as this continues to hit their pockets and increases uncertainty about electricity pricing.

The matter dates back to January last year, when Nersa set the amounts Eskom would be allowed to recover from consumers through electricity tariffs:

• For 2025/26, it approved revenue of R384 billion – a tariff increase of 12.74%;
• For 2026/27, revenue was set at R409 billion – a tariff increase of 5.36%; and
• For 2027/28, at R436 billion – a tariff increase of 6.19%.

This was considerably lower than the amounts Eskom applied for, which would have meant increases of 36.15%, 11.81% and 9.10% over the three-year period.

In June last year, after studying the reasons Nersa gave for its decision, Eskom instituted review proceedings, arguing Nersa had made big mistakes.

Secret settlement

Nersa decided not to oppose the application and started negotiating with Eskom. This led to a secret settlement in terms of which Eskom would be entitled to a further R54 billion in revenue.

The discussions and settlement were conducted behind closed doors, and Nersa only disclosed the arrangement in August after Moneyweb got wind of it.

This followed an earlier settlement worth R40 billion, linked to errors Eskom found in Nersa’s decisions with tariff implications in each year from 2015 to 2021. By the time the matter became public, the decision had already been made an order of the court.

The R54 billion settlement, however, had not been confirmed by the court at the time, and AfriForum and the Minerals Council South Africa intervened in the proceedings to oppose it.

In December, the High Court in Pretoria rejected the settlement and remitted the decision back to Nersa.

In his ruling, Justice Swanepoel said the R54 billion figure appeared to be a “thumb-suck” and that Nersa itself seemed unclear about what the exact number should be.

Avoiding ‘scrutiny’

It also came out that one of Nersa’s considerations behind the settlement was to avoid court scrutiny.

Justice Swanepoel said in his judgment: “Nersa was clearly embarrassed by its mistake. Its purpose in entering into the agreement was, at least partially, to avoid public scrutiny of its error. It also wished to avoid judicial scrutiny and a just and equitable order that may not have suited it.”

The regulator invited submissions from the public and received more than a thousand responses, but eventually took a decision that granted Eskom exactly the same additional amount as it would have received in terms of the earlier secret settlement – R54 billion.

As a result, tariff increases jumped from 5.36% to 8.76% in 2026/27, and from 6.19% to 8.83% in 2027/28.

“Given how it [the R54bn settlement] was arrived at in the first place, arriving at the same result a second time around is extremely unlikely. Even if it were possible, it would require careful consideration and good reasons at the time of the decision,” AfriForum said in its urgent court application.

Failure to publish reasons

However, Nersa has yet to publish the reasons for its decision.

This should have been done within 90 days, as required by the Promotion of Administrative Justice Act (Paja). According to AfriForum, that deadline expired on 10 June.

AfriForum said that despite repeated requests, Nersa had failed to provide the reasons. “Nersa likely withheld them to avoid disclosing the decision’s irrationality,” the organisation alleged.

The lobby group also accused the regulator of deliberately stalling to “mislead everyone”.

In correspondence with AfriForum, Nersa indicated that it had to send the draft Reasons for Decision document back repeatedly for “enhancements”.

AfriForum said, “given the responses AfriForum received to the request for written reasons, and Nersa’s to-and-fro, this creates the impression that convincing-sounding reasons may be fabricated as the need arises, rather than being formulated at the time of taking the redetermination decision”.

It further accuses Nersa of unlawfully discussing the matter behind closed doors.

AfriForum is asking the court to set aside the redetermination decision and order Nersa to do it all over again.

It wants the regulator to once again consult the public and consider the submissions before determining Eskom’s detailed tariffs for the 2027/28 financial year by 31 August.

Why it matters for consumers

The retail tariff decision is critical, as it forms the basis for determining municipal electricity tariffs.

The deadline is also part of a court-imposed timetable introduced after Nersa in the past repeatedly failed to finalise tariff decisions in time for municipalities to lawfully incorporate them into their annual budgets.

AfriForum is not seeking a retrospective order.

It said it “appreciates that the ship has sailed in respect of the 2026/27 financial year. If the redetermination is set aside in its entirety, it will be practically impossible for Nersa or any licensee to adjust electricity tariffs accordingly. It is in the interest of justice that the order of invalidity is not retrospective as far as it relates to the 2025/26 and 2026/27 financial years.”

The organisation has asked that the matter be heard on 14 July.

This article was republished from Moneyweb. Read the original here.