‘Don’t punish Eskom for it,’ court hears.
Energy regulator Nersa entered the controversial R54 billion settlement with Eskom earlier this year because it would help it avoid court scrutiny that could “expose Nersa further”.
This was disclosed in the High Court in Pretoria on Wednesday during the hearing of Eskom’s application to review the regulator’s determination of its revenue for the current and next two financial years.
Eskom initially applied to have the decision, which was announced in January, remitted to Nersa to correct mistakes it claimed Nersa made to the value of R107 billion.
Nersa, however, admitted some of the mistakes and settled the matter with Eskom for R54 billion, which they agreed would be additionally recovered from electricity tariffs over the next two years and beyond.
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Impact on electricity tariffs
This resulted in:
- An additional 3.4 percentage points average tariff increase in 2026/27, bringing the total tariff increase to 8.76% instead of the 5.36% announced in January; and
- An additional 2.63 percentage points in 2027/28, meaning the tariffs will increase by 8.83% instead of the 6.19% announced in January.
This would account for R35 billion of the total of R54 billion, while the remaining nearly R19 billion would have to be recovered in subsequent years.
The settlement was never disclosed publicly, until Moneyweb wrote about it in August.
It will only take effect if made an order of court, which is still pending.
AfriForum and Minerals Council SA both applied to intervene in the matter, and their arguments against the settlement, as well as Eskom and Nersa’s argument in favour of it, were heard on 10 December.
Both intervening parties referred to Nersa’s utterances in its record of decision, which shows that the settlement was at least partially motivated by a desire to cover its own tracks, rather than by the interests of Eskom or the public.
It stated: “The other benefit of entering a settlement with Eskom is that the settlement becomes binding between the parties and achieves the relief sought by Eskom, [and] does not enable the ventilation of the details in open court, which can expose Nersa further.”
Nersa further wanted to avoid a situation where the court issues an order that would bind it in future, thereby limiting the way it exercises its powers.
It motivated the settlement as follows: “It further removes a space for a just and equitable order, which the court can determine the regulatory scope and set the decision that may have to be abided by.”
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Nersa’s motives
Advocate Etienne Botha SC for AfriForum accused Nersa of acting with ulterior motives, and pointed out that this comes on the back of the criticism of the same court earlier this month in a case concerning Nersa’s handling of municipal tariff determinations.
The court then criticised Nersa’s unilateral declaration that consumers were not entitled to see what it costs municipalities to supply electricity.
“It is a public watchdog that has, due to its privacy policy, kept the public in the dark about matters that directly concern the public,” the court stated.
Botha argued that no entity of state may use any judicial mechanism for any other purpose other than the administration of justice, which is what Nersa was doing.
The draft order was therefore unlawful and against public policy and should not be made an order of the court, he added.
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He said Eskom and Nersa are seeking to avoid meaningful public participation by entering into a settlement even though they differ about what the actual shortfall is – anything between R31 billion and R63 billion – and simply came to a compromise somewhere in between.
He said consumers and other licensees who are affected by the decision must be heard.
Botha said the court cannot confirm the draft order, because it isn’t just a rubber stamp and does not have the necessary information before it to consider it meaningfully. Nersa did not provide the record of its decision and failed to file an answering affidavit to Eskom’s original challenge.
Advocate Gilbert Marcus SC, representing the Minerals Council, emphasised that this is not a normal settlement between two private entities, but rather a matter in which two state entities are deciding a matter that affects every person in the country.
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Eskom and Nersa’s defence
Advocate Adrian Friedman for Eskom acknowledged that Nersa’s statement about the “benefits” of entering a settlement were unfortunate and asked that Eskom not be punished for it.
He argued that AfriForum and Minerals Council SA should not have been part of the proceedings and the court should only focus on the proposed remedy, on which Eskom and Nersa agree.
He said it is not the first time the two parties entered into a settlement and that there has never before been a need for another round of public participation.
He added that Eskom would suffer serious prejudice if the matter was delayed as it relates to its going concern status, and asked that the settlement be made an order of the court.
Judgment was reserved.
This article was republished from Moneyweb. Read the original here.
