Eskom moves to secure R23bn granted by High Court for 2021, despite Nersa appeal

19th October 2020 By: Terence Creamer - Creamer Media Editor

 Eskom moves to secure R23bn granted by High Court for 2021, despite Nersa appeal

Eskom CFO Calib Cassim presenting the utility's case at MYPD4 hearings in 2019
Photo by: Creamer Media's Donna Slater

Eskom has launched a fresh legal bid to ensure that the automatic reintroduction of a R23-billion equity injection to its allowable revenue in 2021/22, as granted by the High Court in July, is not negated by the fact that the National Energy Regulator of South Africa (Nersa) has been granted leave to appeal the judgment.

In her July 28 judgment, Judge Fayeeza Kathree-Setiloane ruled that Nersa had acted illegally in 2019 when it removed a R69-billion government equity injection from the State-owned utility’s allowable revenue when adjudicating Eskom’s fourth multiyear price determination (MYPD4).

Removing the injection breached the MYPD methodology used to set wholesale electricity tariffs in South Africa and enabled Nersa to moderate the hikes approved for the 2019/20, 2020/21 and 2022/23 financial years.

Kathree-Setiloane ordered that the first R23-billion be added back automatically during the 2021/22 financial year, which would have the effect of increasing the electricity tariff to 128.24c/kWh on April 1 next year, rather than the 116.72c/kWh initially approved under Nersa’s MYPD4 determination.

Nersa was also ordered to add the R46-billion balance, in two R23-billion tranches, to Eskom’s allowable revenue for the 2022/23 and 2023/24 financial years, when adjudicating Eskom’s allowable revenue for the next tariff period.

On October 7, however, Nersa was granted leave to appeal the judgment to the  Supreme Court of Appeal (SCA).

The scope of the appeal was limited, though, to whether Kathree-Setiloane was correct in ordering that the first R23-billion be added back automatically from April 1, 2021, without referring the matter back to the regulator, as Nersa conceded on the merits of the case ahead of the July judgment.

In the application Eskom CFO Calib Cassim states that reintroduction of the R23-billion is urgent, as the utility would suffer irreparable harm in the event Nersa’s appeal, granted on October 7, rendered the July 28 order “nugatory”.

Cassim notes that the SCA is unlikely to have finalised the appeal prior to March 15, 2021; the deadline set in terms of the Municipal Finance Management Act for the finalisation of the Eskom tariff applicable to municipalities for the upcoming financial year.

Nevertheless, there was still time for the court to intervene to prevent the “catastrophic harm” to Eskom and the national economy that would be created by a liquidity crisis at the debt-laden utility – Eskom’s debt is regarded as unsustainable at more than R450-billion.

Cassim also argues that the application, made under Section 18(1) of the Superior Courts Act, can be justified on the basis of several “exceptional circumstances”, including a “succession of irregular decisions and delays on the part of Nersa that have unlawfully deprived Eskom of R146-billion-worth of revenue over the period 2015 to 2022”.

He also highlights media statements by Nersa’s Nhlanhla Gumede subsequent to the July judgment in which Gumede categorically dismissed any suggestion that the tariff could increase by either 10% or 15% next year, a statement described by Kathree-Setiloane during the appeal hearing as “irresponsible”.

Eskom has, thus, instructed its attorneys to approach Kathree-Setiloane to provide a timetable that “will ensure that the Section 18 application is set down as soon as reasonably possible” so that a judgment can be handed down “before the end of the court year”.