Eskom Finance

Eskom caps 2021 extra-revenue claim at R23bn, but tells court anything less will be ‘disastrous’

Eskom caps 2021 extra-revenue claim at R23bn, but tells court anything less will be ‘disastrous’

Photo by Creamer Media

29TH JANUARY 2021

BY: TERENCE CREAMER
CREAMER MEDIA EDITOR

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State-owned power utility Eskom indicated during a court hearing on Friday that it would not seek to recover more than R23-billion in additional revenue through the tariff during its 2021/22 financial year, implying that any possible hike implemented on April 1 would be capped at about 15.5%.

Advocate Matthew Chaskalson, who acted for Eskom, also told Justice Joseph Raulinga that any amount less than R23-billion would be financially unsustainable for the utility and potentially “socially disastrous”, as yet more fiscal resources would have to be diverted from other social needs to shore up Eskom’s finances.

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Eskom approached the court last year to have R23-billion of a larger R69-billion equity injection, unlawfully removed by the National Energy Regulator of South Africa (Nersa) from its allowable revenue, added back during the upcoming financial year.

The application was made using Section 18 of the Superior Courts Act in a bid to have orders made in a July 28, 2020, High Court judgment executed, pending an appeal of the judgment to the Supreme Court of Appeal (SCA).

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The High Court ruled that Nersa’s decision to exclude a R69-billion government equity injection from Eskom’s allowable revenue was unlawful and ordered that an amount of R23-billion be added back during Eskom’s 2021/22 financial year.

The R46-billion balance should be placed, the order stated, in the 2022/23 and 2023/24 tariff years, which would fall under the next multiyear determination period, yet to be adjudicated by the regulator.

In a hearing held virtually in line with Covid-19 precautions, Chaskalson argued that the court-ordered amount could be offset against revenue already secured in recent determinations made by Nersa.

The day before the hearing, Nersa announced that Eskom was entitled to recover an additional R6.6-billion in the upcoming financial year, in line with its decision that half of the R13.2-billion granted to Eskom following its adjudication of a 2018/19 regulatory clearing account (RCA) application be liquidated in 2021/22.

In addition, Nersa announced that Eskom would be allowed to claw back a further R6-billion, following a court-ordered re-adjudication of three RCA applications for the 2014/15 to 2016/17 financial years and a supplementary tariff application for the 2018/19 financial year.

However, Nersa did not announce an implementation timetable, indicating that the final liquidation schedule would be decided only by late February.

Chaskalson said that Eskom was, therefore, requesting a court order granting it a further R16.4-billion to close the residual gap between the additional revenue officially approved by Nersa and the R23-billion required to remain financially sustainable.

Should Nersa allow for the full additional R6-billion approved on January 28 to be liquidated in 2021/22, the amount granted by the court could be reduced to about R10-billion.

Ahead of the hearing, Nersa confirmed that the 2021/22 tariff increase would be higher than the 5.22% increase originally sanctioned as part of the fourth multiyear price determination, made in early 2019.

The liquidation of half of the R13.2-billion approved following Eskom’s 2018/19 RCA would translate to a hike of 8.12%. Should the full additional amount of R6-billion approved on January 28 be recovered in the same financial year, the tariff increase would be 10.95%, or should only half were liquidated 9.53%.

In response to Eskom’s application to have the 2021/22 tariff hike supplemented further through a court order, Nersa’s advocate, Ngwako Maenetje, argued that the utility’s application should be rejected, as it failed to meet the threshold required by the Section 18 of the Superior Courts Act.

Eskom not only had to prove that it would be irreparably harmed should the order not be executed, but that Nersa would suffer no irreparable harm. In addition, it had to prove that there were exceptional circumstances that made it necessary for the court to intervene.

Maenetje argued that the recent adjudications made by Nersa to grant Eskom additional revenue would be sufficient to militate against the utility succumbing to a liquidity crisis in the upcoming financial year.

He also argued that there was sufficient scope for Eskom to recover the disallowed revenue through the RCA mechanism.

By contrast, Maenetje argued that both Nersa and electricity consumers would suffer irreparable harm in the event that the order was executed, and the regulator prevailed in its SCA appeal.

He also argued that the circumstances were not exceptional, arguing that a review of a decision of a regulator by an aggrieved applicant was a “routine occurrence”.

Chaskalson put forward several reasons for why the circumstances were exceptional, including the “unprecedented” misappropriation of a government equity injection, Nersa delays and a “contemptuous” public statement of Nersa’s Nhlanhla Gumede, who in an ENCA interview gave the categorical assurance that High Court order would be implemented.

Maenetje argued that Gumede’s statements had been explained in an affidavit, indicating that they were made on the basis that Nersa had decided to take the order on appeal.

Raulinga reserved judgment, but indicated he was aware of the fact that it should be made well ahead of the March 15 deadline for Eskom to submit its tariffs for approval in line with the Municipal Finance Management Act. 

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