The Steel and Engineering Federation of Southern Africa (Seifsa) has welcomed the decision by the National Energy Regulator of South Africa (Nersa) to appeal the High Court judgment that set aside Nersa’s decision on Eskom’s fourth Multi-Year Price Determination (MYPD4) for the 2019/20, 2020/21 and 2021/22 financial years.
In a scathing judgement made on July 28, the court declared as illegal Nersa’s decision to deduct a R69-billion equity injection into Eskom from its allowable revenue for the period 2019/20 to 2021/22 and has instructed that the full amount be added back to the utility’s allowable revenue over the coming three years.
Ultimately, this will increase the 2021/22 tariff from the 116.72c/kWh approved on March 7, 2019, as part of the MYPD4, to 128.24c/kWh.
Under Nersa’s original determination, tariffs were meant to increase by only 5.22% on April 1, 2021.
Seifsa CEO Kaizer Nyatsumba says the federation shares Nersa's concerns that, if left uncontested, the judgment will not only disrupt the beleaguered industry, but it will further suppress broader economic recovery, considering the current threat facing the economy.
“We believe this appeal is of utmost importance as the judgment undermines Nersa’s ability to ensure electricity consumers are not burdened by Eskom’s financial inefficiencies,” he adds.
Nyatsumba further points out that the ruling is bad news for the metals and engineering sector because local companies will have to absorb additional shock in the form of increased electricity prices, at a time when the country is buckling under a struggling economy, aggravated by the negative impact of the Covid-19 pandemic.
He says that, as energy is an essential input to local businesses and represents a large share of the turnover of primary steel producers, any further increase in electricity costs will have a negative ripple effect on other subsectors, further slowing down production and growth in the sector and worsening the country’s unemployment crisis.