Eskom hits back at Ramaphosa on tariffs: Costs don’t just go away

According to Eskom, it is not legally possible to charge a price for electricity other than that set by Nersa.

David McNew/Staff/Getty

  • Earlier this week President Cyril Ramaphosa said he had asked Eskom to halt an 18.65% tariff hike amid the energy crisis.
  • South Africa’s national energy regulator is the only authority that sets the price consumers can be charged for electricity, Eskom says.
  • The decision of the regulatory authority can only be challenged in court.
  • You can find more financial news on the News24 Business homepage.

Those “damaged” by the upcoming 18.65% increase in electricity tariffs will have to file a court petition to challenge the energy regulator’s decision, utility Eskom said.

This comes days after President Cyril Ramaphosa told delegates at the ANC provincial conference in Free State that he had asked the utility to halt tariff hikes amid ongoing load shedding. The tariff is scheduled to start in April.

In response to questions from News24, Eskom said South Africa’s national energy regulator (Nersa) is the only authority in the country that can set the price consumers can be charged for electricity. Nersa also follows an “extensive” public participation process to gather input from various stakeholders and takes into account the costs Eskom will incur before deciding on the final outcome.

Nerssa allows Eskom to recoup “efficient costs,” Eskom said. These relate to obligations such as coal contracts, independent power generator contracts, diesel purchases, performing maintenance, employee contracts and debt obligations.

“If Eskom is not reclaimed by the consumer, the burden on the taxpayer increases. So efficient costs need to be reclaimed – they don’t just go away,” the utility said.

It added that the only way to challenge Nersa’s decision is to file an application with a Supreme Court to review and overturn the regulator’s decision.

“Neither Eskom nor any other authority can determine electricity prices, Nersa cannot change its own decision unless it is reviewed in court. Once a decision has been made, Nersa has no authority to review its decision. It is not legally possible to ask for prices other than those determined by Nersa.”

– Eskom

UJ professor Hartmut Winkler, who studies energy issues, similarly highlighted Nersa’s role in setting the price of electricity. He argued that if Eskom did not implement the tariff increase, a compromise would be required, with the government providing some support to make up the deficit that utilities are facing.

Winkler warned that if Eskom complied with the president’s request, Eskom would set a precedent where in the future a president could step in again and demand that a price increase be postponed.

Peter Attard Montalto, CEO of Intellidex, does not believe Eskom would comply with the President’s request.

“This kind of top-down populist interference has huge downsides — including crime by directors, a large sales tax hike to fund more bailouts, and the destruction of credibility around how users are paid [principle]. All of this means that despite the board’s advice, the president’s request is unlikely to be heard,” he said.

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