File picture: Reuters, Stephane Mahe
CONSUMERS in South Africa should brace for exorbitant electricity prices after the high court paved the way for Eskom to increase tariffs by a cumulative 33.8% in the next two financial years.
The National Energy Regulator of South Africa (Nersa) on Friday welcomed the North Gauteng High Court judgment dismissing the challenge against the revenue determination and tariff approval of Eskom’s fifth Multi-Year Price Determination (MYPD5).
The high court dismissed the judicial review applications on Nersa’s revenue determination and tariff approval of Eskom’s MYPD5 application for the 2023/24 and 2024/5 financial years.
The first tariff increase in the MYPD5 of 18.65% came into effect on April 1 for direct Eskom customers and July 1 for municipal users, and a second tariff hike of 12.74% is earmarked from April 1, 2024 for Eskom direct users, followed by municipal consumers from July 1, 2024.
The judgment followed applications by the DA and the South African Local Government Association (Salga), respectively, to review Nersa’s decision on Eskom’s MYPD5 revenue application for the 2023/24 and 2024/25 financial years, made in January this year.
The DA wanted the MYPD5 decision declared invalid and suspended while giving Nersa six months to remedy the situation.
It argued that the court should declare the need to increase electricity tariffs exponentially was due to the government’s failure to take expert advice, plan, or take action to meet the country’s electricity needs.
Salga also rejected the increases following consultations with municipalities, arguing that they were irrational and that certain considerations were not taken into account in making the decision.
Salga argued that the hikes would push municipal customers to alternative energy, negatively affecting municipal revenue, saying municipalities were particularly concerned about their ability to purchase bulk electricity at the new tariffs.
However, in its ruling on December 1, the high court found in favour of Nersa, saying that both the review applications of the DA and Salga must fail.
“When all is considered and the detailed and extensive reasons furnished by Nersa are compared with the attacks on its decisions, none of the review grounds pass muster,” reads the judgment.
“All relevant factors have properly and in detail been considered, the conclusions reached were neither arbitrary nor irrational and the issue of cross-subsidisation was considered at the appropriate stage.”
Nersa said on Friday it was in the process of studying the full judgment.
Eskom’s application for the 2023/24 financial year’s revenue was R351 billion, including Regulatory Clearing Accounts (RCAs) and court orders, but Nersa approved allowable revenue of R318bn after considering adjustments for inefficiencies and prudency reviews.
For the 2024/25 financial year, Eskom applied for revenue of R381bn, including RCAs and government injection, as per the court order.
However, the Nersa-approved revenue was R334bn for the 2024/25 financial year, which translates to a tariff of 195.95c/kWh.
In the MYPD5, Eskom applied for costs related to the procurement of energy from independent power producers (IPPs) under the Standard Offer Programme and the EPPP for approval.
– BUSINESS REPORT