South Africa: Energy Regulator Wins Appeal on R69 Billion Misappropriated Government Equity

  • The South African energy regulator, NERSA, has won their leave to appeal on the misappropriation of R69 billion of government equity which comprised of three R23-billion-a-year tranches.
  • The court had originally judged that the R69 billion was illegally deducted by Nersa from Eskom’s allowable revenue for the period 2019/20 to 2021/22.
  • The remedy will now increase the Eskom tariff by 15% to 128.24c/kWh on 1st April 2021.

In the latest judgement, Judge Fayeeza Kathree-Setiloane said that the first R23-billion should be immediately added back during the 2021/22 financial year. Nersa was also ordered to add the other two R23-billion equity injections to Eskom’s allowable revenue during the 2022/23 and 2023/24 financial years, which would form part of the regulator’s adjudication of the next multiyear tariff determination cycle.

Nersa’s appeal did not dispute that the R69-billion should be added back to Eskom’s allowable revenue. Instead, the regulator argued that Kathree-Setiloane erred when directing the regulator to reverse the first R23-billion injection without remitting the matter back to the regulator, which had broad discretion in making tariff determinations in the interest of the consumer and the economy.

In her order granting leave to appeal, Kathree-Setiloane said: “Having heard argument from the parties in the application for leave to appeal, I am of the view that there are reasonable prospects of success that another court would come to a different decision.”

Nersa welcomed the granting of leave to appeal against the judgment, which substituted the Energy Regulator’s decision on Eskom’s fourth Multi-Year Price Determination with its own. “The matter is of critical importance to the electricity supply industry and the economy of South Africa, as well as for the creation of certainty to investors,” Nersa said in a statement.

In a press release Eskom acknowledged the judgement. “Eskom’s CFO, Mr Calib Cassim, is in agreement that this is a matter of significant importance to the country. It would be beneficial for a Superior Court to provide an order on the recovery of the misappropriated equity. Eskom is committed to a speedy outcome to this process as any further delay in resolving this matter continues to burden the economy of the country. It is hoped that this process will allow for adherence to the relevant legislative and regulatory requirements in the future”.

Author: Bryan Groenendaal

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