On Monday, the Pretoria High Court rejected Eskom’s urgent bid for an electricity tariff increase. The state-run energy utility company had lodged an appeal with the court for a tariff increase of 16.6 percent from April and a rise of 16.7 percent from April 2021 to compensate for what it said was an error by the National Energy Regulator of South Africa (NERSA).
The court ruled that Eskom has failed to prove that its disagreements with NERSA were urgent in what could translate to months of court hearings for the state utility company and the regulator.
Last year, NERSA set Eskom’s tariff rises at 9.4 percent for 2019/20, 8.1 percent for 2020/21 and 5.2 percent for 2021/22. Eskom believes it miscalculated its tariffs for the financial years beginning in 2019 to 2021 by treating 69 billion Rands ($4.8 billion) of bailout which the utility has been promised as revenue.
“The judge indicated that ‘NERSA violated the basic principle of accounting by treating an equity injection as revenue’,” a statement by Eskom reads. Bailouts are rescue packages in the form of cash or equity injection by a government to state enterprises and in rare cases, private companies, to help them survive.
While Eskom said it would respect the court’s judgment and expressed hope of merit to its case, NERSA spokesman has said that the regulator would make comments after studying the court’s judgments.
Energy crisis in South Africa actively began in 2007 with different levels of power cuts after its coal-fired national grids experienced recurrent breakdowns in its generating capacity, making Eskom struggle to deliver electricity.
In December 2019, heavy rain and flooding triggered failures at its Medupi coal-fired plant which led to the dropping of 6,000 megawatts (MW) of power consumption from the national grid. Still, Eskom executives blamed the breakdowns on a lack of critical mid-life maintenance at older plants and design flaws on the mammoth Medupi and Kusile projects.
The power cuts have led to slow production and also the shutting down of businesses across the country, especially mining companies. This situation has had a significant impact on the country’s economy and stunted its growth.