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Avoidable distraction

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Avoidable distraction

Photo of Terence Creamer

10th December 2021

By: Terence Creamer
Creamer Media Editor

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In record time, Justice Jody Kollapen delivered a judgment on December 3 relating to the most recent – and arguably the most worrying – legal tussle between Eskom and the National Energy Regulator of South Africa (Nersa). The matter itself was only heard on December 1.

The case arose after Nersa rejected, on September 30, Eskom’s latest revenue application, a draft of which was submitted to the regulator on March 16, with the formal submission lodged on June 2.

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The rejection was based on the fact that the methodology used by Eskom to craft its application was based on one used for the fourth multiyear price determination (MYPD4) control period, which comes to an end on March 30 next year.

Nersa argued, belatedly, that the methodology had expired and could, thus, not be used for the MYPD5 cycle, meant to cover the three financial years from April 1, 2022, to March 30, 2025.

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The problem is not so much that Nersa wanted the new application to be based on a new methodology – indeed many South Africans believe that the MYPD methodology needs review both because of its failure to deliver stable and predictable tariffs and because of changes under way in the electricity supply industry.

The problem is that Nersa sat on its hands for months before deciding, firstly, to reject the MYPD5 application and, secondly, to begin public consultations on a future methodology, with the initial focus being on the “principles” that should govern that new methodology rather than the methodology itself.

It then instructed Eskom to prepare a one-year application based on these principles, which were approved by the Energy Regulator only on November 25 and had not yet been communicated to Eskom by the time Judge Kollapen presided, on December 1, on Eskom’s application to have the rejection of its submission set aside.

In other words, instead of denying Eskom’s application in either March or June in favour of urgent consultations on a new methodology, Nersa waited until the end of September to act – far too late for any meaningful consultation on something as intricate and far-reaching as a new methodology.

Then, instead of opting for a common-sense solution of settling on a one-year adjudication based on the existing methodology, Nersa doubled down.

It insisted, wrongly, that Eskom could easily integrate some pretty high-level and, in some cases, ambiguous principles into a new application that could be prepared and adjudicated for implementation on April 1.

Nersa also made the improbable argument that this could all be achieved absent any legal objections and without triggering a 40-day consultation with the National Treasury and the South African Local Government Association as prescribed by the Municipal Finance Management Act.

The legal wrangle became yet another time- consuming and entirely avoidable distraction in a context of an economically debilitating electricity crisis that can only be resolved with the help of clear policy and supportive regulation.

Sadly, Nersa is simply not offering the latter.

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