PE companies continue their fight against Eskom’s tariff hikes

Johannesburg - This week, the Nelson Mandela Bay Business Chamber approached the Constitutional Court for leave to appeal against the decision by a lower court to uphold electricity tariff increases approved by the National Energy Regulator of SA (Nersa).

A group of Port Elizabeth companies – all members of the business chamber – are lobbying for better electricity tariffs. Known as the High Energy User Group, the group is the first applicant in the case, which dates back to 2013.

“Yes, we have approached the Constitutional Court,” David Mertens, spokesperson for the group, told City Press. “We launched the request for leave to appeal this week and we see our chances of winning the case as excellent.”

The application for leave to appeal was filed with the Constitutional Court late on Wednesday afternoon. The court is yet to give a date when the case will be heard.

Business chamber spokesperson Cindy Preller said: “We strongly oppose the proposed unreasonable electricity tariff increase, not only for the sustainability of business in the metro, but for all residents and citizens of our community.”

Last year, Eskom applied to Nersa to increase electricity tariffs for 2016/17 by 8%. The High Energy User Group and the Nelson Mandela Bay Business Chamber took the matter to the high court.

In February this year, the court ruled that Eskom’s regulatory clearing account adjustments were “irrational, unfair and unlawful”. This account allows the public utility to claim unexpected costs.

Nersa limited the tariff increase to 2.2%.

Nersa and Eskom then approached the Supreme Court of Appeal (SCA), challenging the high court judgment.

On June 6, the SCA ruled in their favour and set aside the high court decision. However, the High Energy User Group has vowed to fight on.

The group comprises businesses that use large amounts of electricity and includes Borbet SA, PG Group, Crown Chickens and Agri Steels SA.

Mertens lashed out at Eskom’s poor governance as the reason for imposing major increases in electricity tariffs.

“Our main argument in this case is that both Nersa and Eskom failed in their duties and were poorly governing their affairs. For instance, Eskom did not follow procedures in reporting its deviations, and Nersa failed to force Eskom to comply with reporting requirements.

“This was over a period of two years -March 2013 to November 2015. During this period, Eskom’s costs went completely out of control and it now just wants to force electricity consumers to pay for these deviations, an act which, surprisingly, Nersa condones.

“The SCA judgment basically allows Nersa to be its own judge, which, given the issues of poor governance at Nersa – especially its failure to enforce compliance – is quite odd,” said Mertens.

He said that, if allowed, tariff increases of about 50% could be introduced – adding that any above-inflation electricity tariff increase would hurt the economy and have a negative effect on employment.

“Eskom is in a vicious circle of decreasing sales and increasing prices. If it increases prices further, sales will decrease, leading to further price increases,” said Mertens

City Press has seen a copy of the legal papers, in which the group argues that Eskom, when asking for the tariff increase, did not comply with the multiyear price determination (MYPD) methodology.

A standard procedure, the MYPD sets a level of “allowed revenue” that gets translated into a tariff level every year, based on expected power sales.

In the papers the group states: “The central issue at stake in this application is whether Nersa is legally entitled to adopt and publish the MYPD methodology after significant public engagement – and then without warning or explanation to the people affected thereby, to depart therefrom in significant and material respects and permit Eskom to benefit under that policy in the amount of some R11.2 billion, which Eskom then recovered from the public through retrospectively inflated electricity tariffs.”

Outlining the grounds of appeal, the applicants say they “respectfully” submit that the SCA’s decision is neither just nor equitable and that it should be in the interests of justice for the Constitutional Court to grant leave to appeal against the decision.

The high court found Nersa’s conduct in this regard to be unlawful.

In the papers, the group says the SCA upheld the appeal by Nersa and Eskom largely on the premise that noncompliance with the MYPD was not fatal to a licencee’s continued operations or conditions of licence.

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