Ruling on Eskom tariff hikes a blow for high-energy users

Eskom has been given the green light to pursue up to R60 billion in clawback tariffs.

The Constitutional Court has dismissed an application to set aside the power utility’s regulatory clearing account (RCA) adjustments, clearing the way for Eskom to recover a potential R60 billion through tariffs in the next year, revenue lost over the last three financial years.

RCA adjustments deal with funds that Eskom needs to recover due to a shortfall in electricity losses or an escalation in operating costs, through possible tariff hikes.

The National Energy Regulator of South Africa (Nersa) will now hold hearings as Eskom argues why it should be granted the delayed tariff hikes.

Meanwhile, Nelson Mandela Bay’s high-energy users are preparing for another battle with Eskom as they await the negotiation process for new electricity tariff increases.

The Nelson Mandela Bay Municipality believes higher energy costs will affect business operations and potential future investments and will ultimately increase the unemployment rate.

According to a statement by Eskom, the ruling allows it to institute a regulatory clearing account (RCA), through which it can recover costs retrospectively after the close of the financial year by raising tariffs the following year.

Eskom has submitted RCAs for each financial year since 2014.

The Bay’s high-energy users group wanted the RCA declared unlawful, but the Constitutional Court dismissed its appeal.

The group’s spokesman, Autocast SA chief executive David Mertens, said the court’s ruling was regrettable.

“The big question now remains how this ruling will affect next year’s electricity tariffs. Eskom encouraged users to consume less electricity when there was a shortage, then incurred massive expenses to increase the energy supply. Now that users have got into the habit of consuming less, Eskom expects them to pay more for electricity.”

“This will only encourage them to save more – and the power utility to increase tariffs more.”

Nelson Mandela Bay Business Chamber president Thomas Schaefer said households would also be affected should Eskom institute an “irrational electricity increase”. However, he believed some good had come from the entire exercise.

“Although this ruling reverses a high court judgment, which had originally set aside an interim tariff increase in 2016, the business chamber believes that by challenging the national energy regulator [Nersa] it has ensured an increased level of scrutiny and accountability of Eskom and its practices,” said Schaefer.

“This, coupled with the increased public awareness around the governance concerns relating to Eskom, will hopefully contribute to a more realistic approach on the part of Nersa when considering future tariff adjustments.”