Nersa's mistakes will hit you hard
The courts have ruled in favour of Eskom in almost all of its applications against Nersa, and the trend looks set to continue. Picture: Shutterstock
Moneyweb has learnt that consumers will have to cough up at least R40 billion more for Eskom following a settlement between the utility and the energy regulator Nersa. This pertains to mistakes Nersa's made in several decisions regarding Eskom's revenue and tariffs.
This amount may increase as Eskom has launched a fresh challenge to Nersa's latest decisions regarding the utility's revenue and tariffs for the current and the next two financial years.
Eskom's court application is the latest in a string of challenges to Nersa decisions, almost all ruled in favour of Eskom.
Moneyweb has learnt that several such applications were settled between the two parties in May. This was not widely communicated at the time.
The settlement, which was made an order of the court, pertains to clawbacks spanning the financial years 2015 to 2021.
ALSO READ: Ekurhuleni metro and Nersa lock horns over electricity tariff discrepancy
Clawbacks
The clawback mechanism is designed to retrospectively compensate either the utility or its customers for variations in the assumptions underlying the revenue determination, such as sales volumes.
The compensation is done by adjusting electricity tariffs in following years.
Eskom disputed the amount Nersa decided it was entitled to claw back in each year from 2015 to 2021.
Following the settlement Eskom is entitled to recover in total R40 billion more from consumers for underrecovery over the period due to mistakes made by Nersa.
In terms of the order, Nersa will decide on the timing of this recovery.
ALSO READ: Nersa's municipal tariff process flawed, says Sapoa
Nersa still making mistakes?
Eskom now alleges that Nersa's latest revenue and tariff determination for the current and next two financial years is also flawed.
This will be on the agenda of Nersa's electricity subcommittee during a special meeting on Wednesday (16 July).
It follows an application by Eskom to the Gauteng Division of the High Court to have the decision reviewed and set aside.
Nersa announced in January that it had approved revenues of R384.6 billion for Eskom for the current financial year, which translated to an average percentage increase of 12.74%. This took effect on 1 April.
ALSO READ: The silent 77.5% rise of your electricity bill
The allowable revenue approved for 2026/7 is R409.5 billion, which translates to an average increase of 5.36% and for 2027/8 it is R435.8 billion, which translates to an average increase of 6.19%.
This is considerably lower than the amounts Eskom applied for, which would have meant increases of 36.15%, 11.81%, and 9.1% in the three consecutive years.
Following Nersa's publication of the reason for its decision early last month, Eskom filed an application to have the decision reviewed and set aside specifically regarding Nersa's treatment of the Regulatory Asset Base (RAB).
Moneyweb has reliably learnt that Nersa has not yet indicated whether it will oppose the application.
Presumably the meeting on Wednesday will make a recommendation to the electricity regulator, which will then take a final decision.
The formulation of the agenda point however indicates that Nersa may have accepted Eskom's argument and is open to settling the matter.
It reads: 'Correction of error on the Eskom sixth multi-year price determination decision (MYPD6) Regulatory Asset Base section and proposed settlement.'
ALSO READ: Nersa approves 12.7% electricity tariff hike for Eskom
Eskom's arguments
In an affidavit supporting its court application, Eskom CFO Calib Cassim sets out in detail – some of it quite technical – the mistakes that Eskom contends Nersa has made.
This includes attaching a zero value to several operational power stations, including Koeberg.
He shows that the value attached to the RAB is key to determining the returns Eskom is entitled to – and that Nersa's downward adjustments of the RAB in each of the three years dealt with in the tariff application cost the utility about R30 billion in total.
Cassim says that Nersa, in taking the decision, exceeded its powers and acted inconsistently with its own methodology and with an earlier court order dealing with the same subject.
ALSO READ: 30% electricity tariff increase is a reality, says Erasa
He states that Nersa's decision is irrational and unreasonable.
Cassim points out that Nersa's flawed approach to the RAB only applies to the application by Eskom's generation business.
Those of the National Transmission Company of South Africa, a wholly owned subsidiary dealing with transmission, and the distribution business, were dealt with correctly, in Eskom's view.
In addition, there are discrepancies between some of the numbers in the press release Nersa issued in January announcing its decision and those in the document issued in June setting out the reasons for its decision.
ALSO READ: Eskom proposes further tariff restructuring to ensure 'transparency and fairness'
Cassim further argues that the condition Nersa set for its approval of the utility's revenue – that it submit a revaluation of its RAB, with the first clawback application following the 2025/6 financial year – is unrealistic and impossible. Such a revaluation takes at least 30 months and is an expensive exercise, according to Cassim.
Any adjustments in Eskom's favour will be reflected in future increases in electricity tariffs.
This comes against the backdrop of widespread concern about the affordability of electricity, with Minister of Electricity and Energy Kgosientso Ramokgopa saying that South Africans must increasingly choose between buying food and buying electricity. He said even middle-class South Africans are battling to afford electricity.
This article was republished from Moneyweb. Read the original here.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Citizen
3 hours ago
- The Citizen
SMEs need to brace for reduced orders due to a 30% US tariff
The 30% tariff hike's impact will result in small profit margins, a risk of having to retrench employees, and slower business growth with fewer US sales. As of August 1, a 30% tariff on goods exported to the United States (US) will take effect, placing immense pressure on businesses, particularly small and medium-sized enterprises (SMEs). The automotive sector will be impacted severely by the 30% tariff hike, as the US is a significant export market for cars and car parts. Lula, an SME services provider, stated that businesses supplying parts, logistics, and services to these large manufacturers must brace for reduced orders, intense pressure on pricing, and therefore a significant loss of competitiveness against other exporters to the US, such as Brazil and China, which face only 10% tariffs. ALSO READ: US tariff of 30% on SA exports: where to now? Tariff hike to threaten job security Thomas McKinnon, Chief Growth Officer at Lula, added that the 30% tariff hike's impact will be felt more acutely and quickly by SMEs, as it will result in small profit margins, a risk of having to retrench employees, and slower business growth with fewer US sales. He highlighted that the agricultural and textile sectors, which have relied on the duty-free access provided by the African Growth and Opportunity Act (Agoa), are now left vulnerable. 'The tariff effectively neutralises the benefits of Agoa, jeopardising the livelihoods of thousands, particularly in rural communities that depend on exports of citrus, wine, and speciality textiles.' How can businesses survive with the tariff hike? McKinnon advises SMEs in these industries to shift their focus to reinforcing their unique value proposition while exploring new and emerging markets to absorb the capacity previously destined for the US. 'If your product offers exceptional quality, niche appeal, or a distinct competitive advantage, demand might persist even with higher tariffs.' ALSO READ: Ordinary South Africans will feel impact of US tariffs He added that from now on, every cent counts and businesses need to look for any big or small ways in which they can streamline operations, reduce waste, and negotiate better terms with suppliers. 'The tariffs will have a knock-on effect that we will more than likely see across the board, and SMEs need to be ready and prepared.' Can businesses survive? He said it is essential for businesses to recognise that most people are already financially strained. For instance, South Africans are paying significantly more for electricity after the Eskom tariff hike took effect. Therefore, for businesses to survive, they might need to absorb a portion of these tariff costs to remain competitive, making internal cost-cutting essential for maintaining margins. 'Consider short-term funding options to bridge any potential cash flow gaps during this transition period. Having agile financial solutions in place can provide a crucial buffer as SMEs adapt to the new economic landscape.' NOW READ: Trump's new 30% tariff less about trade and more about power
The Citizen
5 hours ago
- The Citizen
Eskom: Koeberg repairs won't worsen load-shedding this winter
Eskom has announced that Koeberg Unit 1 will now return to service by the end of August, instead of this month, due to additional steam generator maintenance. The unit was initially expected back online in July, but Eskom said the revised timeline reflects its commitment to thorough inspections and the highest quality standards at South Africa's only nuclear power station. 'During scheduled detailed eddy current inspections – a non-destructive testing method used to detect cracks, corrosion or wear in the metal tubes of steam generators – defects were identified on four tubes, among several thousand inspected, across two of the newly installed generators,' the power utility explained. Specialised international and local teams immediately carried out advanced automated repairs on the four tubes. Eskom confirmed these repairs have been successfully completed to uphold stringent safety standards. Major maintenance completed Eskom said major maintenance work, including the legally required 10-year Integrated Leak Rate Test (ILRT), had been successfully completed. The ILRT pressurised the reactor building over 72 hours to confirm its structural integrity and leak-tightness in line with international standards. Eskom group executive for generation Bheki Nxumalo emphasised: 'The safety of employees, the public and the environment remains our top priority. Carrying out these additional inspections and repairs to world-class standards is an investment in the long-term reliability of Koeberg and South Africa's energy future.' No increased load-shedding risk Eskom reassured that the delay will not increase the risk of load-shedding. Since mid-May, there has been no load-shedding, with only 26 hours of outages recorded between April 1 and Thursday. 'The winter outlook released on May 5 remains valid. Importantly, the planned return of 2 500MW this winter does not rely on Unit 1,' Eskom said. Unit 2 remains fully operational, generating up to 946MW with a year-to-date Energy Availability Factor of 99.38% at the end of June. – Read original story on At Caxton, we employ humans to generate daily fresh news, not AI intervention. Happy reading!
The Citizen
8 hours ago
- The Citizen
Nail in load shedding coffin removed after Eskom delay
Eskom clears the air on whether the setback will affect its winter outlook Eskom has shared bad news, announcing that the planned maintenance on Koeberg Unit 1 will be delayed by about a month, with the unit now expected to only return to operation by August. The utility shared an update on the planned maintenance of Unit 1 at the Koeberg Nuclear Power Station in Cape Town on Tuesday. Offline The 930 MW Unit 1 is currently offline for the second phase of a long-term operation extension. It was initially planned to be back online in July after undergoing scheduled maintenance, including fuel refuelling and statutory tests, as part of the life extension process. Load shedding Eskom said the revised return date for Koeberg Unit 1 will not increase the risk of load shedding. 'The Winter Outlook released on 5 May 2025, which covers the period until 31 August 2025, remains valid. Importantly, the planned return of 2 500MW this winter does not rely on Unit 1'. Eskom spokesperson Daphne Mokwena said the revised timeline underscores the utility's commitment to ensure the ongoing safe and reliable performance of South Africa's only nuclear power station. ALSO READ: Eskom gets boost as Kusile's final unit adds 800MW to grid Inspections Mokwena said that eddy current inspections — a non-destructive testing method used to detect cracks, corrosion, or wear in the metal tubes of steam generators — identified defects on four tubes among several thousand tubes inspected, across two of the newly installed generators. 'Eskom immediately carried out an advanced automated process to address the four tube defects, supported by specialised international teams working alongside local experts. These critical repairs have now been successfully completed to uphold the highest safety and quality standards. Back to grid Bheki Nxumalo, Eskom's Group Executive for Generation, said the planned maintenance underway on Unit 1 will help deliver decades of affordable, low-carbon baseload power. 'Once all maintenance work is complete, Unit 1's reactor core will be refuelled, tested and synchronised back to the national grid'. Eskom said to protect the supply, planned outages at Koeberg are carefully staggered every 16 to 18 months so that both units are never offline at the same time. 'Together, Koeberg Units 1 and 2 provide around 1 860MW — approximately 5% of the country's electricity needs. Unit 2 remains fully operational, generating up to 946MW, with a year-to-date Energy Availability Factor (EAF) of 99.38% as of the end of June 2025. 'The national power system remains stable, with a month-to-date EAF of 62%. As the winter season continues, Eskom encourages all customers to adopt energy-efficient practices,' Eskom said. Medupi Last week, Eskom hammered another nail in the load shedding coffin, announcing that Unit 4 of the Medupi Power Station was successfully returned to service eight months ahead of its original schedule. This has added 800MW to the national grid. Medupi's return follows extensive repairs, made possible by the innovative use of a refurbished Generator Stator, an alternative to waiting for a brand-new component. The unit had been out of service since 8 August 2021, after sustaining significant damage from the explosion of its Generator Stator, a key component in the operation of the generation unit. ALSO READ: Eskom takes action after breach of online vending system
