Keeping the lights on: This is how you pay for state capture in 2021

South African electricity consumers will again pay for years of state capture and mismanagement at Eskom, and ineptitude by the energy regulator, through the extra R6.037bn to be added to electricity prices.

Consumers must now wait to find out when this will be loaded onto the Eskom prices. The already approved increase was 8.12%; NERSA says if the new award is loaded onto one year's prices from April the total price increase will be 10.95%, or if it runs over the next two years it will be an increase of 9.53% in April.

NERSA granted Eskom extra revenue in four decisions announced on Thursday: R4.749bn in total for clawbacks for the three years 2014/15 to 2016/17, plus R1.288bn in a clawback for 2018/19. NERSA failed to produce reasons for these decisions or clear implementation plans, but said the plans would be developed during February. This would be in time for an April increase.

Eskom still does not get the prices it wants but consumers are already unable to cope. Instead of a predictable price path, Eskom and NERSA are stuck in a pattern of constantly re-writing the prices, now with intervention by the courts.

As bad as this news is, the real hit is still to come: the decision on how to claw back the R69bn bailout (R23bn a year for 2019/20, 2020/21 and 2021/22) which the Pretoria High Court ruled in July 2020 that NERSA had illegally removed from the electricity price. This depends on the outcome of a court hearing on Eskom's pending application for R23bn of this to be recovered from 1 April, pending the outcome of NERSA’s appeal against the earlier judgment allowing Eskom to recover the R69bn over three years.

Eskom price increases will come into effect in April, but municipal customers will only feel the blow in July when municipal tariff increases are applied on top of the Eskom increases.

“These price increases are distressing and take electricity further out of reach of households and businesses in a time of economic disaster, but are unavoidable in the light of last year’s court judgments. The judgments highlighted NERSA’s ineptitude at overseeing the pricing process and, while NERSA had attempted to protect consumers, the judgments show its operations need urgent attention. NERSA’s processes also need an overhaul in terms of how it interacts with the public. In order to arrive at its decisions, NERSA must have rational reasons.  It is incomprehensible that such reasons are not revealed at the time of delivering the decision,” says Liz McDaid, Energy Project Manager at OUTA.  

NERSA must only approve prudent expenditure but it is impossible to assess the rationality of any NERSA decision-making without access to its reasons. Waiting for reasons further delays any action that civil society might want to take to oppose or review NERSA’s decisions.

Eskom’s response once again emphasises that everyone must pay for the electricity they use.  However, many people are trapped in an electricity system which relentlessly increases the cost of electricity year after year, way above the cost-of-living increases. And in return for paying, the public are rewarded with load shedding. 

“Overall, this mess is a direct result of the willful misgovernance and thieving through state capture. This massive problem is what we have inherited from Jacob Zuma and his cabinet.  Perhaps, in the light of evidence before the State Security Commission this week, the State Security Agency should be closed down immediately and its 2021/22 budget of up to R4.8 billion put into Eskom instead,” says McDaid.

The court judgments which resulted in today’s pricing decisions were made last year.

In March 2020, the Pretoria High Court set aside NERSA’s decision on Eskom’s 2018/19 prices, leaving the existing price in place but allowing Eskom to apply for additional revenue, to be liquidated along with any 2018/19 RCA award. This is the supplementary tariff application which Eskom brought.

In June 2020, the Pretoria High Court set aside all three of NERSA’s RCA decisions for 2014/15, 2015/16 and 2016/17 and ordered NERSA to make new decisions. The court had disagreed with NERSA’s decision on disallowing funds for lower-than-forecast sales and for disallowing some coal costs.

More information

A soundclip with comment from Liz McDaid (57 sec) is here.

In February 2020, OUTA made a submission to NERSA on electricity prices which called for the regulatory clearing account (RCA) process, which allows for the clawbacks, to be scrapped. For more on this, see here.