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Eskom Headed To Court After Pricing Plan Is Rejected

Judge's Gavel

South Africa’s power utility Eskom has filed an urgent application in the Gauteng High Court after the National Energy Regulator of South Africa (Nersa) rejected their new multi year pricing plan.

Nersa rejected Eskom’s Eskom MYPD 5 revenue application on 30 September 2021. Eskom argued that Nersa’s decision created uncertainty and risk.

In 2008 South Africa experienced rolling blackouts. This led the government to declare a national power emergency on 25 January 2008. In a statement, the government said ‘it is the view of Cabinet that the unprecedented unplanned power outages must now be treated as a national electricity emergency that has to be addressed with the urgent, vigorous and coordinated actions commensurate with such an emergency situation’.

Twelve years later South Africa is faced with the same issues as, even after two power stations were announced in response to the country's power needs. The Kusile power station is yet to be completed while the Medupi power station has already been offline due to an explosion that happened in August.

Economic and energy analyst Tshepo Kgadima says the funding model for two power stations that would help combat South Africa’s energy issues was flawed. He explains that Eskom believed that the funding needed for the projects would be generated from tariff increases.

He said, “the assumption was that they were going to fund these new bills from tariff increases over the years. We know what happened with those two mega projects' cost overruns, and the question still remains on whether or not South Africa got value for money”.

Kgadima explains that continued increasing tariffs is making electricity unaffordable to consumers and argues that nothing will change as long as Eskom's leadership remains the same.

He argues that if there was ever time for a Minister of Public Enterprises to act, it would now. This as electricity prices have a direct impact on inflation and monetary policy.

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