NERSA rejects price hike application by Eskom

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5 October 2021

Power plants are being constructed at exorbitant inflated costs of nearly 300%, and have a 60% surplus of staff at a cost of an estimated R10 billion per annum.

Suzuki Ermelo (WEB) 22 September

In January, Nersa allowed Eskom to recoup an additional R6-billion after a court set aside several of its earlier decisions. It had rejected Eskom’s fifth multi-year price determination (MYPD5) revenue application for the financial years 2022/2023, 2023/2024 and 2024/2025 on the basis that it was based on an expired methodology. Eskom has also come under fire for their notorious fruitless en wasteful expenditure, which includes, amongst others, paying R300 per roll of toilet paper, coughing up a blistering R238 000 for a single floor mop, and purchasing kneepads at R80 000 each. This has been slated as cadre enrichment and gross corruption withing the struggling entity. In an effort to curb the corruption, and alleviate mounting pressure on consumers, NERSA has started its process to develop this new pricing methodology that will be applicable to the industry. The first step entails a consultation to determine the new pricing methodology. This will be followed by the development of the actual methodology.

As is usual all stakeholders will be given an opportunity to influence the finalization of the new pricing methodology. Once this is finalized, utilities will be required to submit applications to NERSA for analysis to be undertaken before price increase decisions are made. According to Eskom, NERSA’s rejection of Eskom’s MYPD 5 application, has created a regulatory vacuum for the electricity supply industry in South Africa. Eskom is accordingly considering how to proceed, and is taking advice on its position following the NERSA decision. Eskom claims that the situation will create a legal liability for the company. Consumers and regulatory boards are having none of the wet dog attitude set forth by Eskom, stating that power plants being constructed at exorbitant inflated costs of nearly 300% and having a 60% surplus of staff at a cost of an estimated R10 billion per annum. Ultimately, consumers cannot, and should not pay for inefficiency in a state monopoly’s internal structural inflation.