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Eskom might have to refund huge price hike

| Innovation and technology

A court ruling to review the decision to hike electricity this year could affect consumers, with Eskom possibly having to reimburse them.

Since April, consumers have been paying 9.4 percent more for electricity while the increase between 2014 and last year was just 3.4 percent.

On 16th August 2016, the high court in Pretoria ruled that the decision of the National Energy Regulator of SA (Nersa) to approve this year’s abnormally large hike was “irrational, unfair and unlawful”.

Judge Cynthia Pretorius set aside the decision on the basis that Nersa granted Eskom an additional R11.2 billion for higher-than-expected energy costs and lower sales in 2013/14.

The court found discrepancies in Eskom’s quarterly reports to Nersa.

In her scathing verdict, Judge Pretorius said: “It was irrational for Nersa not to have the quarterly reports for the 2013/2014 year, not to alert consumers and the public that it intended to deviate from the MYPD (multi-year price determination) methodology and not to allow the consumers and the public to deal with the deviations in the public hearings and submissions to Nersa.”

She added: “It was irrational, unfair and unlawful not to deal with the deviation in 2014, which was the subsequent year, but to wait 27 months before launching the RCA (regulatory clearing account) application.”

Energy experts believe the ruling could mean Eskom would have to refund consumers the difference between this and last year’s increases.

Both Nersa and Eskom could appeal the ruling. Nersa has said it would reply to the ruling by Friday.

Eskom said it had noted the judgment and was waiting for Nersa’s response.

On Wednesday morning, Organisation Undoing Tax Abuse (Outa) spokesman Ted Blom praised the findings, saying: “The multi-year price determination process and methodology used since 2006 have been defective.

“This means the tariff hikes implemented were done illegally and not just this time, it goes all the way back to 2006,” he said.

Blom said the big issue now was “how to unscramble the egg”.

“The agreement that was made with Nersa was that if Eskom lost they would reimburse. But how will they reimburse those who have pre-paid accounts? It’s not going to be feasible for those who buy pre-paid electricity to claim back extra time,” he said, adding those on regular accounts should be able to claim back.

“It gives business a chance to resurrect itself. We’ve seen about 400 businesses close every year because of continued increases. Eskom have been riding the people rough,” he said.

Meanwhile, energy analyst Chris Yelland tweeted that the judge showed Eskom was anything but customer-focused.

“Nersa failed to ensure Eskom followed its own procedures to protect customers,” he said.

He said the judgment had massive financial implications for Eskom in 2016/17, 2017/18 and possibly 2018/19.

“The judgment knocks off R11.5bn from Eskom’s bottom line in 2016/17 financial years and probably more in 2017/18,” he said.

Yelland added: “I’ve not the slightest doubt that Eskom and Nersa will appeal all the way.”

The court was forced to intervene in the matter after Eastern Cape businesses filed an application to have Eskom’s 2013/14 application overruled.

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