I recently wrote about a court case between the National Energy Regulator of South Africa (Nersa) and Eskom, which Eskom won. Nersa is a government body that is supposed to regulate the electricity, piped-gas and petroleum pipeline industries in terms of the various applicable national regulations.

By ‘regulate’, the idea is that the various industries cannot charge any amount they want for the service they supply – the tariffs have to be approved by Nersa. Eskom is generally allowed to charge an amount which recovers its fuel and operating costs and allows some mark-up. Fairly recently, Nersa erred badly by not allowing Eskom to include certain operating costs. The dispute refers back to 2018/19, when Eskom requested an 18.91% average price increase and was granted only 5.23%. Judge Jody Kollapen, in the Pretoria High Court, berated Nersa for “unfairly, irrationally and unreasonably” departing from the methodology by which the tariff was determined. Kollapen said Nersa had deviated from the methodology in important respects, without informing Eskom beforehand and allowing it an opportunity to be heard.

Nersa did not use the agreed methodology to determine Eskom’s coal costs, which requires a detailed analysis of the grade of coal procured, its burn rate and other factors. Nersa also wrongly calculated Eskom employee costs and refused to allow Eskom to recover the costs for its demand management programme.

Anyway, Kollapen granted Eskom’s request. Now, into this discussion has stepped Nersa full-time member for electricity Nhlanhla Gumede. He is reported as saying that the multiyear price determination (MYPD) model used to determine Eskom tariffs is outdated and that it was “not moving with the times”. Okay, let’s hold it there. Back in the day with the solar and wind power programme, the first round bids were awarded at unit rates for energy, which were above the rate that Eskom could sell the energy. Thus, for each unit they sold, they made a loss. A big loss. Enter the MYPD and they still made a loss on renewable energy but not such a big one. But it hardly mattered. There was a lot of corruption around and few cared. But now it is evident that Nersa doesn’t know how to apply the MYPD. If it did, then they would not have been nailed to the wall in court. In suggesting that the MYPD is flawed, Gumede is reported as saying that “the market is changing dramatically, yet we are using static structures; we’re using outdated methodologies in terms of how we set prices, how we regulate the sector and how we’ve structured the industry”. Oh. Now, I really can’t see that the energy market is “changing dramatically” at all. The only real change in the last six years is renewable energy. Renewable-energy installations are now about 4 000 MW and tonight will contribute little or nothing to the total power generation, today being windless and tonight dark.

In one way, the market is changing as all the Eskom corruption is undone and Medupi and Kusile are gradually being fixed, dodgy contracts cancelled and the general rot dealt with. It must surely occur to Nersa that, unlike Nersa, Eskom has been determining electrical tariffs for over 50 years. In this regard, they know their stuff. They fine-tune the tariffs so that the consumer generally gets a good deal. The Eskom people are not fools. Those at Nersa, on the other hand, in my opinion, are a waste of time. Following their recent battering in court, they now are reported as planning to appeal the recent High Court decision. What is the point of this particular spitting contest? Following the comments of the judge, do they really think that the matter will be dismissed on appeal? Why are they doing this? Are they just miffed? Will the basis for their appeal be that the MYPD is out of date? This is strange, since Nersa wrote the MYPD and now seemingly wants to kick it to the kerb. A shake-up is needed, but not, I think, of the MYPD.