Appointment of acting electricity regulator questioned as legal challenges mount

May 4th, 2019, Published in Articles: EE Publishers, Articles: Energize, Articles: Vector, Featured: EE Publishers

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Ms Nomfundo Maseti has been re-appointed acting electricity regulator board member at the National Energy Regulator of South Africa (Nersa) with effect from 1 March 2019, after her previous term as acting electricity regulator board member expired on 28 February 2019.

This is the second 12-month term by Maseti as acting electricity regulator at Nersa, and the third consecutive appointment of an acting electricity regulator board member at Nersa following the departure of Mr Thembani Bukula as full-time electricity regulator board member in 2017.

Maseti is also serving her second 5-year term as full-time piped-gas regulator board member at Nersa.

The appointment of Maseti for a second 12-month term as acting electricity regulator appears to contradict the National Energy Regulator Act, 2004 (Act No. 40 of 2004), which states:

  • Section 5(6)(d): If a vacancy occurs on the Energy Regulator the Minister may fill the vacancy temporarily for a period of not more than twelve months by appointing a person without complying with Section 6(7).
  • Section 6(7): Before appointing members to the Energy Regulator, the Minister must by notice in the Gazette call for nominations from members of the public.

In addition to her appointment for a second 12-month term as acting electricity regulator, the appointment was made without any notice in the Government Gazette calling for nominations from members of the public.

Sources indicate that Nersa advised Energy Minister Jeff Radebe against the re-appointment of Maseti on the above legal grounds, and on grounds that such appointment, and any decisions made by the acting electricity board member, could be challenged in law.

At the time of writing, neither Nersa, the Department of Energy, nor Energy Minister Jeff Radebe had responded to questions from EE Publishers regarding the re-appointment of Ms Nomfundo Maseti for a second 12-month term as acting electricity regulator board member at Nersa.

The questionable re-appointment of Maseti for a second 12-month term as acting electricity regulator comes at a time when Nersa is facing two definite legal challenges by Eskom, as well as the likelihood of still further legal challenges by the utility.

The first legal challenge is in respect of Nersa’s revenue determination (i.e. the annual average electricity price increase allowed by Nersa) for Eskom’s 2018/19 financial year ending 31 March 2019. For the 2018/19 financial year, Eskom had applied for a revenue (average price) increase of 19,9% but was only granted a 5,23% increase by Nersa, commencing 1 April 2018.

The second legal challenge is in respect of Nersa’s 2014/15, 2015/16 and 2016/17 regulatory clearing account (RCA) liquidation determination. Eskom applied to claw back some R66,6-billion from customers via the electricity tariff, but Nersa only allowed Eskom to claw back R32,69-billion, through a tariff increase of 4,4% applied over four years, commencing 1 April 2019.

The Regulator’s legal challenges continue to mount further as Eskom awaits written reasons for Nersa’s recent determinations announced on 7 March 2019. These include Nersa’s revenue determination (i.e. the average electricity price increase allowed by Nersa) for the 3-year MYPD4 period (i.e. Eskom’s 2019/20, 2020/21 and 2021/22 financial years), as well as its RCA liquidation determination for Eskom’s 2017/18 financial year.

Eskom had applied for a revenue (average price) increase of 15% per year for the 3-year MYPD4 period, but was only granted price increases of 9,41%, 8,15% and 5,2% respectively for the next three years commencing 1 April 2019. In addition, for its 2017/18 financial year, Eskom had applied to claw back some R21,6-billion from customers via the electricity tariff, but Nersa only allowed Eskom to claw back R3,86-billion.

Depending on the written reasons given by Nersa for its MYPD4 and RCA determinations of 7 March 2019, Eskom may challenge these determinations in court as well.

Eskom has already indicated its disagreement with the way in which the Regulator has treated the R23-billion per year bailout during the 3-year MYPD4 period announced by Finance Minister Tito Mboweni in his budget speech on 20 February 2019.

All of the above legal challenges to Nersa’s determinations in recent years, and those still envisaged ahead, are likely to have a seriously debilitating effect on the work of the Regulator, and are expected to take several years to be resolved in court.

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