Energy Regulator rescinds decision on new tariff-setting rules as Eskom prepares to apply for big hike

The Energy Regulator has rescinded its approval, made in December, of the so-called Electricity Price Determination Methodology Rules (EPDMR), which were proposed for implementation in the 2025/26 financial year as a replacement to the prevailing multiyear price determination methodology (MYPDM) for setting tariffs.

The decision was made by the National Energy Regulator of South Africa’s (Nersa’s) highest decision-making structure during a meeting on June 27 and confirmed in a statement issued on July 2.

Nersa indicated that the decision followed the Energy Regulator’s consideration of the practicality of implementing the rules, as well as the fact that licensees and stakeholders were not yet ready to implement the EPDMR.

Following the approval of the rules last year, Eskom questioned whether they could be implemented, owing to the absence of an accompanying methodology to calculate tariffs and the fact that insufficient time had been left to adjust its application, which was being prepared using the MYPDM.

These timing requirements had been reinforced in court judgments and orders, which stipulated that only a methodology that was in place 18 months ahead of a new tariff adjustment could be applicable.

That being the case, Eskom argued that the new rules and associated methodology would have to have been approved by September 2023 for it to be implemented for the 2025/26 tariff period, which starts on April 1 next year.

Eskom is already consulting with the National Treasury and the South African Local Government Association on its next tariff application, with media reports having emerged indicating that the State-owned utility will be applying for allowable revenue of R446-billion for 2025/26. This would translate into a hike of more than 36% for direct customers.

While rescinding the EPDMR approval, the Energy Regulator said Nersa remained committed to reviewing its regulatory tools to take account of “dynamic changes in the electricity supply industry, as well as legislative change, the unbundling of Eskom and new investments in energy generation”.

It also resolved that a plan would be developed to clarify the approach in processing and evaluating future revenue and tariff applications.