The High Court of South Africa, Gauteng Division, Pretoria (the “Court”) was recently tasked to consider an application for urgent relief by Eskom (the “Applicant”) pending an application in terms of the Promotion of Administrative Justice Act (“PAJA”) for judicial review and setting aside of a decision taken by the National Energy Regulator of South Africa (the “Respondent”) in relation to an application by the Applicant for electricity tariff increases for the 2019/2020, 2020/2021 and 2021/2022 financial years.
The issue for determination before the Court was the treatment by the Respondent of an annual government equity injection of R23 billion in. the calculation of the Applicant’s annual allowable revenue.
In 2006, the Energy Regulatory Act (“ERA”) was enacted, which established the Respondent and a tariff applicable to electricity licensees (including the Applicant). In this regard, all electricity licensees would be entirely self-financing and would be required to cover the reasonable cost of their licensed operations (including capital costs and a reasonable return on capital) through their tariffs. As one of its objectives, ERA recognised the need to facilitate a fair balance between the interests of customers and end-users, licensees, investors and the public.
The regime contained in ERA succeeded a very different regime in terms of which the Applicant’s tariffs were maintained at “artificially low levels by pricing electricity without adequately accounting for the costs of generating, transmitting and distributing electricity”.
On 14 September 2018, the Applicant applied to the Respondent for approval of its electricity tariffs increases for the 2019/2020, 2020/2021 and 2021/2022 financial years. On 7 March 2019, the Respondent granted the Applicant increases but at a much lower rate than it applied for. The Applicant contended that the difference in the increase applied for and granted results in a shortfall of its revenue of R102 billion over the next 3 (three) financial years in question and, accordingly, the Respondent’s decision stood to be reviewed and set aside.
In making its finding, the Court considered the case of National Energy Regulator of South Africa v Borbet SA (Pty) Ltd  ZASCA 87 wherein the Supreme Court of Appeal summarised the legal regime governing he Respondent in the determination of tariffs as follows:
“The provisions set out above create a situation where licensees are the ones empowered to charge a tariff for electricity consumption within parameters set by the Regulator. Licences, as can be seen from the provisions of section 14(1)(d) and (e) of ERA, may contain conditions relating to the setting and approval of prices, charges, rates and tariffs to be charged by licensees. Licences may be made subject to conditions relating to the methodology to be used in the determination of rates and tariffs which must be imposed by licensees (section 14(1)(e)). NERSA is therefore responsible for determining whether a licence should be granted; the terms of the licence; the methodology by which tariffs and charges are to be determined and the imposition of that methodology on the licensee by way of a licence condition; and the tariffs and charges that the licensee may recover from its customer. All of these are embodied directly or indirectly in the licence and the obligation to adhere to them flows from the licence.”
Having regard to the aforegoing, the Court held that to interpret section 15(1) in isolation without having regard to the context of the ERA in its entirety, would have the effect of distorting the objectives of ERA and even in seeking to ensure a licensee is able to recover the full cost of its activities and a reasonable return, the issues of affordability and impact on the consumer remain relevant and are required to be factored into such a determination.
Further, the Court considered the caution expressed in National Treasury and Others v Opposition to Urban Tolling Alliance and Others 2012 (6) SA 223 (CC):
“The common-law annotation to the Setlogelo test is that courts grant temporary restraining orders against the exercise of statutory power only in exceptional cases and when a strong case for that relief has been made out. Beyond the common law, separation of powers is an even more vital tenet of our constitutional democracy. This means that the Constitution requires courts to ensure that all branches of government act within the law. However, courts in turn must refrain from entering the exclusive terrain of the executive and the legislative branches of government unless the intrusion is mandated by the Constitution itself. It seems to me that it is unnecessary to fashion a new test for the grant of an interim interdict. The Setlogelo test, as adapted by case law, continues to be a handy and ready guide to the bench and practitioners alike in the grant of interdicts in busy magistrates’ courts and high courts. However, now the test must be applied cognisant of the normative scheme and democratic principles that underpin our Constitution. This means that when a court considers whether to grant an interim interdict it must do so in a way that promotes the objects, spirit and purport of the Constitution.”
Accordingly, the Court found that the balance of convenience does not favour the granting of interim relief, however, the Court was mindful that the issues raised in this application are of great significance and that it would be in the interests of all concerned that the issues raised therein be dealt with and determined expeditiously.
In this matter, the Court discussed the principles relied upon in the granting of interim relief.
Written by Ashleigh Butler and Kerry Theunissen