National Energy Regulator of South Africa and Another v Borbet SA (Pty) Ltd and Others, Eskom Holdings Soc Limited and Another v Borbet SA (Pty) Ltd and Others (1288/2016, 1309/2016) [2017] ZASCA 87; [2017] 3 All SA 559 (SCA) (6 June 2017)

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[2017] ZASCA 87
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National Energy Regulator of South Africa and Another v Borbet SA (Pty) Ltd and Others, Eskom Holdings Soc Limited and Another v Borbet SA (Pty) Ltd and Others (1288/2016, 1309/2016) [2017] ZASCA 87; [2017] 3 All SA 559 (SCA) (6 June 2017)

Links to summary

THE
SUPREME COURT OF APPEAL OF SOUTH AFRICA
JUDGMENT
Case
No: 1288/2016
1309/2016
Reportable
In
the matter between:
THE
NATIONAL ENERGY REGULATOR OF
SOUTH
AFRICA

FIRST APPELLANT
ESKOM
HOLDINGS SOC LIMITED

SECOND APPELLANT
and
BORBET
SA (PTY) LTD

FIRST RESPONDENT
PG
GROUP (PTY) LTD t/a SHATTERPRUFE

SECOND RESPONDENT
CROWN
CHICKENS (PTY)
LTD

THIRD RESPONDENT
AGNI
STEELS SA (PTY) LTD

FOURTH RESPONDENT
AUTOCAST
SOUTH AFRICA (PTY) LTD t/a
AUTOCAST
PORT ELIZABETH

FIFTH RESPONDENT
NELSON
MANDELA BAY BUSINESS CHAMBER
SIXTH

RESPONDENT
MINISTER
OF ENERGY

SEVENTH RESPONDENT
NELSON
MANDELA BAY MUNICIPALITY

EIGHTH RESPONDENT
SOUTH
AFRICAN LOCAL GOVERNMENT
ASSOCIATION

NINTH RESPONDENT
and
In
the matter between:
ESKOM
HOLDINGS SOC LIMITED

FIRST APPELLANT
THE
NATIONAL ENERGY REGULATOR OF
SOUTH
AFRICA

SECOND APPELLANT
And
BORBET
SA (PTY)
LTD

FIRST RESPONDENT
PG
GROUP (PTY) LTD t/a SHATTERPRUFE

SECOND
RESPONDENT
CROWN
CHICKENS (PTY)
LTD

THIRD RESPONDENT
AGNI
STEELS SA (PTY) LTD

FOURTH RESPONDENT
AUTOCAST
SOUTH AFRICA (PTY) LTD t/a
AUTOCAST
PORT ELIZABETH

FIFTH RESPONDENT
NELSON
MANDELA BAY BUSINESS CHAMBER
SIXTH

RESPONDENT
Neutral
citation:
NERSA
v Borbet SA (Pty) Ltd
[2017]
ZASCA 87
(1288/2016 & 1309/2016) (6 June 2017)
Coram:
Navsa,
Ponnan, Wallis and Dambuza JJA and Mbatha AJA
Heard:
4
May 2017
Delivered:
6
June 2017
Summary:
Adjudication
by the National Energy Regulator of South Africa (NERSA), a statutory
regulator, of tariff adjustment application by
Eskom, a licensee with
a license, inter alia, to distribute as principal supplier
electricity in South Africa : nature of adjudication
process and
decision: administrative action: subject to review in terms of the
Promotion of Access to Justice Act 3 of 2000: not,
as suggested by
NERSA and Eskom, immune from judicial scrutiny because it involved
application of policy.
Price
adjustment methodology discussed, interpreted and applied: whether
decision by NERSA rational and whether adjudication process
and
decision unfair.
Discussion
of deference to specialised administrative body.
ORDER
On
appeal from:
Gauteng
Division, Pretoria of the High Court (Pretorius J sitting as court of
first instance):
The following order is
made:
1
The appeal is upheld with costs including the costs of two counsel.
2
The order of the court below is set aside and replaced with the
following:
‘
The
application is dismissed with costs including the costs of two
counsel.’
JUDGMENT
Navsa
JA (Ponnan, Wallis and Dambuza JJA and Mbatha AJA concurring):
Introduction
[1]
On 1 March 2016 the first appellant, the National Energy Regulator of
South Africa (NERSA), approved an additional 1,4 per cent
increase in
the electricity tariff, over and above an earlier, properly approved
eight per cent increase, that the second appellant,
Eskom Holdings
SOC Limited (Eskom),
[1]
could
impose on its customers in relation to the 2013/2014 financial year.
The decision was announced on 2 March 2016. It is common
cause that
the increase came into effect on 1 April 2016 and endured until 31
March 2017. It is uncontested that the increase was
passed on to
municipalities by Eskom and that consumers were charged that
increased rate.
[2]
At the end of
March 2016, the first to sixth respondents successfully challenged
NERSA’s approval of the additional 1,4 per
cent increase in the
Gauteng Division, Pretoria of the High Court. The first to fifth
respondents are private companies which operate
businesses within the
Nelson Mandela Bay Metropolitan Municipality. They are consumers and
users of electricity distributed by
that municipality and were all
affected by the tariff increase. The sixth respondent is the Nelson
Mandela Bay Business Chamber
(the Chamber), which represents a broad
spectrum of businesses in the Nelson Mandela Bay with a membership of
close to one thousand.
I shall, for the sake of convenience, refer to
the respondents collectively as Borbet.
[3]
Eskom is undoubtedly the major bulk supplier of electricity in South
Africa. The State is its sole shareholder. In the ordinary
course it
provides electricity to municipalities for onward transmission to
consumers within their area of jurisdiction. Eskom’s
continued
viability is of vital national importance. In this regard, NERSA is
charged with oversight.
[2]
The Gauteng Division, Pretoria of the High Court (Pretorius J)
reviewed and set aside the decision taken by NERSA, on the basis
that
it had failed to follow its own statutorily based Multi-Year Pricing
Determination Methodology (MYPDM), more specifically,
the provisions
dealing with adjustments to already approved tariffs. The details of
the prevailing methodology will be dealt with
in due course. It is
against that order that the present appeal, by NERSA and Eskom, with
the leave of that court, is directed.
It is, I venture, not unfair to
say that because of historical inefficiencies leading to what South
Africans have come to know
as load shedding – a euphemism for
electrical power cuts – and because of extensive public debates
concerning its competency,
Eskom has attained a level of unpopularity
in the public eye. In the present case, however, the question is
whether NERSA duly
discharged its statutory obligations.
If it
did then Eskom was entitled to charge the tariffs it authorized.
[3]
Electricity tariff increases affect all South Africans. They impact
the business world as well as domestic households. Thus,
there is a
statutory framework to ensure fairness so that tariff increases have
the result that electricity infrastructure remains
sustainable while
at the same time ensuring that undue hardships are not imposed on
consumers. For a proper appreciation of the
matter it is necessary at
the outset to have regard in some detail to the regulatory framework.
The
regulatory framework
[4]
NERSA was established in terms of the National Energy Regulator Act
40 of 2004 (NERA),
[4]
which,
inter alia, regulates the generation, transmission and distribution
of electricity. Section 4 of NERA sets out NERSA’s
functions
and provides, amongst others, that NERSA is to undertake the
functions set out in s 4 of the Electricity Regulation Act
4 of 2006
(ERA).
[5]
In that section of ERA
the powers and duties of the regulator are set out as follows:
‘
The
Regulator –
(a)
must
–
(i)
consider
applications for licenses and may issue licences for –
(aa)
the operation of
generation, transmission or distribution facilities;
(bb)
the import and
export of electricity;
(cc)
trading;
(ii)
regulate
prices and tariffs
;
(iii)
register
persons who are required to register with the Regulator where they
are not required to hold a licence;
(iv)
issue
rules designed to implement the national government’s
electricity policy framework, the integrated resource plan and
this
Act;
(v)
establish
and manage monitoring and information systems and a national
information system, and co-ordinate the integration thereof
with
other relevant information systems;
(vi)
enforce
performance and compliance, and take appropriate steps in the case of
non-performance;
(b)
may
–
(i)
mediate
disputes between generators, transmitters, distributors, customers or
end users;
(ii)
undertake
investigations and inquiries into the activities of licensees;
(iii)
perform
any other act incidental to its functions.’ (My emphasis.)
[5]
The objects of ERA are as follows:
[6]
‘
(a)
[to]
achieve the efficient, effective, sustainable and orderly development
and operation of electricity supply infrastructure in
South Africa;
(b)
ensure that the
interests and needs of present and future electricity customers and
end users are safeguarded and met, having regard
to the governance,
efficiency, effectiveness and long-term sustainability of the
electricity supply industry within the broader
context of economic
energy regulation in the Republic;
(c)
facilitate
investment in the electricity supply industry;
(d)
facilitate
universal access to electricity;
(e)
promote the use of
diverse energy sources and energy efficiency;
(f)
promote
competitiveness and customer and end user choice; and
(g)
facilitate a fair
balance between the interests of customers and end users, licensees,
investors in the electricity supply industry
and the public.’
[6]
Section 14(1) of ERA under the title ‘Conditions of licence’
provides, inter alia:
‘
(1)
The Regulator may make any licence subject to conditions relating to
–
.
. .
(d)
the setting and
approval of prices, charges, rates and tariffs charged by licensees;
(e)
the
methodology
to be used in the determination of rates and tariffs which must be
imposed by licensees;
.
. .’ (My emphasis.)
[7]
Section 15 of ERA sets out ‘Tariff principles’:
‘
(1)
A licence condition determined under section 14 relating to the
setting or approval of prices, charges and tariffs and the regulation

of revenues –
(a)
must enable an
efficient licensee to recover the full cost of its licensed
activities, including a reasonable margin or return;
(b)
must provide for or
prescribe incentives for continued improvement of the technical and
economic efficiency with which services
are to be provided;
(c)
must give end users
proper information regarding the costs that their consumption imposes
on the licensee’s business;
(d)
must avoid undue
discrimination between customer categories; and
(e)
may permit the
cross-subsidy of tariffs to certain classes of customers.
(2)
A licensee may not charge a customer any other tariff and make use of
provisions in agreements other than that determined or
approved by
the Regulator as part of its licensing conditions.
(3)
Notwithstanding subsection (2), the Regulator may, in prescribed
circumstances, approve a deviation from set or approved tariffs.’
[8]
Section 21(2) of ERA provides:
‘
A
licensee may not discriminate between customers or classes of
customers regarding access, tariffs, prices and conditions of
service,
except for objectively justifiable and identifiable
differences approved by the Regulator.’
[9]
Municipalities are charged with the obligation to ensure electricity
reticulation services within their areas of jurisdiction.
Section 27
of ERA states that each municipality must exercise its executive
authority and perform its duty by:
‘
(a)
complying with all the technical and operational requirements for
electricity networks determined
by the Regulator;
(b)
integrating its
reticulation services with its integrated development plans;
(c)
preparing,
implementing and requiring relevant plans and budgets;
(d)
progressively
ensuring access to at least basic reticulation services through
appropriate investments in its electricity infrastructure;
(e)
providing basic
reticulation services free of charge or at a minimum cost to certain
classes of end users within its available resources;
(f)
ensuring
sustainable reticulation services through effective and efficient
management and adherence to the national norms and standards

contemplated in section 35;
(g)
regularly reporting
and providing information to the Department of Provincial and Local
Government, the National Treasury, the Regulator
and customers;
(h)
executing its
reticulation function in accordance with relevant national energy
policies; and
(i)
keeping separate
financial statements, including a balance sheet of the reticulation
business.’
[10]
In the present case, in relation to the time period concerned, Borbet
and others in that municipal area were billed by the
Nelson Mandela
Bay Metropolitan Municipality. It is necessary to record that
municipalities are themselves, as licensees for reticulation
to
customers and/or end-users, in terms of s 15(1)
(a)
of
ERA, entitled to the same recovery of costs of
licenced
activities,
as is Eskom, including a reasonable margin or return.
[11]
Section 35(1) reads as follows:
‘
(1)
The Regulator may, after consultation with –
(a)
licensees;
(b)
municipalities
that reticulate electricity; and
(c)
such
other interested persons as may be necessary, make guidelines and
publish codes of conduct and practice, or make rules by notice
in the
Gazette
.’
[12]
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 ss 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 (s 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. Notionally,
licence conditions could vary from licensee
to licensee.
[13]
During the hearing of this appeal, we called for a copy of the Eskom
licence. It sets out Eskom’s duties, largely in
line with the
provisions of ERA. Under ‘Specific Conditions’, Eskom is
required to maintain financial records in relation
to the
distribution of electricity. Clause 4.6 of the licence provides that
‘the licensee’ shall comply with ‘the
price and
tariff methodology’ provided by NERSA in determining its prices
and tariffs and it is restricted to charging the
consumer and/or
end-user tariffs and prices approved by NERSA. Under ‘General
Conditions’, Eskom is required to comply
with the applicable
provisions of ERA. It is also required to take reasonably practical
steps to protect the environment and to
ensure safety in the course
of operations associated with the licence, including, but not only
those specified, in health and safety
and environmental legislation.
[14]
In terms of s 17 of ERA, NERSA may revoke a licence on the
application of a licensee if the licenced facility or activity is
no
longer required and the licenced facility or activity is not
economically viable. That provision is mirrored in clause 7 of

Eskom’s licence. Section 18 of ERA deals with contraventions of
a licence and allows for the Regulator to sit as a tribunal
to deal
with allegations of a failure to comply with a licence condition, or
with any provision of ERA. Section 18(5) of ERA allows
for financial
penalties to be imposed on licensees, depending on the degree of
non-compliance. Section 19 of ERA empowers the Regulator
to apply to
the high court for an order suspending or revoking a licence, if
there are grounds for doing so. Many of the sections
of ERA referred
to and the licence conditions predominantly set and define the
parameters of the relationship between NERSA and
licensees. I pause
to reflect that it is significant that any failure to comply with
licence conditions, which includes the failure
to maintain financial
records, and non-compliance with the pricing tariff methodology,
clearly does not, in terms of the provisions
set out above, operate
as a guillotine against the licensee, resulting in an immediate
cancellation of the licence and the cessation
of licenced activities.
This is an aspect to which I shall revert.
The
Multi-year Price Determination Methodology (the MYPDM)
[15]
It is common cause that tariffs to be charged by licensees are
determined by NERSA at intervals in accordance with the MYPDM,

ostensibly in terms of s 14(1)
(e)
of
ERA.
[7]
[16]
Each price determination interval covers a period of three to five
years, hence the description ‘multi-year price determination

methodology’. The MYPDM is apparently updated in relation to
each interval. The determination in dispute falls within the
third
price determination interval, which covers five tariff years between
1 April 2013 and 31 March 2018. The methodology employed
in relation
thereto will henceforth be referred to as the MYPDM3. It is the
interpretation and application of the MYPDM3 that lies
at the heart
of this appeal.
[17]
Under the MYPDM3 the tariffs set by NERSA that Eskom would charge and
recover from its customers was envisaged to increase
by eight per
cent year-on-year for each of the five years in question. The
additional 1,4 per cent, an adjustment in relation to
the 2013/2014
financial year, approved by NERSA, referred to in para 1 above, would
mean that in the financial year 1 April 2016
till 31 March 2017 Eskom
would have been entitled to a total increase of 9,4 per cent, which,
as stated earlier, was passed on
to end-consumers.
[18]
In keeping with the principle of transparent and accountable
governance and administration, the MYPDM3 is contained in a
comprehensive
document and was the product of extensive consultation
by NERSA with interested and affected parties. The introduction to
the document
is significant and I consider it necessary to set it out
in full:
‘
The
Multi-Year Price Determination (MYPD) Methodology is developed for
the regulation of Eskom’s required revenues. It forms
the basis
on which the National Energy Regulator of South Africa (NERSA or “the
Energy Regulator”) will evaluate the
price adjustment
applications received from Eskom. The MYPD was first introduced in
2006 for implementation from 01 April 2006
to 31 March 2009. It is a
cost-of-service-based methodology with incentives for cost savings
and efficient and prudent procurement
by the licensee (Eskom). The
Methodology also provides for Services Quality Incentives (SQI) for
Eskom. On an annual basis, the
MYPD runs concurrently with Eskom’s
financial year(s). A second MYPD period started from 01 April 2010 to
31 March 2013,
with the next one scheduled to run from 01 April 2013
to 31 March 2018.
In
developing the MYPD Methodology, the following objectives were
adopted:
1.
to
ensure Eskom’s sustainability as a business and limit the risk
of excess or inadequate returns; while providing incentives
for new
investment;
2.
to
ensure reasonable tariff stability and smoothed changes over time
consistent with socio-economic objectives of the Government;
3.
to
appropriately allocate commercial risk between Eskom and its
customers;
4.
to
provide efficiency incentives without leading to unintended
consequences of regulation on performance;
5.
to
provide a systematic basis for revenue/tariff setting; and
6.
to
ensure consistency between price control periods.
The
development of the Methodology does not preclude the Energy Regulator
from applying reasonable judgment on Eskom’s revenue
after due
consideration of what may be in the best interest of the overall
South African economy and the public.’
The
qualification in the last part of the introduction is significant. It
allows NERSA latitude to exercise ‘reasonable judgment’

after due consideration of what may be in the public interest.
[19]
The MYPDM3 reflects, in large part, government’s electricity
pricing policy, issued by the Department of Minerals and
Energy.
[8]
The MYPDM3 and the pricing policy are in line with the tariff
principles set out in s 15 of ERA. It provides for the recovery of

the full costs of licensed activities, including a reasonable margin
or return and provides for prescribed incentives for continued

improvement of technical and economic efficiency. Section 3 of the
MYPDM3 sets out a formula to determine the allowable revenue
for
Eskom within the interval, which includes taking into account, inter
alia, its asset base, weighted average cost of capital,
expenses and
other factors which for present purposes are not material.
[20]
Before Eskom applied for the additional 1,4 per cent increase in
terms of MYPDM3 it had, during April/May 2015, applied for
what is
termed a ‘selective reopener of the MYPD[M]3’, based on a
shortfall on electricity sales of approximately R22
billion in
respect of expected revenue of approximately R143 billion, recorded
as part of the earlier MYPDM3 tariff approvals.
Eskom applied for a
‘selective reopener’ because, so it alleged, its
operating costs had increased due to unexpected
events such as a
boiler explosion at one of its units, the collapse of a power station
silo, challenges related to the quality
of coal, and delays in the
commissioning of new power stations.
[21]
After receipt of Eskom’s application, NERSA published it on its
website and called for public comment. NERSA went further
and held
public hearings on 23 and 24 June 2015. A total of 225 written
comments were received. On 29 June 2015 NERSA decided to
decline the
application on the basis that the MYPDM3 did not provide for a
‘selective reopening’, but stated that Eskom
could resort
to the risk management control and pass-through mechanism which is
described in the MYPDM3 as ‘The Regulatory
Clearing Account’
(RCA).
The
Regulatory Clearing Account – s 14 of the MYPDM3 –
Eskom’s application
[22]
In response, Eskom, on 10 November 2015, submitted an RCA application
to NERSA, seeking an adjustment in respect of the tariff
for the
2013/2014 tariff year of approximately R22 billion, purportedly in
terms of s 14 of the MYPDM3. In para 3 of Eskom’s
RCA
submission to NERSA, the following appears:
‘
Eskom’s
2013/14 RCA Submission is driven substantially by revenue
under-recovery and higher primary energy costs to meet demand,
whilst
operating in a constrained electricity system. The determined RCA
balance is motivated with evidence for prudent scrutiny
by NERSA.
Variances
can be linked to two key sources
:
·
Increases
in costs due to a changing environment and assumptions after the
MYPD3 decision;
·
Assumptions
made for purposes of the MYPD3 revenue decision which did not
materialise.’
[23]
Under para 3.1 of its RCA submission Eskom stated the following:
‘
The
revenue variance of R11 723m was primarily as a result of lower
electricity sales volumes attributable to standard tariff
customers.’
Paragraph
3.2 reads as follows:
‘
Due
to the constrained electricity system and level of Generating plant
performance, Eskom was required to operate a more expensive
mix of
generating plant compared to the assumptions in the MYPD3 decision in
order to avoid/minimize load shedding. This included
a combination of
higher levels of supply from local and regional [Independent Power
Producers] (IPPs), more [Open Chamber Gas Turbines]
(OCGT) usage and
a change in the mix of the coal fleet which was required in trying to
meet demand and more importantly to protect
the stability of the
overall electricity system.
This
resulted in R8 024m higher OCGTs fuel spend, extra net coal burn
of R2 000m, more from local IPPs of R580m, regional
IPP supply
of R1 136m and additional other primary energy of R2 491m
compared to the assumptions in the MYPD3 decision.
The other primary
energy variance was substantially linked to costs for startup gas and
oil and nuclear fuel costs.
The
coal burn variance of R2 000m is a result of a combination of
the positive volume variance of R1 378m in favour of
the
consumer and the negative coal price variance of R3 378 in
favour of Eskom. The coal volume variance is attributable to
lower
coal production volumes because of lower sales volumes and reduction
in Generation coal plant performance levels compared
to that assumed
in the MYPD3 decision.’
In
its RCA submission, Eskom also alluded to under-expenditure in
relation to the environmental levy of R312 million, which would
inure
to the benefit of consumers. There were also other items in relation
to over – and under-expenditure that, for present
purposes, are
not material.
[24]
Because of its importance in the determination of this appeal it is
necessary to quote s 14 of the MYPDM3 in full:
‘
14.1
Risk Management Device
The
risk of excess or inadequate returns is managed in terms of the RCA.
The RCA is an account in which all potential adjustments
to Eskom’s
allowed revenue which has been approved by the Energy Regulator is
accumulated and is managed as follows:
14.1.1
The nominal estimates of the regulated entity will be managed by
adjusting for changes in the inflation rate.
14.1.2
Allowing the pass-through of prudently incurred primary energy costs
as per Section 8 of the Methodology.
14.1.3
Adjusting capital expenditure forecasts for cost and timing variances
as per Section 6 of the Methodology.
14.1.4
Adjusting for prudently incurred under-expenditure on controllable
operating costs as may be determined by the Energy Regulator.
14.1.5
Adjusting for other costs and revenue variances where the variance of
total actual revenue differs from the total allowed
revenue. In
addition, a last resort mechanism is put in place to trigger a
re-opener of the price determination when there are
significant
variances in the assumptions made in the price determination.’
[25]
Section 14.2 bears the heading, ‘The Regulatory Clearing
Account’, and provides:
‘
The
RCA is used to debit/credit all the aforementioned potential
adjustments to Eskom’s allowed revenue and must be used as

follows:
14.2.1
The RCA will be created at the beginning of the financial year and
continuously monitored. The evaluation of the account
(for the
purpose of determining the pass-through and/or claw-back) will be
done with actuals for the full financial year.
14.2.2
This account must be updated quarterly so as to use it for regular
alerts to customers of any possible adjustment in
the coming year.
Eskom must therefore submit actual financial data on a quarterly
basis.
14.2.3
The RCA balance will be measured as a percentage of total allowed
revenue and will act as a trigger for re-opener as follows:
14.2.3.1
If the RCA balance is less than or equal to 2 % of the allowable
revenue, then there will be no immediate pass-through
adjustment, but
the RCA balance will be carried over to the next financial year.
14.2.3.2
If the RCA balance is between 2 % and 10 %, the amount is allowed as
a pass-through in the next financial year without
the need for a full
stakeholder consultation process.
14.2.3.3
If the balance is greater than 10 % of the allowable revenue, there
will be a full stakeholder consultation process before
any
pass-through is allowed.
14.2.4
The adjustments to be included in the RCA and balance of the RCA will
be approved by the Energy Regulator in terms of the
MYPD Methodology.
The Energy Regulator will only have to determine the timing of when
it should be passed through or clawed-back.
14.2.5
Eskom will, on a quarterly basis, present the Energy Regulator with
possible adjustments based on the Methodology, the costs
to date and
the projections to year-end.
14.2.6
The Energy Regulator will then review Eskom’s submission and
make a preliminary assessment of any adjustments required
in the
subsequent financial year’s tariff adjustment.
14.2.7
The review will be performed on receipt of audited statements from
Eskom.’
[26]
As can be seen, the RCA exists to facilitate
ex
post facto
adjustments to the approved revenues under the MYPDM3 determination.
Variations between projected and actual revenues and expenses
can
only be finally determined after the end of a financial year.
Variances may arise because expected revenues do not materialise
or
expenses increase beyond those contemplated. They might also occur
due to revenues being beyond expectation and expenses less
than those
envisaged. This very rarely might ultimately redound in favour of the
consumer. In theory, the RCA allows Eskom to obtain
adjusted revenues
for prior years by after-the-fact adjustments to the electricity
price. If NERSA approves it, subject to the
requirements of s 14 of
the MYPDM3, the adjustment is effected through price increases in
subsequent years. Unlikely though it
might seem the same would apply
in the event that consumers were entitled to the benefit of over
recovery and the claw-back provisions
applied.
[27]
Because the adjustment sought, namely R22 billion, as against
expected revenue of R143 billion, fell within the provisions
of s
14.2.3.3 of MYPDM3 – ten per cent greater than the allowable
revenue – the matter had to be dealt with by way
of ‘a
full stakeholder consultation process before any pass-through [was]
allowed’.
The
public participation process
[28]
Thus, on 13 November 2015, NERSA published Eskom’s RCA
application for public comment and held public hearings. The Chamber,

made written representations. In its covering letter to the
submissions made by it, the Chamber stated that it was strongly
opposed
to the application. The following part of the letter bears
repeating:
‘
The
current submission by the [Chamber] is a plea to Nersa to play its
crucial role in ensuring Eskom gets back on track. Eskom
has to get
out of its vicious circle of spiraling costs and lack of delivery: it
is imperative that Eskom turns a situation where
it is doing ever
less with ever more, into a situation where it will be doing more
with significantly less.’
[29]
The Chamber provided a summary of its written submissions, part of
which is reproduced hereunder:
‘
Having
reviewed the RCA submissions by Nersa, the submissions by the
[Chamber] may be summarized as follows:
·
Eskom
is unable to sustain itself in a competitive environment. As a result
of this Eskom cannot support an industry which needs
to be globally
competitive;
·
If
the RCA submission by Eskom were accurate, the complete and
substantial inability by the MYPD3 process and decision to forecast
a
stable energy price, with any measure of reliability, strongly
suggests that the entire MYPD3 process was tainted by unlawfulness;
·
The
tariffs are serving as an investment disincentive to South Africa;
·
Eskom
has failed to make a full disclosure and in so doing has deprived
Nersa of the opportunity of making an informed decision;
·
And
Eskom is seeking to recover the cost of its inefficiency. The ERA
only allows for the recovery of efficient costs.’
[30]
It made the following recommendations:
·
‘
With
regards to the revenue variance, Eskom should not get compensated for
the lost revenue as claimed in the RCA submission, and
that the
request to reclaim R11.9723 billion be rejected;
·
No
further cost increases beyond the scope of the original MYPD3
decision must be allowed;
·
The
2016/17 tariff decision be based on the tariff per the original MYPD3
decision;
·
All
inefficient costs incurred by Eskom be absorbed or funded by its
shareholders, the Government;
·
And
Eskom must be encouraged to operate more efficiently, reduce costs
and then pass these on to South African consumers.’
[31]
In its oral submissions during the public hearings arranged by NERSA,
the following that appears from a transcript, seems to
have been the
primary thrust of the Chamber’s contention that Eskom was not
following the RCA methodology:
‘
Eskom
is not following Nersa’s RCA Methodology
·
Eskom
refers to a 2011
consultation
document
as the basis for its application
·
Eskom’s
application does not comply with Nersa’s MYPD Methodology (Nov
2012)
-
Timing
and frequency:
·
The
RCA has to be created during the year the deviations are incurred.
·
Eskom
must present possible adjustments to Nersa on a quarterly basis
·
The
review is done prior to financial year end  adjusted upon
receipt of FS [financial statements]
-
The
current application comes 1,5 years after the end of FY [financial
year] (un-procedural)
-
No
evaluation of the RCA in the Annual Financial Statements 2013/14
Eskom’s RCA did not follow the
MYPD methodology in relation to IPP’s and OCGT’s and it
ignoring RCA methodology.
The RCA is to be
rejected on this basis alone.
’
This
complaint was repeated as a primary contention on behalf of Borbet in
the court proceedings that followed.
[32]
The public participation process to deal with Eskom’s RCA
application was undoubtedly extensive. More than 18 stakeholder

comments were received and included comments from individuals, small
users, energy-intensive users, environmental activists and

government. Public hearings were conducted at various locations
nationwide. Forty-two oral representations were made. It is necessary

to record that during the public participation process small users
noted that Eskom had failed to follow the MYPDM3 RCA methodology,
in
that it did not provide quarterly financial updates during the
2013/2014 year. Eskom had instead submitted bi-annual reports.
NERSA’s
electricity sub-committee and its deliberations and report
[33]
Following on the public hearings, notice was given to the public on
NERSA’s website, of a special meeting of its electricity

subcommittee (ELS) to be held during February 2016.
[9]
Section 8(9)
(a)
of NERA dictates that any meeting of NERSA must be open to the
public, ‘unless the quorate meeting passes a resolution to
the
effect that, for the part of the meeting concerned, the information
to be discussed during that part of the meeting would create
a record
that would in turn oblige the Energy Regulator to refuse access to
that information…’.
[34]
The purpose of the meeting was to consider and make a decision
surrounding Eskom’s RCA application. It is clear from
the
record of proceedings that the ELS took into account written
stakeholder comments. The report of the ELS chairperson to NERSA
that
followed the meeting contained summaries of stakeholder comments,
which included comments from small and intensive users and
government
departments.
[35]
Small users noted that the MYPDM3 provided a clear price path and
predictability and that Eskom had deviated from it by not
producing
quarterly updates during 2013/2014. NERSA was urged to ‘either
reject the application due to procedural failure
or penalise Eskom
for not following the process prescribed in the MYPD methodology’.
In addition, NERSA was urged to disregard
Eskom’s claims for
all
customers to compensate it for under-collections due to low prices
charged to some, in terms of negotiated price agreements. Small
users
complained that the over-utilisation of Open Chamber Gas Turbines
(OCGTs) was a result of Eskom being an inefficient operator
and that
the RCA did not allow for recovery of losses as a result of
inefficiency. Small users contended that Eskom’s failure
to
implement new capacity generation projects was related to inefficient
project management.
[36]
Like small users, intensive users also complained about
all
customers being penalised for agreements with
certain
customers who had been charged at lower rates, resulting in lower
revenue. Intensive users did not consider it fair to allow a
tariff
adjustment for variances in costs resulting from the use of more
expensive coal and because of the delays in new power producing

plants being implemented. They also objected to oil and gas costs
being passed on to consumers. They were adamant that the cost

occasioned by OCGT usage should not be imposed on consumers.
Government departments were concerned about the additional cost
caused
by the use of OCGTs.
[37]
The ELS agreed that quarterly reports had not been submitted. It
noted that the evaluation of the RCA for determining pass-through
or
claw-backs is only finally done with actual audited annual financial
accounts for the full year. It noted that quarterly reports
are used
for monitoring purposes. It took the view that actual audited
financial accounts had been submitted in line with MYPDM3.
The ELS
recorded that costs considered not to be prudent would not be
allowed. The following is recorded in the report that followed:
‘
It
is a fair comment to say that the factors resulting in the need for
the over-utilisation of OCGT were all within Eskom’s
control.
Eskom’s plant performance deteriorated from 80 % to 75 %.
Although the system as a whole had a reserve margin of
31,7 %, this
was made futile by the low availability of the coal fleet.
The
new generation capacity that was due to come on line in the form of
Medupi and Ingula would have made a significant difference
in the
capacity shortfall and would have resulted in less OCGT usage.’
[38]
The report of the ELS deals fairly extensively with the economic
impact of a tariff adjustment. Its negative impact on inflation,
the
GDP and employment were all considered. The ELS indicated that there
was an endeavor to strike a balance between Eskom’s
financial
sustainability and the impact on the South African economy.
[39]
The report of the ELS also stated that in terms of the provisions of
MYPDM3, coal burn costs and coal handling costs were subject
to
automatic pass-through. The following also appears:
‘
The
[MYPDM3] methodology prescribes that OCGT price variance is automatic
pass-through however limited to the allowed volumes. Since
Eskom has
applied for the total OCGT variance, the price variance is factored
in already.’
[40]
On 22 February 2016 the ELS, as appears from the minutes of that
meeting, noted that the implementation of the RCA balance
as
determined is the prerogative of NERSA, after consideration of the
interests of both the licensee and its customers. It resolved,
inter
alia, as follows:
‘
The
Subcommittee approved:
Based
on the available information and the analysis of Regulatory Clearing
Account (RCA) Application – third Multi Year Price

Determination (MYPD3) Year 1 (2013/14) the Subcommittee, at its
meeting held on 25 February 2016 recommended the following to the

Energy Regulator:
(a)
The RCA balance of R11 243m be recoverable from the standard
tariff customers,
local SPAs and international customers. The
recovery of the RCA balance is proportional to the respective
customers groups’
forecasted sales volumes for the year of
implementation (2016/17).
(b)
The RCA balance of R11 243m be implemented for the 2016/17
financial year only.
(c)
The amount of R10 259m be recoverable from standard tariff
customers for the
2016/17 financial year only.
(d)
The disallowed amount for other primary energy of R1 589m will
in future be made
available to Eskom provided that Eskom demonstrates
improvement in the plant performance and coal handling costs. This
may only
be available after the 2016/17 financial year.
(e)
The average tariff for standard tariff customers be increased [to]
9.4% for 2016/17
financial year only.
(f)
The amount of R984m be recoverable proportionally from Eskom’s
local SPA customers
and international customers for 2016/17 financial
year only.
(g)
Eskom must submit a new MYPD application based on revised assumptions
and forecasts
that reflect the changed circumstances.’
[41]
On 24 February 2016, the chairperson of the ELS signed the written
report referred to above and submitted it to NERSA, which
was
requested to approve the resolution and the underlying reasons. The
report contained the synopses of written stakeholder comments

referred to above.
NERSA’s
decision
[42]
After receipt of the ELS report, notice was given on NERSA’s
website of a meeting it intended to convene on 1 March 2016.
The
meeting took place as scheduled. It considered the ELS report and
required 18 changes to be made to the draft decision and
reasons.
[43]
On 1 March 2016 NERSA announced its decision to approve Eskom’s
RCA application, in terms of which the latter would be
able to obtain
an additional price increase in relation to the 2013/2014 tariff year
of R11,2 billion to take effect on 1 April
2016. The decision by
NERSA had the consequence that Eskom was allowed an additional tariff
increase of 1,4 per cent over and above
the eight per cent already
approved in terms of the MYPDM3. The reasons for the decision were
not immediately made available. Borbet
had to request reasons.
[44]
On 29 March 2016 NERSA published the reasons for its decision. It is
a 54 page document that sets out in detail the history
leading up to
the RCA application. In dealing with revenue variance, NERSA had
regard to MYPDM3. It noted the under-recovery in
revenue from the
estimated amount which had led to the prior eight per cent approval.
NERSA considered the energy availability
performance targets it had
set for Eskom for the 2013/14 financial year and recorded that it
fell short by 6,4 per cent. It required
Eskom to revise its
maintenance strategy and implementation. In respect of OCGTs it
allowed a pass-through of variances up to the
MYPDM3 allowance. It
decided as follows:
‘
Eskom
is therefore allowed a total of R1 252m for OCGTs made up of
R647m for OCGT generation compensation and R578m for fuel
price
variance against the R8 024m that is applied for by Eskom.’
[45]
In respect of higher coal costs, NERSA said the following:
‘
45.
The MYPD methodology allows coal to be treated as a single cost
centre without differentiating between the various coal sources

(contract types).
46.
The methodology did not anticipate scenarios where the coal variances
will result in higher average coal costs due to purchasing
of coal
from different suppliers.
47.
In light of the above, the methodology must be reviewed.
48.
The R2 000m coal burn cost is allowed in favour of Eskom.’
[46]
It dealt with Independent Power Producer costs as follows:
‘
49.
The Independent Power Producer (IPP) costs were based on approved
Power Purchase Agreement (PPA) contracts submitted by Eskom.
50.
Therefore Eskom is allowed the variance of R580m with regard to IPP
costs in its favour.’
[47]
In respect of costs in relation to a regional independent power
producer, NERSA said the following:
‘
51.
The purchase of power from the regional IPP was approved by the
Energy Regulator when generation performance deteriorated as
a
cheaper option.
52.
Therefore Eskom is allowed the variance of R1 136m with regard
to regional IPP costs in its favour.’
[48]
In relation to reduced water costs, it had regard to the variance of
R295m in favour of the consumer.
[49]
NERSA had regard to the startup gas and oil variances and dealt with
it as follows:
‘
55.
Eskom’s start-up oil and gas variance (R1 549m in its
favour) is adjusted by R1 184m to R365m as shown in Table
9
above. The adjustment is because the costs were inefficiently
incurred as they relate to issues that were within management control

(e.g. maintenance related).
56.
Eskom is allowed R365m due to the unfavourable fluctuation in the
Rand/Dollar exchange rate and issues that were outside management

control (e.g. torrential rainfall).’
[50]
It reasoned as follows on coal handling costs:
‘
57.
The additional costs resulted from the misaligned performance of the
generation fleet compared to what was anticipated in the
MYPD3 (EAF
of 75.1 % as opposed to the approved 81.5 % in Table 8).
58.
As a result, Eskom’s application for the variance of R377m for
coal handling is disallowed.’
[51]
It dealt with water treatment costs as follows:
‘
59.
The Eskom application for R55m water treatment variance is with
respect to poor water quality and an increase in the volume
of water
processed. Part of the variance (R27m) was with respect to poor water
quality and the rest (R28m) was because of an increase
in the volume
of water processed.
60.
The additional water treatment cost of R27m is allowed because of
water quality issues, which are outside Eskom’s direct
control.
61.
However, the increase in the volume of water processed and the
associated costs of R28m is considered to be within management

control as it deals with issues such as boiler tube leaks due to poor
maintenance and is therefore disallowed.’
[52]
NERSA went on to consider other variances, such as in relation to the
environmental levy.
[10]
[53]
The economic impact of the increased tariff was considered by NERSA.
The following appears in the written decision:
‘
124.
The electricity industry plays a significant role in enabling
economic activity and growth within the South African economy.
It is
evident that an increase in electricity tariffs will have a negative
economic impact. The Energy Regulator conducted a macroeconomic

impact assessment of a 9,4 % electricity price increase on the
economy.
125.
The main focus of this assessment was on Consumer Price Increase
(CPI), Producer Price Index (PPI), Gross Domestic Product
(GDP),
export and the impact on low-income households.’
They
concluded as follows:
‘
132.
After due consideration, [NERSA] has endeavoured to strike a balance
between Eskom’s financial sustainability and the
impact on the
South African economy.
133.
[NERSA] is of the view that the approved RCA balance puts Eskom in a
favourable financial position. The impact the increase
will have on
key macroeconomic indicators and low-income households is noted given
the current state of the economy.’
[54]
As can be seen from the above, the public participation process
leading up to the decision was extensive and interactive. Even
from
the brief synopsis in the preceding paragraphs one can see that the
decision making by NERSA was well motivated and detailed.
The
respondents’ engagement with NERSA and Eskom
[55]
Aggrieved at NERSA’S decision, the first, second, third and
sixth respondents, urgently engaged with NERSA. It is necessary
to
record that even before launching the urgent application culminating
in the present appeal, more particularly during the public

participation process, Borbet sought information from NERSA and Eskom
in terms of the Promotion of Access to Information Act 2
of 2000
(PAIA). Subsequent to NERSA’s decision referred to in para 1
above, which is the subject of the present appeal, the
second to
fifth respondents sought reasons for the decision both from Eskom and
NERSA. NERSA and Eskom required time to consult
each other. NERSA
expressed concerns about Eskom’s confidential commercial
information being made available to the public,
an aspect to which I
shall return later in this judgment.
[56]
Frustrated at being thwarted in its quest to obtain the information
sought, Borbet launched an urgent application in the North
Gauteng
Division of the High Court, Pretoria, in which it sought relief in
two parts. First, it sought an order directing NERSA
and Eskom to
supply NERSA’s reasons for its decision to approve Eskom’s
RCA application for the year 2013/14. In addition,
it sought an
interdict restraining NERSA and Eskom from giving effect to the
decision.
[57]
The urgent application was scheduled to be heard on 31 March 2016.
The day before the first scheduled hearing, reasons for
the approval
in question were supplied. The parties then reached agreement in
relation to further affidavits to be filed and an
expedited date for
the hearing of the application was arranged with the Judge President
of that division, obviating the need for
the interdictory relief.
The
application in the high court
[58]
At the outset, the primary thrust of Borbet’s attack on the
decision was that the MYPDM3 had not been followed because
the RCA
process should have been initiated during the 2013/2014 tariff year
and completed that year.
[59]
According to Borbet this was a peremptory provision of the MYPDM3.
The respondents contended that the interdictory relief had
been
sought because, once the approval of the increased tariffs was
implemented, millions of consumers would be forced to pay unlawful

increases and recovering those amounts later would be difficult.
Their fears seem to have been allayed by the undertaking by Eskom

that it would credit particular customers in the event of an order in
that regard by the court. This does not explain how the credit
system
would work in relation to municipalities and consumer accounts sent
out by them.
[60]
In their challenge, Borbet contended that it was clear that NERSA’s
decision was administrative action and subject to
review in
accordance with the Promotion of Administrative Action Act 3 of 2000
(PAJA). In this regard, they had ss 9 and 10 of
NERA in mind.
[61]
Section 9 reads as follows:
‘
Members
of the Energy Regulator must –
(a)
act in a
justifiable and transparent manner whenever the exercise of their
discretion is required;
(b)
at all times act in
the interests of the Energy Regulator and not in their own sectoral
interests;
(c)
act independently
of any undue influence or instruction;
(d)
recuse themselves
from and refrain from voting on or discussing any matter, pending
before the Energy Regulator in which they have
a direct or indirect
pecuniary interest;
(e)
act in a manner
that is required and expected from the holder of a public office; and
(f)
act in the public
interest.’
[62]
Section 10 provides:
‘
(1)
Every decision of the Energy Regulator must be in writing and be –
(a)
consistent with the
Constitution and all applicable laws;
(b)
in the public
interest;
(c)
within the powers
of the Energy Regulator, as set out in this Act, the Electricity Act,
the Gas Act and the Petroleum Pipelines
Act;
(d)
taken within a
procedurally fair process in which affected persons have the
opportunity to submit their views and present relevant
facts and
evidence to the Energy Regulator;
(e)
based on reasons,
facts and evidence that must be summarised and recorded; and
(f)
explained clearly
as to its factual and legal basis and the reasons therefor.
(2)
Any decision of the Energy Regulator and the reasons therefor must be
available to
the public except information that is protected in terms
of the
Promotion of Access to Information Act [Act
2 of 2000].
(3)
Any person may institute proceedings in the High Court for the
judicial review of
an administrative action by the Energy Regulator
in accordance with the Promotion of Administrative Action Act [Act 3
of 2000].
(4)
(a)
Any person affected by a decision of the Energy Regulator sitting as
tribunal may appeal to the High Court against
such decision.
(b)
The procedure
applicable to an appeal from a decision of a magistrate’s court
in a civil matter applies, with the changes
required by the context,
to an appeal contemplated in paragraph
(a)
.’
[63]
With reference to s 15(1)
(a)
of ERA, referred to in para 7 above, the respondents argued that only
an ‘efficient licensee’ is entitled to recover
the full
costs of its licence activities, including a reasonable margin of
return. Thus, they submitted, Eskom was in deficit because
of its own
inefficiency and was therefore precluded from seeking an RCA
adjustment.
[64]
In its answering affidavit, directed principally at resisting the
interdictory relief, Eskom contended that the respondents’
case
was baseless. It stated that the challenge to NERSA’s decision
offended against the doctrine of the separation of powers,
as the
approval of electricity tariffs was classically polycentric in nature
and fell outside the sphere of administrative law.
It was argued that
these were policy decisions and could only be challenged on very
narrow bases which were not present in this
instance.
[65]
In a
further founding affidavit, the case for Borbet mutated somewhat.
Although they continued to insist that Eskom ought to have
applied
for an adjustment during the 2013/14 tariff year, they did concede
that an adjustment could only be brought into effect
in the following
financial year (2014/2015).
[66]
They continued to be adamant that the quarterly updates by Eskom,
required in terms of MYPDM3, were integral to the RCA process.
It was
submitted on behalf of Borbet that the early warning system was to
enable consumers to plan ahead rather than be overtaken
by events and
attendant increased costs. It was also contended on behalf of Borbet
that quarterly reports might provide an early
basis for corrective
action leading to possible production schedules being amended by
Eskom. In this regard, Borbet relied on the
affidavit of Professor
Nattrass, a professor of sociology and economics, particularly in
relation to businesses being informed
timeously and the negative
impact on their future planning.
[67]
Borbet contended that paras 14.2.1 to 14.2.7 of the MYPDM3, which
deals with the RCA, had to be satisfied in all respects before
a
price adjustment could be approved by NERSA. Borbet pointed out that
the first time Eskom submitted the required information
remotely to
NERSA was during November 2015, some 27 months after they were
required to commence with quarterly submissions. In
accepting
bi-annual reports, so it was contended, NERSA simply adopted the
attitude that it could deviate arbitrarily from the
MYPDM3.
[68]
Furthermore, Borbet adopted the attitude that ‘efficiency’
is a persistent theme in the MYPDM3 and that expenses
are therefore
to be prudently and efficiently incurred and thus Eskom should not be
allowed to recover expenditure brought about
by its own inefficiency.
[69]
In relation to purchase agreements with independent power producers
(IPPs), it was contended on behalf of Borbet that NERSA
was required
to review the efficiency and prudence of these agreements before
and
after
they were concluded.
[70]
In relation to the over-utilisation of OCGTs Borbet took the view
that this was all within Eskom’s control. In respect
of
under-recovery in relation to lower electricity sales, Borbet adopted
the position that this was due once again to Eskom’s
own
inefficiency.
[71]
In NERSA’s answering affidavit to the further founding
affidavit, it was emphatic that there should be ‘judicial

deference’ to the Regulator’s decision. It was contended
on behalf of NERSA that the principle of the separation of
powers
required that interference with the Regulator’s functions
should only be done if the Constitution so mandated.
[72]
In dealing with Borbet’s contention that the quarterly reports
served an important signaling function, NERSA pointed
out that the
MYPDM3 provided that an RCA application could only be finally decided
after the audited financial statements of Eskom
became available,
which meant that the earliest that the tariff increase or decrease
could be assessed, was in the financial year
following the year in
which the revenue was generated and/or the expenditures were incurred
and could at best only be affected
in a subsequent financial year. It
was submitted that to the extent that there was non-compliance with
the MYPDM3, it was not a
material failure which defeated the purpose
of the RCA.
[73]
In dealing briefly with Borbet’s contention of an inadequate
consultation and public participation process, NERSA referred
to the
processes described in considerable detail earlier in this judgment.
It was submitted that a fatal flaw in Borbet’s
approach was
that, should a tariff increase be set aside, there would be no tariff
applicable at all. The previous tariff, it was
submitted, could never
be the default or fall-back position to the existing tariff, were it
to be set aside. It was contended that
the previous tariff, did not
take into account ‘actual revenue generated’ and
‘expenditure incurred’ during
the financial year.
[74]
In relation to the RCA account, NERSA was adamant that it was created
at the beginning of each financial year and continuously
monitored.
According to NERSA the MYPDM3 contained clear indicators that the
Regulator had to balance the interests of the consumer
and Eskom and
that it served as a guide to that end. It was repeated on behalf of
NERSA that the MYPDM3 involved the implementation
of policy that had
been translated into legislative form, which was protected from
judicial interference by the doctrine of the
separation of powers. It
may not, so it was contended, be translated into an immutable role.
Eskom echoed NERSA’s contentions
in relation to the doctrine of
the separation of powers.
[75]
In respect of the temporal requirements of MYPDM3, the following
parts of Eskom’s answering affidavit are of importance:
‘
17.3
An entity such as Eskom has an obligation to report its financial
statements to the public, and it must have its financials
audited.
The audited financial statements are the ones used in the RCA
application. The financial year ordinarily ends at 31 March.
Although
the financial year ends during 31 March, for Eskom’s books to
be closed takes a month or more. Then the auditors
have to audit the
financial results. This is done by external auditors including the
Auditor General’s office. It takes Eskom
over two months to
finalise this process. Eskom traditionally makes its financial
statements in July of every year. It is on this
basis that Eskom was
ready to launch the MYPD3 RCA 2013/14 application during January
2015.
17.4
There are variables that create a delay in the production of annual
financial statements. This has occurred and consequently
occasioned
delays in Eskom launching its RCA application during the 2013/14
tariff year. On this basis, Eskom couldn’t submit
its financial
statements during July 2014. This is so as it was also finalising the
MYPD2 RCA which was finalised during November
2014. Eskom could only
apply itself to the RCA application from November 2014 once MYPD2 RCA
process (the first ever RCA process)
was concluded.’
[76]
The following further paragraphs of Eskom’s answering affidavit
are also significant:
‘
22.3
Furthermore, the 2013/14 RCA cannot be recovered in the 2014/15 year
because the audited financial results are finalised and
released by
end-July 2014. By that time the 2014/2015 year has already commenced
and the tariffs for that year have already been
finalised. It must be
borne in mind that Eskom cannot charge any tariff that has not been
approved by NERSA, and that that process
must be completed by March
preceding the next financial year in which the decision is to be
implemented. It is therefore not possible
to have the decision of the
RCA implemented in the year immediately after the end of the
financial year implicated.
22.4
Eskom gives NERSA, six monthly reports. These regulatory reports are
a reflection of Eskom’s actual results for 6 months.
This is in
line with the Regulatory Financial standard. Clearly Eskom provides
sufficient information to NERSA in this regard amounting
to
substantial compliance.’
[77]
In respect of the MYPDM3 process, Eskom too pointed to the extensive
public participation process and reminded Borbet that
it had not
received all that it had sought in its application for a tariff
adjustment.
[78]
According to Eskom, it is notable that there is no prescribed time
within which an application for an RCA approval is to be
made.
[79]
Insofar as variances in relation to OCGTs were concerned, Eskom
pointed out that NERSA did not allow for any variance above
the
allowed variance for OCGTs. What was allowed was the price variance
due to fluctuations in the diesel price and the coal equivalent
costs
for the OCGT costs above the allowed levels.
[80]
According to Eskom, NERSA expected the energy from OCGTs to have been
provided by coal fired power stations. On that basis
NERSA only
provided the coal equivalent costs for that energy category. The
determination meant that Eskom was restricted in running
its OCGTs to
what was allowed in MYPDM3. Eskom pointed out that NERSA did not
allow any compensation for decreased revenues as
a result of low
sales.
[81]
In relation to IPP’s, locally and internationally, NERSA
approved power purchase agreements, including their related
costs and
all other agreements as part of its licencing process. This allowed
Eskom to recover its costs in terms of the rules
for power purchase
cost recovery.
[82]
Those then were the opposing positions adopted by the parties.
The
high court judgment
[83]
Pretorius J prepared and finalised a comprehensive 63 page judgment.
After considering the regulatory framework, she dealt
with the
submissions on behalf of NERSA and Eskom, namely, that Borbet was
precluded by the doctrine of the separation of powers
from
challenging the approval of the additional 1,4 per cent. She also had
regard to the contentions on behalf of Eskom and NERSA
concerning
deference to specialised administrative bodies. She dealt with the
submission concerning NERSA’s non-compliance
with the MYPDM3
and the contention that the decision was rationally and procedurally
unfair.
[84]
Pretorius J agreed with Borbet that NERSA had not complied with the
temporal and procedural requirements of MYPDM3. She held
it against
NERSA that it was contending simultaneously that it had complied with
MYPDM3 and that it was empowered to depart from
it. She held that
NERSA had departed from the MYPDM3 and that its reliance on the
introduction did not absolve it from justifying
a decision to deviate
and to publish the reasons for such a deviation.
[85]
The court a quo thought it significant that the requirement that
quarterly updates be submitted was couched in ‘peremptory

language’. The court took into account that financial
statements for the 2013/14 year had been available at the latest in

July 2014. It went on to say that:
‘
[T]he
tariff increase could and should have been assessed in the 2014
tariff year.’
It
considered 14.2.6 of MYPDM3 important in relation to time limits.
‘
The
Energy Regulator will then review Eskom’s submission and make a
preliminary assessment of any adjustments required in
the subsequent
financial year’s tariff adjustment.’
[86]
Pretorius J went on to hold that the concession by both Eskom and
NERSA that quarterly reports had not been submitted and the
further
concession by Eskom as to the purpose of the quarterly reports,
compelled a finding that in that regard non-compliance
with the
MYPDM3 was irrational, unfair and therefore unlawful.
[87]
In respect of efficiency, the court below agreed that one could not
have a fixed rule, but went on to state that it was nonetheless
a
factor to be considered and held that NERSA did not pay sufficient
heed to the efficiency test in relation to contracts with
IPP’s.
According to the court below the efficiency and prudency of the IPP
contracts should be checked before and after contracts
were
concluded.
[88]
Pretorius J held it against Eskom that it encouraged customers to use
less electricity and then sought to recover the resultant
variance.
She felt that NERSA’s failure to take this into account was
irrational.
[89]
It appears that the court below, wary of the submissions on behalf of
NERSA and Eskom, namely, that courts should be slow to
interfere with
policy decisions and careful not to offend against the doctrine of
the separation of powers, based its findings
primarily on the basis
that NERSA had acted irrationally in the manner referred to above.
[90]
The court below then went on to make the following order:
‘
1. The
decision published by the first respondent on 1 March 2016 in
relation to the Regulatory Clearing Account (“RCA”)

application by the second respondent – third Multi Year Price
Determination (MYPD3) Year 1 (2013/2014) (the “Decision”)

is reviewed, set aside and remitted to the first respondent.
2. It is directed that all future RCA
applications by the second respondent in relation to the MYPD3 must
be submitted and evaluated
in accordance with paragraph 14 of the
MYPD3 Methodology, or any future amendment thereof.
3. The first and
second respondents are to pay the costs of this application jointly
and severally, as well as the costs occasioned
by the interim
application of 31 March 2016, including the costs of three counsel.’
[91]
It is against those orders and the conclusions referred to above that
the present appeal is directed.
Conclusions
[92]
I propose to deal first with the legal nature of NERSA’s
decision-making in relation to Eskom’s RCA application,
which
implicates the question whether courts will be offending against the
doctrine of the separation of powers in reviewing such
a decision. It
also dictates the scope of such a review.
[93]
The introduction to the MYPDM3 set out in para 18 above, makes it
clear that it was developed for the ‘regulation of
Eskom’s
required revenues’. That introduction states that the MYPDM3
would form the basis on which NERSA would evaluate
price adjustment
applications received from Eskom. NERSA performs a regulatory
function. When it makes decisions concerning adjustment
applications,
it is acting in an administrative capacity even though it is applying
policy. The MYPDM3 states that it is applying
NERA and ERA, which, as
discussed above, reflects in substantial parts, government policy.
[94]
As stated in
Grey’s Marine Hout Bay (Pty) Ltd & others v
Minister of Public Works & others
[2005] ZASCA 43
;
2005 (6) SA 313
(SCA) para
24, ‘[a]dministrative action is rather, in general terms, the
conduct of the bureaucracy (whoever the bureaucratic
functionary
might be) in carrying out the daily functions of the State, which
necessarily involves the application of policy, usually
after its
translation into law, with direct and immediate consequences for
individuals or groups of individuals’. In this
regard, the
decision of the Constitutional Court in
President of the Republic
of South Africa & others v South African Rugby Football Union &
others
2000 (1) SA 1
(CC), at para 136, was relied upon. That
paragraph reads as follows:
‘
136.
The principal function of s 33 is to regulate conduct of the public
administration and, in particular, to ensure that where
action taken
by the administration affects or threatens individuals, the
procedures followed comply with the constitutional standards
of
administrative justice. These standards will, of course, be informed
by the common-law principles developed over decades. The
question
that arises in this case is what is included within the concept of
“administrative action” as it is employed
in s 33.’
[95]
The legislature, conscious of what is set out in the preceding
paragraph, enacted s 10(3) of NERA referred to above, which
entitles
any person to institute proceedings in the high court in terms of
PAJA for the judicial review of an administrative action
by NERSA.
[96]
Of course, proceedings for judicial review of an administrative
action, can be instituted on any of the grounds set out in
s 6(2) of
PAJA, including on the basis that it was not rationally connected to:
the purpose for which it was taken, the purpose
of the empowering
provision, the information before the administrator or the reasons
given by the administrator.
[11]
A review is also justified on the basis of action that was
procedurally unfair.
[12]
[97]
To sum up, NERSA’s decision-making in relation to an RCA
application is an administrative action reviewable in terms
of PAJA.
The scope of review is therefore wider than contemplated by the
appellants and the court below.
[98]
Considering the correctness of the approach and the conclusions of
the high court in relation to the legality of the 1,4 per
cent
adjustment approved by NERSA, there should, at the outset be careful
scrutiny of MYPDM3 weighed against the statutory framework.
[99]
As explained in para 12 above, licences issued by NERSA may be made
subject to conditions relating to the MYPDM3 to be used
in the
determination of rates and tariffs. As pointed out in para 13, clause
4.6 of the Eskom licence obliges it, as licensee,
to comply with the
price and tariff methodology.
[100]
In para 14 above, sections 17, 18 and 19 of ERA were discussed. It
appears clearly from those provisions that they were intended

primarily to regulate the relationship between NERSA and a licensee
and that non-compliance by a licensee was not necessarily fatal
to
its continued operations. So, for example, a licensee might not be
scrupulous or punctual in the keeping of its financial statements.

Such failure might mean that financial penalties could be imposed by
NERSA as sanction for non-compliance and as a disincentive
to
continued maladministration. As was indicated in para 14 above,
non-compliance with the MYPDM3 or any other condition of the
licence
does not act as a guillotine resulting in an immediate cancellation
of the licence and or the cessation of licenced activities.
That is
not to say, if the licenced activity was no longer viable, that NERSA
could not resort to s 17 and revoke a licence. However,
s 17(3)
dictates that the Minister must prescribe the form and procedure to
be followed in revoking a licence. In short, there
has to be some
form of due process.
[101]
It is clear that the MYPDM3 and the statutory framework provides for
best and worst-case scenarios, in the collection of revenues
and
concomitant expenditure, and indicates how either or a combination
ought to be dealt with. The introduction to the MYPDM3,
as appears in
para 18 above, specifically states that the development of the MYPDM3
does not ‘preclude the Energy Regulator
from applying
reasonable judgment on Eskom’s revenue after due consideration
of what may be in the best interest of the overall
South African
economy and the public’. That is an overall power, the
propriety of the application which can be tested by
whether the
ultimate decision is indeed in the interest of South Africa. As
discussed earlier, Eskom is the major bulk supplier
of electricity in
South Africa and the State is its only shareholder. Its continued
operation is a matter of national importance.
It is against that
background that NERSA’s role and the application of the MYPDM3
has to be seen.
[102]
It is clear from what appears above that the statutory framework and
the MYPDM3 imposes certain obligations on licensees,
but they also
recognise that these obligations may not always be met and that
corrective or remedial measures on the part of NERSA
might ensue.
What they are to be is entirely within NERSA’s compass.
[103]
The RCA account was established to deal with the possibility of plans
and estimates going awry. In Eskom’s case, for
the reasons
articulated above, the variance between estimates and actual revenue
and expenditure was wide. That variance led to
the RCA application by
Eskom.
[104]
It is true that 14.2.2 of MYPDM3 requires the RCA account to be
updated quarterly ‘so as to use it for regular alerts
to
customers of any possible adjustment in the coming year’.
Section 14.2.2 goes on to state that in order for the RCA account
to
be updated quarterly as part of a regular alert system, Eskom ‘must
. . . submit actual financial data on a quarterly
basis’. As
pointed out earlier, in the ordinary course, failure by a licensee to
comply with the methodology or a licence
condition, might result in
sanctions being imposed by NERSA. NERSA could also apply to court to
compel Eskom to comply. It chose
not to do so, electing rather to
abide by bi-annual reports. However, it does not follow ineluctably
that Eskom’s failure
to supply the quarterly report precludes
NERSA from entertaining an RCA application. The MYPDM3 nowhere says
so and holding otherwise
would be to defeat the purpose of the RCA
and negate NERSA’s role as regulator. It would mean that an RCA
application which,
if approved would strike the proper balance
between the liability of Eskom and continued electricity supply and
the public interest,
would be thwarted because of a failure to supply
quarterly reports. This might have the consequence that Eskom was
rendered financially
non-viable and threaten the supply of
electricity regionally or nationwide. That is not to say that laxity
by licence holders such
as Eskom should be encouraged. In these
circumstances, to preclude an RCA application because of a historical
failure to submit
quarterly reports would not only be destructive of
the regulatory framework and purpose of the RCA but would also
threaten Eskom’s
viability and expose NERSA to legal challenge.
[105]
A careful reading of the affidavit filed in support of Borbet’s
case reveals that it vacillated and was confused in
respect of the
core of its case concerning Eskom’s failure to supply the
quarterly reports. It was never unequivocally suggested
that the
failure to submit the quarterly reports operated as an absolute bar
to the bringing of an RCA application. Rather, the
complaint in
essence appeared to have been that the RCA application should not
have been approved because of the failure to submit
the quarterly
reports.
[106]
Sections 14.2.5 and 14.2.6 of the MYPDM3, set out to in para 25
above, have to be viewed in context. The following is envisaged:
(a)
On a quarterly basis Eskom has to present NERSA with ‘possible
adjustments’ based on MYPDM3, the costs to date and
projections
to year end.
(b)
NERSA then has to review Eskom’s submission and make a
preliminary assessment of any adjustments required in the subsequent

year’s tariff adjustment.
This
caters for a situation where the quarterly reports form a basis for
possible future tariff adjustments. The quarterly reports,
in these
circumstances, are to be accompanied by submissions requiring a
preliminary assessment with an eye towards future tariff
adjustments.
We now know that Eskom did not make such submissions and much later
thought that the correct path to follow was the
ill-fated application
for a ‘selective re-opener’.
[107]
I am mindful of submissions on behalf of Borbet’s counsel that
one must guard against being too readily dismissive of
the value of
the early customer alerts catered for by s 14.2.2 of the MYPDM3. It
was contended that they served an important purpose
and enabled
customers to plan for the future. I accept that had quarterly reports
been filed customers might have been alerted
earlier to future
adjustments. I do not intend to minimise or negate the need for the
alerts by way of the quarterly reports. In
the present case the first
bi-annual report would no doubt, particularly having regard to the
extent of Eskom’s financial
woes, already have
signalled
trouble.
As stated above, the failure to present the quarterly reports can be
met by corrective and/or penal action by NERSA. It
would be salutary
practice for NERSA to insist on this. However, it is entirely within
NERSA’s province to determine how
to deal with shortcomings by
licensees.
[108]
As far as the timing of the RCA is concerned, it should be borne in
mind, as pointed out above, that final reviews can only
realistically
be conducted, in the year subsequent to the one in which the audited
financial reports are made available. In this
regard, it is necessary
to bear in mind what is stated by Eskom in paras 75 and 76 above
concerning the timing of the closure of
its books of account after 31
March each year and that the audit involves external auditors,
including the Auditor-General’s
office. Eskom pointed out that
there are variables that create delays in the production of annual
financial statements that caused
delays in lodging its RCA
application. It is against that factual background and the realities
of commercial accounting that the
timing of the RCA application has
to be adjudicated.
[109]
The delay was compounded by Eskom misconstruing its remedy to seek
tariff adjustments by way of a ‘selective re-opener’.

Eskom only brought the RCA application, after it was informed by
NERSA that its remedy to deal with the variances lay down that
path.
[110]
Faced with the RCA application, NERSA was obliged to deal with it in
the manner contemplated in s 14.2.3.3 of the MYPDM3,
namely, because
the variance was more than ten per cent, a full stakeholder
participation process had to be conducted. If it failed
to follow
that process, NERSA would, as Regulator, have been remiss in not
dealing with the very real problem of a variance of
billions of rands
threatening the lifeblood of a key national asset. Its task, as
stated above, is to maintain a balance between
Eskom’s
sustainability as a business and reasonable tariff stability as well
as to appropriately allocate commercial risk
between Eskom and its
customers. That is not to say that NERSA is obliged to approve
variances due to maladministration on Eskom’s
part. The RCA
application has to be dealt with on its merits and in terms of the
MYPDM3.
[111]
As pointed out earlier, the imposition of sanctions for
non-compliance by a licensee with its licence obligations or the
condonation thereof, are entirely within NERSA’s remit. In
justifiable circumstances NERSA is empowered to apply to the high

court for an order suspending or revoking a licence. The contention
by Borbet that the failure by Eskom to supply quarterly reports

vitiates the entire RCA process is inconsistent with the regulatory
and
licencing
structure
catered for by the legislative framework. Casting it in the manner
suggested by Borbet would lead to absurd results and
would render
nugatory the entire statutory scheme.
[112]
The question of Eskom’s failure to submit quarterly reports was
pertinently raised during the RCA process. All stakeholders
made
their submissions in this regard. The public participation process
concerning the RCA application was conducted nationwide
and was
extensive and interactive. The lack of quarterly reports was
specifically, carefully and extensively dealt with by the
ELS and
NERSA, as referred to earlier in this judgment. The RCA process can
hardly, in light thereof, be described as unfair.
[113]
As to the timing of the implementation of the tariff increase, as
pointed out above, in terms of s 14.2.4 of the MYPDM3, it
is wholly
within NERSA’s power. Realistically, given the financial years
of both Eskom and municipalities, the decision that
it be imposed
from the beginning of the year following the one during which the
decision was made, appears to be realistic and
rational.
[114]
Borbet’s contention in relation to IPPs referred to above is,
in my view, without any foundation. Once contracts are
approved and
concluded one might rightly ask how one could review them midstream
without incurring contractual liability, thereby
incurring further
potential costs for Eskom. It is necessary to note that the legality
of those contracts have in the present case
not been challenged. As
correctly pointed out by NERSA, a review of those contracts is not
part of the MYPDM3 process. That is
not to say that Eskom and NERSA
can act beyond Treasury requirements or outside of the parameters of
any legislative provisions
which serve to ensure transparency and
accountability.
[115]
The MYPDM3 pre-approved, on estimates, an eight per cent year-on-year
increase. This appears to have been based on some degree
of
differentiated pricing, hence the complaint by stakeholders
concerning such differentiation. The RCA process was concerned not

with a review of the underlying basis for the MYPDM3 projected
year-on-year tariff increases but rather with the question of the

variance and what ought rightfully to be allowed in terms of the RCA.
[116]
The high court also held it against Eskom that it urged less
electricity usage and then complained about under recovery of

revenue. As accepted in the Chamber’s submissions, consumers
heeded a call to reduce electricity usage in order to prevent
power
outages. In this regard Eskom appears to have been caught between a
rock and a hard place. The variance was due to failure
by Eskom to
take steps to ensure that its capacity was not overtaken by consumer
demand. This was due to the reality of historical
primary
inefficiencies and lack of foresight (a period long before the
financial year in question).
[117]
I do not intend to deal with each individual pass-through that was
allowed by NERSA, referred to in greater detail in paras
44 to 53,
save to note that this was not a case of a rogue Regulator but one
that was cautious and motivated in each of the constituent
parts of
its overall decision. The economic impact of the adjustment was
considered by NERSA and the amounts allowed were within
the bounds
set by the MYPDM3. As far as efficiency is concerned, NERSA was
astute to ensure Eskom did not obtain a benefit from
its own
inefficiency. One has to bear in mind the balance to be achieved
between Eskom’s sustainability and the impact on
the consumer
and the South African economy. This is a case in which there has to
be a degree of judicial deference to a specialised
administrative
body engaged in an administrative action. In this regard the words of
the Constitutional Court in
Bato Star Fishing (Pty) Ltd v Minister
of Environmental Affairs & others
[2004] ZACC 15
;
2004 (4) SA 490
(CC), are
apposite:
‘
[48]
In treating the decisions of administrative agencies with the
appropriate respect, a Court is recognising
the proper role of the
Executive within the Constitution. In doing so a Court should be
careful not to attribute to itself superior
wisdom in relation to
matter entrusted to other branches of government. A Court should thus
give due weight to findings of fact
and policy decisions made by
those with special expertise and experience in the field. The extent
to which a Court should give
weight to these considerations will
depend upon the character of the decision itself, as well as on the
identity of the decision-maker.
A decision that requires an
equilibrium to be struck between a range of competing interests or
considerations and which is to be
taken by a person or institution
with specific expertise in that area must be shown respect by the
Courts. Often a power will identify
a goal to be achieved, but will
not dictate which route should be followed to achieve that goal. In
such circumstances a Court
should pay due respect to the route
selected by the decision-maker. This does not mean, however, that
where the decision is one
which will not reasonably result in the
achievement of the goal, or which is not reasonably supported on the
facts or not reasonable
in the light of the reasons given for it, a
Court may not review that decision reasonably. A Court should not
rubber-stamp an unreasonable
decision simply because of the
complexity of the decision or the identity of the decision-maker.’
The
following part of an article by Professor Hoexter, cited with
approval by the court in
Bato Star
, bears repeating:
‘
[A]
judicial willingness to appreciate the legitimate and
constitutionally-ordained province of administrative agencies; to
admit
the expertise of those agencies in policy-laden or polycentric
issues; to accord their interpretations of fact and law due respect,

and to be sensitive in general to the interests legitimately pursued
by administrative bodies and the practical and financial constraints

under which they operate. This type of deference is perfectly
consistent with a concern for individual rights and a refusal to

tolerate corruption and maladministration. It ought to be shaped not
by an unwillingness to scrutinize administrative action, but
by a
careful weighing up of the need for – and the consequences of –
judicial intervention. Above all, it ought to
be shaped by a
conscious determination not to usurp the functions of administrative
agencies; not to cross over from review to
appeal.’
[13]
[118]
In my view, Borbet and the court below misconceived the manner in
which the MYPDM3 operates and how it is to be applied. They
both
erred in considering that Eskom’s failure to submit quarterly
reports, without more, precluded the approval of an RCA
application.
Furthermore, they misconstrued the role of NERSA as Regulator.
[119]
I appreciate that the South African taxpayer and electricity consumer
are exhausted by the constant historical failures by
Eskom. Whether
Eskom is penalised by NERSA through the imposition of a fine or
whether a request for a tariff adjustment is granted
or denied, the
taxpayer and the consumer ultimately appear to be the ones who bear
the financial burden. Eskom is a strategic national
asset. What is
required from it is optimum efficiency and accountability. NERSA and
its sole shareholder, the government, are tasked
to ensure that
result. This case was concerned with the question of the proper
adjudication of an RCA application. What was disallowed
by NERSA took
into account the failures on the part of Eskom. Those are matters
that have to be addressed prospectively by NERSA
and with government
oversight. They are matters beyond the adjudication in this case.
[120]
One further aspect requires brief consideration. State owned
enterprises have to resist the impulse to immediately resist

constitutionally permissible judicial scrutiny. This includes
resistance to making information available that rightly belongs in

the public domain. After all, they are, through the State, owned by
the nation. I appreciate that there might well be commercial

confidentiality that attaches to certain commercial contracts but the
default position should be to make information available
subject to
justifiable redaction. It is a pity that Eskom and NERSA did not, in
the early stages when it was evident that litigation
would follow,
adopt that attitude.
[121]
For all the reasons set out above, the following order is made:
1
The appeal is upheld with costs including the costs of two counsel.
2
The order of the court below is set aside and replaced with the
following:
‘
The
application is dismissed with costs including the costs of two
counsel.’
_____________________
M S Navsa
Judge
of Appeal
APPEARANCES:
For
the First Appellant

D Fine SC (with him A Pantazis and M Chauke)
Instructed
by:
Hogan
Lovells (SA) Inc. c/o Macintosh Cross & Farquharson, Pretoria
McIntyre
& van der Post, Bloemfontein
For
the Second Appellant:

J Gauntlett SC (with him K Hofmeyr)
Instructed
by:
Ledwaba
Mazwai, Pretoria
Symington
& De Kok, Bloemfontein
For
the First to Sixth Respondents

D Unterhalter SC (with him M du Plessis, S Pudifin-Jones and J
Thobela-Mlambisi)
Instructed
by:
Joubert
Galpin Searle Attorneys c/o Couzyn Hertzog & Horak, Pretoria
Spangenberg
Zietsman & Bloem, Bloemfontein
[1]
Eskom is a public
company licensed to generate, transmit and distribute electricity
under licences issued by NERSA.
[2]
This was ascertained for the first
time by counsel for the second appellant during argument before us
after enquiry by the court.
It should be borne in mind that
municipalities are able to load the tariff with their own margin.
[3]
Borbet SA (Pty) Ltd is the first
respondent.
[4]
Section 3 of the Act provides:
‘
The
National Energy Regulator is hereby established as a juristic
person.’
[5]
NERSA is also a
gas and petroleum regulator. See sections 4(1)
(a)
and
(b)
.
[6]
Section 2 of ERA.
[7]
This is envisaged in the Electricity
Pricing Policy, GN 1398,
GG
31741,19 December 2008.
[8]
See fn 7 above.
[9]
The ELS was established in terms of s
8(10)
(a)
of NERA, which provides:
‘
The
Energy Regulator may establish subcommittees of its members to
perform such functions of the Energy Regulator as it may determine,

including conducting hearings and enquiries and sitting as a
tribunal.’
[10]
This was a R312 million variance in
favour of the consumer.
[11]
Sections
6(2)
(f)
(ii)
(aa)
-
(dd)
.
[12]
Section 6(2)
(c)
.
[13]
C Hoexter ‘The Future of
Judicial Review in South African Administrative Law’
(2000)
117
SALJ
484
at 501-502.