The civil rights organisation AfriForum will turn to the Gauteng High Court, Pretoria, on June 25 against the National Energy Regulator of South Africa (Nersa) in a bid to stop it from considering municipalities’ applications for electricity tariff increases, which must be implemented on July 1, without the required cost studies.
The organisation said in terms of a court order issued in October 2022, a cost study is required as part of municipalities’ applications for tariff increases. This is also prescribed by the Electricity Regulation Act.
According to Morné Mostert, manager of local government affairs at AfriForum, the use of a cost study for tariff increases is critical because it gives a clear outline of what municipalities’ tariffs must be to deliver the service properly, and maintain networks.
“The applications of municipalities that do not have cost studies are simply based on an estimate of what it costs to provide the service. However, applications for tariff increases must be made on accurately calculated figures to ensure that fair tariff increases are passed on to consumers,” Mostert said.
Nersa has in the past used guidelines based on previous years’ tariffs as well as price bands for determining municipalities’ tariff increases. However, this was banned by the court order of October 2022.
Mostert said despite this order mandating the use of cost studies, it appears as if Nersa is disregarding the order.
“The regulator recently sent communications to municipalities in which the use of a revenue requirement template instead of the prescribed cost study was made available for tariff increase applications,” he said.
AfriForum requested Nersa in April to confirm whether the regulator still obliges municipalities to submit cost studies as part of the tariff increase applications. No feedback has been received on this from the energy regulator.
Deidré Steffens, adviser on local government affairs at AfriForum, said the civil rights organisation’s application is made in the interests of consumers.
“Fairness and transparency in the approval of municipal electricity rates is essential. It appears as if Nersa’s current policy and process is not being carried out in accordance with the law and is therefore being applied to the detriment of consumers. This is what we urgently need to stop,” Steffen said.
Mostert meanwhile added that it is time that Nersa and municipalities get their houses in order. “Nersa is supposed to regulate the electricity sector, but currently it seems as though their inability to comply with legislation has an extremely negative impact on consumers,” Mostert said.
He stated in papers filed in the urgent application that the use of a revenue requirement template instead of the prescribed cost study does not provide for consideration of the actual electricity supply costs for a particular licensee for the year in question, nor does it involve any determination of a reasonable margin or return for that particular year.
“It is still based on averages and generic norms which are applied to all municipalities, regardless of their actual costs and their particular efficiencies and inefficiencies.”
Mostert said the result is that municipalities are charging tariffs that are much higher than the costs of supplying the electricity or at the very least, applying to increases to the tariffs without Nersa being able to determine the actual cost of supplying the electricity efficiently.
He said the indirect result if the order is granted by the court will be to compel municipalities to take steps in mitigation and to increase their efficiencies in delivering electricity to the public.
Pretoria News