Energy9.06.2024

Court case could stop electricity price hikes

Afriforum has launched an urgent legal application that could stop municipalities from increasing electricity tariffs next month.

The civil rights organisation has asked the Pretoria High Court to block the National Energy Regulator of South Africa (Nersa) from considering municipalities’ tariff adjustment applications if they did not include cost studies.

The action comes after a ruling by the High Court in October 2022 that declared Nersa’s old method for approving municipal electricity tariff adjustments unlawful.

Under the old method, the regulator had relied on the previous years’ tariffs and price bands to approve adjustments.

That approach only considered how municipalities’ biggest electricity supply cost elements increased.

However, the Electricity Regulation Act 4 of 2006 prescribed that these adjustments must be based on cost studies that determine distributors’ actual cost of providing electricity to their customers, inclusive of all relevant factors.

The court ordered Nersa to develop a new tariff methodology within 12 months.

Nersa passed the buck to municipalities in November 2023, instructing them to carry out their own cost studies. Few have complied, likely due to the significant costs and logistics involved.

Afriforum manager of local government affairs, Morné Mostert, said it appears Nersa has disregarded the court 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,” said Mostert.

Mostert stressed that applications of municipalities that do not have cost studies are simply based on an estimate of what it costs to provide the service.

“Applications for tariff increases must be made on accurately calculated figures that will ensure that fair tariff increases are passed on to consumers,” Moster said.

Morné Mostert, Afriforum manager for local government affairs

In the interest of customers — but punishment for municipalities

Afriforum local government affairs adviser Deidré Steffens said that the organisation’s application was made in the interest of consumers.

“Fairness and transparency in the approval of municipal electricity rates is essential,” Steffens stated.

“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 — and this is what we urgently need to stop.”

Electricity regulation specialist law firm MC Botha Incorporated previously told Rapport that Nersa’s only option was to request the court allow it to use the old method in 2024.

Rapport had also learnt that this was the internal legal advice Nersa received. However, it had yet to decide on a course of action.

It should be noted that the outcome of Afriforum’s application will only impact municipal customers’ tariffs.

These are adjusted in July of every year, while Eskom Direct customers already got slapped with their annual increase at the start of April.

Nersa has approved a 12.72% increase in the price of wholesale electricity that Eskom sells to municipalities.

That increase was approved as part of Eskom’s multi-year price determination methodology application, which is a separate process from municipal tariff approvals.

Should the court rule that the regulator may not apply the old municipal tariff methodology to approve their adjustments in 2024, any price changes implemented by municipalities would likely face legal challenges.

However, municipalities could come under immense financial pressure if they have to pay more for Eskom electricity while not being allowed to increase their prices from next month.

Show comments

Latest news

More news

Trending news

Sign up to the MyBroadband newsletter