Afriforum launches urgent legal action to block electricity price hikes

Afriforum has implemented urgent legal action to prevent municipalities from hiking electricity tariffs next month, saying they have failed to comply with the prerequisite assessments required for the price increases.

Speaking to 702, Afriforum’s local government affairs manager, Morné Mostert, said most municipalities have yet to submit the required cost-of-supply documents.

He said municipalities were mandated in 2022 to conduct cost-of-supply studies to inform their tariff increases.

“Our court application says that at least municipal licensees or municipal consumers hopefully won’t pay an additional amount,” said Mostert.

“Our application is based on the legislative requirements as well as a court order obtained in 2022, which says all licensees must have a cost of supply document that informs the tariff.”

“Without this document, we can’t determine what the tariff of a municipality should be,” he added.

He explained that the court required the National Energy Regulator of South Africa (Nersa) to pressure municipalities to provide the cost of supply studies.

However, Mostert said this hasn’t been happening, and they’re using the same methodology that was previously declared unlawful and unconstitutional.

“In that same court order in 2022, the court already mentioned that municipal licensees are overcharging municipal consumers already,” he said.

“Municipalities have gotten away with not supplying any details with regards to the task of actually transmitting electricity and selling it to consumers.”

He added that they have made large profits by selling electricity to consumers without conducting the required due diligence.

Morné Mostert, Afriforum’s local government affairs manager

“Last year in about October, there was a letter sent from Nersa to municipalities, warning them that if they don’t do cost of supply studies, they won’t be able to get electricity tariff increases,” said Mostert.

“In January this year, the story changed woefully. They then sent a letter to municipalities saying: if you can send this information or these few steps, then we will consider your tariff increase.”

Mostert said Afriforum’s court application is forward-looking in the sense that blocking this year’s tariff increases will encourage municipalities to plan correctly for the next financial year.

Renowned economist Dawie Roodt said municipalities will struggle to cope without a tariff increase this year.

“The majority of municipalities are in very deep financial troubles,” Roodt told 702.

“Approximately 75% of municipalities in South Africa cannot stand on their own financial feet. The outstanding debt of municipalities to Eskom is around R75 billion as well.”

Dawie Roodt, Efficient Group chief economist

He explained that the municipal debt figure continues to grow at roughly R1 or R2 billion a month.

“The municipalities want to somehow get more money, and what they try to do is increase the electricity prices to their customers,”

He said electricity revenue is crucial to municipalities, and if they can’t get tariff increases, they will likely end up in more severe financial trouble.

Roodt agreed with Mostert that municipalities need to become more efficient.

The outcome of Afriforum’s application will impact municipal consumer tariffs and not those supplied directly by Eskom.

Municipalities hike electricity tariffs in July every year, while Eskom customers have been paying higher prices since the beginning of April 2024.

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

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Afriforum launches urgent legal action to block electricity price hikes