Bad news about unlawful municipal electricity price hikes

The High Court of South Africa has dismissed AfriForum’s application for municipal power providers to reimburse customers after the National Energy Regulator of South Africa (Nersa) approved price hikes for 178 municipalities in July 2024.

Nersa welcomed the decision in a statement. It said that certain decisions relating to the municipal tariff applications made in June 2024 would have been declared invalid.

AfriForum had approached the court to enforce a court order from 2022, which had the effect of declaring the price increases of at least 100 municipalities unlawful and invalid.

According to AfriForum, Nersa had failed to properly implement a requirement that municipalities submit cost-of-supply studies to accompany their tariff increase applications. The High Court found in AfriForum’s favour.

“AfriForum was seeking to have the High Court judgement of 8 July 2024 implemented whilst the appeal process that was granted to Nersa by the Supreme Court of Appeal is underway,” Nersa said.

“Had the court granted AfriForum’s order, certain decisions of the energy regulator on municipal tariff applications made in June 2024 would have been invalid.”

As the municipal price hikes were implemented in July 2024, this would have created a massive headache for municipalities as many may have had to reimburse customers.

However, it isn’t out of the woods yet. Nersa lost its first appeal application at the High Court in August 2024, after which it applied to the Supreme Court of Appeal.

It now awaits the outcome of its appeal. If the Supreme Court of Appeal doesn’t find in Nersa’s favour, the regulator can apply for access to appeal at the Constitutional Court.

AfriForum approached the courts in June 2024 over Nersa’s change of heart regarding the court ruling from 2022.

“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 AfriForum local government affairs manager Morné 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.”

As a result, a large number of municipalities submitted their applications without the cost of supply document.

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

He explained that AfriForum’s application was forward-looking as, if the court blocked tariff increases in 2024, that would encourage municipalities to plan accordingly for the next financial year.

The court ruled in favour of AfriForum in June, and the regulator chose to appeal the decison, before approving price hikes for 178 municipalities.

According to AfriForum, only 66 of these had submitted the necessary cost of supply documents with their applications, leaving 112 without the document.

It added that the lack of compliance was due to the high costs and logistics involved with cost studies.

As the price hikes were implemented on 1 July, AfriForum said it would demand a plan of action from Nersa to reimburse the over-recovery from consumers.

“Nersa has now caused an administrative nightmare due to mismanagement,” said Mostert.

“Although the error can be relatively easily rectified in favour of municipal account holders, it will be much more difficult to rectify the error for consumers of prepaid electricity.”

Mostert acknowledged that this would have a significant impact on municipalities’ budgets.

“The line has now been drawn in the interest of consumers who have been milked as cash cows for years by inept municipalities,” he said.