By Lehlohonolo Lehana.
The civil rights organisation Afriforum, has filed an urgent application in the High Court in Pretoria against the National Energy Regulator of South Africa (NERSA).
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’s Morné Mostert said Nersa must view municipal tariff applications in a legislative way.
Moster said municipalities must have a cost of supply document stating the costs of delivering electricity to consumers, the costs of managing electricity affairs, and the municipalities’ profit.
“As most of the municipalities do not have a cost of supply study, it is improper for Nersa to be able to give an electricity tariff increase if it has no grounds or basis to do so.
“Two years ago, the regional court ordered Nersa to ensure that they apply these processes, and they must make sure that they can do everything that they can to ensure that the electricity industry is not being unregulated or that they have these processes in place for these tariffs to be approved only if they have a cost of supply document”.
Mostert warned that municipalities cannot increase electricity tariffs unless it has a cost of supply study document to justify the hike.
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.