By Roy Cokayne.
Another tariff determination has been bungled by the National Energy Regulator of South Africa (Nersa).
Sasol Oil has successfully secured the review and set aside of Nersa’s decision to approve the tariffs applicable to Transnet’s petroleum pipeline system for the period 1 April 2023 to 31 March 2024, in terms of the Promotion of Administrative Justice Act (Paja), or alternatively under the principle of legality, in the High Court in Pretoria.
Judge David Makhoba further ordered Nersa’s decision be remitted back to the regulator for reconsideration in a judgment handed down earlier this month, but which has only now become available.
The judge said he is satisfied that Nersa’s decision “is irrational and unreasonable, and that it falls to be reviewed and set aside.”
Nersa was also ordered to pay the costs of the application.
This judgment follows the energy regulator confirming last month it had entered into a settlement with Eskom, following the mistakes it made in determining the power utility’s revenue for the current and next two financial years.
That error will result in consumers having to cough up R54 billion more through higher electricity tariffs, phased in over several years. However, this is the second such settlement since May, which brings the total additional revenue due to Eskom to correct Nersa’s mistakes to R94 billion, which is to be paid by electricity users.
Sasol Oil cited Nersa as the first respondent in its application to have Transnet’s petroleum pipeline tariff determination reviewed and set aside, with the nine other respondents including Transnet and the Minister of Mineral Resources and Energy.
Only Nersa and Transnet opposed Sasol Oil’s application. However, Judge Makhoba said Transnet on 28 May 2025 withdrew its opposition to the application, and the matter has since been settled between Sasol Oil and Transnet.
In May, Sasol Oil confirmed it had reached an agreement with Transnet, in terms of which it later made a net payment to Sasol of R4.3 billion in June 2025 to settle multiple disputes between the two entities.
Sasol Oil claimed in its review application that Nersa erred by failing to distinguish between the different pipelines within Transnet’s petroleum pipeline system, and instead regarded them collectively as a single network, which is unlawful, as the Petroleum Pipelines Act (PPA) provides no authority for such an approach.
‘Rolled-in tariff’
It said Nersa acknowledged the differences between the Crude Oil Pipeline (COP) and the Multi-Product Pipeline (MPP), but Nersa still relied on the rolled-in tariff methodology adopted in 2011, which was no more than a guideline and never a binding rule of law.
Sasol Oil further claimed that, to ensure a fair tariff for COP users, Nersa was obliged to consider fairness as a material factor in terms of the PPA, and its failure to do so renders the decision irrational and unlawful.
It argued the decision was also unreasonable, in that Nersa imposed a uniform tariff across the system on the basis of the rolled-in approach adopted in 2011.
It referred to the minutes of Nersa’s meetings and claimed Sasol’s submissions were absent from the deliberations, which supports the conclusion that Nersa’s decision is ‘reviewable.’
Sasol Oil also claimed Nersa’s decision was unfair, discriminatory, and contrary to the PPA, and therefore reviewable in terms of Paja.
Nersa claimed the rolled-in methodology was adopted in 2011 and, as that decision was never challenged, it remains valid until set aside by a court, but Sasol Oil’s application does not constitute such a challenge.
It further claimed the PPA does not prescribe a tariff-setting methodology, and its adoption of the rolled-in approach –which has been consistently applied since 2011 – falls within its statutory discretion and it is the duty of Sasol Oil to prove that this discretion was exercised unlawfully.
Nersa said Sasol Oil failed to provide any explanation for its delay in challenging the 2011/12 methodology, which it considers fatal to Sasol’s case.
It claimed that Sasol Oil’s contention that each pipeline should be tariffed separately disregards the holistic approach required to balance the interests of all stakeholders, and the rolled-in methodology is consistent with the PPA and the regulations.
Nersa argued that Sasol cannot be permitted to challenge the 2011 decision indirectly through the 2023/24 tariff determination, and claimed it did consider Sasol Oil’s written submissions but only insofar that they were relevant.
It said the PPA does not impose a rigid criterion by which tariffs must be mechanically tested, and it cannot be interpreted as dictating that the exclusion of a particular interest automatically renders a tariff unfair or discriminatory.
Nersa said Sasol Oil’s case rests on its narrow commercial interest in the Natref refinery, and its claim that the COP tariff is unfair merely because MPP costs are higher, overlooks the broader context.
Judge Makhoba said Sasol Oil’s case is that its submissions were disregarded, and the adoption of the 2011 rolled-in methodology was inappropriate for the 2023/24 tariff determination, and on this basis, the decision is unlawful and unreasonable. He said it is now settled law that a pricing methodology is not rigid, but operates as a guideline, and Nersa’s argument to the contrary is without merit.
Judge Makhoba said it is unnecessary for Sasol to challenge the 2011 tariff methodology, but Nersa had the responsibility to show that the tariff set was fair, reasonable, and rational, and that it complied with the PPA.
He added it was also incumbent on Nersa to demonstrate that there were no differences between the COP and the MPP, and that imposing a single tariff across both was fair.
Judge Makhoba referred to a Constitutional Court judgment which held that the failure to consider a relevant material factor in taking an administrative decision may render the decision irrational.
He said there are significant differences between the COP and the MPP, including differences in operational characteristics and costs, with the costs associated with the MPP higher than those of the COP.
“Nersa’s failure to recognise these differences amounts to non-compliance with… the PPA, rendering the tariff unfair to the applicant [Sasol Oil]. Nersa misdirected itself by adopting the rolled-in methodology of 2011 and by disregarding the submissions made by Sasol.
“It ought to have given proper consideration to Sasol’s submissions in favour of separate tariffs for the COP and MPP, to ensure fairness for COP users.
“It is unreasonable for Nersa to impose a single pipeline system tariff based on the 2011 rolled-in approach.
“The COP operates upstream of refining, whereas the MPP is downstream, and the two pipelines are not physically connected, “he said.