By Lehlohonolo Lehana.
The High Court in Pretoria has ordered Nersa to publish the Cost-of-Supply Studies (CoS) used for municipal tariff applications, allowing consumers to see the actual costs municipalities incur to supply electricity, including specific expenses.
This means that consumers who question their municipalities’ high electricity tariffs will from now on be able to see exactly what it costs each municipality to supply electricity.
Civil Rights Organisation AfriForum challenged the approval of municipal electricity tariff hikes in court, arguing that submissions lacked proper cost-of-supply studies and sufficient public participation.
AfriForum’s court application was opposed by Nersa. The City of Ekurhuleni, Mogale City and the City of Johannesburg also filed opposing papers, while the City of Cape Town made a submission challenging the timeframes proposed by AfriForum.
In its application, AfriForum requested that the energy regulator’s public participation process be declared invalid due to the lack of opportunities for the public to provide input.
Nersa argued that cost studies do not need to be published with applications, as they are confidential, and that their technical nature ensures that only their expertise is sufficient to interpret them.
The regulator also argued that, while there were flaws in its public participation process, they were not of a nature that the entire process should be declared invalid.
Judge Etienne Labuschagne said in his judgment, rejected Nersa’s contention that cost-of-supply (COS) studies upon municipal tariff applications are confidential.”
“Nersa is a public watchdog that has, due to this private policy, kept the public in the dark about matters that directly concern the public.”
The high court’s ruling did not set aside the approvals of the municipal tariffs for 2025/26. However, it ordered that in Nersa’s future processes for approving these tariffs, the energy regulator must:
(1) Inform municipalities of increases granted to Eskom and other generators by 31 January each year; (2) Consider and publish every municipality’s cost-of-supply study and tariff application for public participation; and (3) Finalise decisions on all municipal tariff applications by 5 May, while simultaneously publishing the reasons for each decision.
The court ordered that municipal licensees must submit their electricity tariff applications by no later than 30 March each year.
The law stipulates that electricity suppliers may recover their cost of electricity supply and a reasonable margin from consumers through tariffs. This applies to Eskom and any other electricity distributor.
However, for more than a decade, Nersa merely published a guideline each year indicating the increase municipalities could apply for – and mostly approved applications within that guideline without checking whether municipalities were over-recovering.
Municipalities have often been accused of making huge profits on electricity sales and using it to subsidise other services.
This year, for the first time, Nersa published municipalities’ tariff applications on its website – but without the CoS studies. The public was ostensibly given the opportunity to comment, as required by law, but the court has now found that the process was flawed.
The court also criticized Nersa for deciding on its own that legal requirements to publish such notices in the Government Gazette and in widely circulated newspapers, in at least two national languages, were outdated.
The high court has given interested parties, including all 158 municipalities, until 18 November to submit reasons why the proposed timelines should not be approved.