‘Household tariffs may increase further.’
Following a high court hearing that went into the evening on Wednesday (14 January), Judge Anthony Millar ordered energy regulator Nersa to redetermine the electricity tariffs applied in 2024/25 for the City of Joburg, Ekurhuleni on the East Rand, Madibeng Municipality in Brits, and Msunduzi in Pietermaritzburg.
This comes after he declared the tariffs unlawful in November – and may lead to those electricity users who were overcharged being credited and those, probably households, who were undercharged having to cough up the difference.
The order may also have a huge impact on the budgets of the four municipalities.
For consumers who must retrospectively pay more, it will be a double whammy, as they will pay twice for Nersa’s flawed decisions – once in relation to their municipal tariffs and again as a result of errors in setting Eskom’s tariffs.
Nersa is currently running a public participation process after it short-changed Eskom, according to the regulator, to the tune of R76 billion.
The court ordered Nersa in November last year to redo that determination as well. Whatever the shortfall is in its final determination will come from the pockets of electricity users countrywide.
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Industrial users challenge tariffs
Wednesday’s order came after several industrial power users approached the court for relief.
The applications against Nersa, the four municipalities and Joburg’s City Power were brought by the Casting, Forging and Machining Cluster of South Africa NPC in the cases of Johannesburg, Ekurhuleni and Madibeng.
In the Madibeng matter, Autocast – which describes itself as “a leading supplier of aluminium and iron cast and machined components to the automotive, mining and engineering sectors within South Africa” – is also an applicant.
In the Msundizi case, the applicant is the Pietermaritzburg and Midlands Chamber of Business NPC.
They asked that Nersa’s approval of the 2024/25 electricity tariffs in the four municipalities be declared unlawful and invalid.
Nersa conceded the unlawfulness, and the court confirmed this in a ruling in November.
The applicants asked for the order of invalidity to apply retrospectively in these four municipalities, but only regarding the applicants.
Nersa failed all along to participate in the litigation, only to file papers on the eve of the hearing in November, objecting to the remedies proposed by the applicants.
Among other things, it objected to the narrow scope of the order applied for, and argued that if the tariffs were to be rectified, this should be rectified regarding all the customers in the four municipalities.
The court postponed the hearing to this week to deal with the remedy.
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CoS studies under review
Millar ordered Nersa to start the tariff determination process afresh, which means the municipalities must submit new applications with cost-of-supply (CoS) studies.
Nersa must publish the applications and the CoS studies and allow the public an opportunity to comment before it makes a final decision.
These decisions must be finalised and published, with reasons, before 30 June, so that the decision can be implemented and over- or under-rectified for all customers in the new municipal financial year starting on 1 July.
The applicants pointed out that Nersa has in the past ignored similar orders and proposed a remedy should this happen again.
If Nersa fails to redetermine the tariffs timeously, the previous year’s tariffs (2023/24) will apply, except in the case of Autocast, which would pay the Madibeng Municipality in line with Eskom’s Megaflex tariff. That is the tariff it would have paid if it bought electricity directly from Eskom.
This only applies to the applicants, but any affected party may approach the court for further relief should Nersa fail to undertake the redetermination.
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Higher household tariffs …
The underlying argument by the applicants, based on the CoS studies the municipalities submitted to Nersa, was that the approved tariffs provided for an undue level of subsidisation by industrial customers to keep residential tariffs lower.
On that basis, the applicants warned that extending the scope of the order to all electricity users in the four municipalities may result in higher tariffs for households.
Nersa however convinced the court that the whole process was unlawful and therefore needed to be rectified in full. This would ensure administrative justice for all customers and promote effective and efficient public administration, and the rule of law, it argued.
This article was republished from Moneyweb. Read the original here.
