Sasol, Nersa not on the same page about gas price hikes

Sasol has rejected preliminary findings by the National Energy Regulator of South Africa (Nersa) that the piped-gas price increase it seeks to implement for FY2023 is too high.

South Africa’s leading chemicals and energy group says the maximum gas price (MGP) of R120 per gigajoule (GJ) that it wants to effect – which is almost double the price it currently charges – accounts for the higher operational costs it has had to stomach and the risk associated with investments, and also incentivises new investments.

While awaiting Nersa’s final decision on the MGP for FY2023 – which runs from 1 July 2022 to 30 June 2023 – Sasol continues to charge customers at 2022 prices of R68.39/GJ.

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According to a statement released by the piped-gas producer on Tuesday, the price increase it has proposed not only follows Nersa’s preferred 2023 pricing methodology but also recognises the interests of consumers and enables the viability of the supply of gas in the country.

“A MGP needs to be fair and enable ongoing investment in new sources of gas supply. During the course of 2022, it became apparent that the MGP would increase dramatically due to international gas hub prices increasing on the back of post-Covid-19 demand, the war in Ukraine and weather conditions affecting gas demand,” says Sasol.

In fact, it argues that its proposed price increase remains significantly less than international forecasts – using the 2020 MGP methodology – that set FY2023 price estimates at around R273.43/GJ.

ALSO READ: Nersa under fire for trying to hike power prices more, without public participation

Price gouging

The latest developments come in the same month the Competition Commission said it believes Sasol has a possible case to answer for selling natural piped gas to customers at excessive prices.

Earlier this month, the commission referred Sasol to the Competition Tribunal – the adjudicator of competition matters – for prosecution after the commission’s investigations found that Sasol sold natural gas to customers at prices marked up by up to 72% for almost a decade.

However, in relation to its matter with Nersa, Sasol defended its price request by highlighting the investments made in the past two decades, which it believes have benefitted both the local consumer and the economy.

The group said that since 2021 it has ploughed over $300 million in capital expenditure to maintain gas supply from Mozambique until 2026.

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“Sasol’s investments over the past 20 years have offered consumers an alternative energy supply, thereby enhancing competition, consumer choice and, importantly, fostering economic activity and investment in the South Africa economy.

“Furthermore, the alternative value for Sasol is that it has the ability to convert gas into other value-added products in its South African facilities, as an alternative to selling this gas to third party customers.”

Sasol said it looks forward to having further engagements with Nersa on the matter, adding that it trusts the regulator will stick to its mandate of determining “an appropriate, reasonable and competitive gas price for FY2023” that will protect gas supply for the country.

Fifi Peters speaks to CompCom senior economist Yongama Njisane about the move to refer Sasol for prosecution:

You can also listen to this podcast on iono.fm here.

This article originally appeared on Moneyweb and was republished with permission.
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