The High Court in Pretoria’s ruling against the National Energy Regulator of South Africa’s (Nersa) municipal electricity tariffs is not reason to celebrate yet, as experts say consumers may find themselves in the exactly same position or worse when the new tariff formulation methodology is effectively designed.

Findings

Last week, the high court found that the way in which the regulatory authority had been setting municipal power tariffs for the past decade was illegal and invalid, and ordered Nersa to develop a legal methodology.

The ruling came shortly after Nersa missed its own deadline to draft a new methodology to determine the tariffs of all licensees, including Eskom.

One year to rectify benchmarking method

Energy analyst Prof Anton Eberhard said Nersa has a year to fix the guideline and benchmarking method, used when approving municipal electricity tariffs, by ensuring that tariffs are more cost-reflective.

“The benchmarking price setting methodology that was declared unlawful applies only to municipal electricity distributors, not Eskom,” he said.

“It will be very challenging for them to get this done for all 177 municipal distributors by 2024. So, [there’s a] lots of uncertainty going forward.”

When asked how it would affect Eskom following their price determination methodology court order, Eberhard said Nersa’s price determination for Eskom was a separate process.

“A different court found that Nersa’s proposed changes to this pricing methodology [different to municipalities] was problematic and could not be applied this year,” he added.

“And so Nersa is using its old methodology and there will continue to be price hikes for consumers.”

Nersa communications head Charles Hlebela said Nersa management was still studying the judgment and will advise on the way forward.

Expert view

Political energy analyst Tshepo Kgadima said following reports that the ruling would change the way power tariffs are set, it was too soon for clients to celebrate especially with no guideline given to Nersa.

“So even, following this court ruling it will not bring reprieve for the consumer,” he noted.

“The consumer will still be subject to the middleman who might feel that electricity prices to municipal customers are not reflective of their actual electricity supply costs.”

Last year, Eskom warned household electricity bills would increase significantly if Nersa’s proposals for big changes in the way Eskom’s tariffs are determined are accepted. Furthermore, even after the Eskom court ruling, Nersa will still determine Eskom tariffs for at least two years according to the existing methodology. – reitumetsem@citizen.co.za

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