Nersa tariff rejection a blow to municipalities who have to refund citizens

Municipalities that unlawfully increased electricity tariffs will have to refund consumers after the High Court in Johannesburg rejected the National Energy Regulator of South Africa’s (Nersa) appeal regarding municipal power tariffs.

The municipal tariff hikes were stopped after the court ruled all municipalities that have not submitted cost-of-supply studies must once again charge the electricity rates approved for the 2023-2024 financial year.

Out of 178 licensed electricity distributors, only 66 distributors, or municipalities, conducted the cost-of-supply studies to qualify to implement these increases.

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Unlawful tariffs

Energy expert Clyde Mallinson said municipalities would have to refund residents for unlawful tariffs if AfriForum have their way.

“AfriForum said no municipalities were allowed to increase tariffs and must not only be reduced to the price it’s supposed to be, but also pay back the money they have taken,” he said.

Mallinson said the case has exposed the chaos in distributional tariffs across the country.

“Those dysfunctional municipalities don’t even know what their cost-of-supply is, their billing systems were a mess and people didn’t pay. Nersa shouldn’t have agreed on the hikes,” he said.

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Economic advisor to the Optimum Investment Group Dr Roelof Botha said this was good news for everyone but Eskom and Nersa.

“Consumers deserve a break as they have been battling under high interest rates,” he said.

“The debt servicing costs of households in the first quarter of this year has increased 9.2% of disposable income. The highest level in 15 years that the monetary policy committee of the SA Reserve Bank seems oblivious of the plight of consumers.”

Botha said the consumer price index had been comfortably in the target range for inflation of three to six percent for more than a year, but they refuse to lower rates. Lower interest rates are exactly what the economy needs to get back on track,” he said.

Botha said in 2010, the private sector was responsible for four percent of the electricity generated in South Africa, which is now 15% and growing, which is one of the reasons why Eskom was in self-inflicted trouble.

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Getting the money back

Economist Dawie Roodt said Nersa and municipalities got away with murder for years.

“Now that supply is being stopped, all prices from Eskom and municipalities are administrative and determined by some formula, not on demand,” he said.

AfriForum’s manager of local government affairs Morné Mostert said AfriForum will send an urgent letter to the regulator and demand a plan of action regarding the refund to consumers.

“This judgment will have a significant impact on municipalities’ budgets, but the line has now been drawn in the interest of consumers, who have been milked as cash cows for years,” he said.

Mostert said submission of cost-of-supply studies was a required component of municipalities’ applications for tariff hikes, as prescribed by the Electricity Regulation Act 4 of 2006.

He said AfriForum will also request a complete list of municipalities that have not yet submitted cost-of-supply studies so that the implementation of the court order can be monitored.

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