Metro gets greenlight for electricity tariff increase
On Friday, June 28 numerous municipalities were interdicted by court for increasing electricity prices from July 1 because of non-compliance to a 2022 court order. The ruling does not affect the metro because it timeously submitted a compliant application and a tariff increase of 12% was approved.
Tshwane can legally raise its tariffs from July 1 after it submitted a cost study to Nersa.
Municipalities must submit comprehensive cost of supply studies that outline their projected costs over the next year.
Previously, the National Energy Regulator of South Africa (Nersa) approved municipalities’ applications for electricity tariff increases without cost studies.
However, on June 28 the Pretoria high court found that this practice was unlawful and invalid.
This finding means that the regulator may not consider any applications for electricity tariff increases from municipalities unless the required cost studies are also submitted.
The regulator announced on June 28 that all 178 licensed electricity distributors’ tariff increase applications have already been considered and approved.
However, only 66 municipalities submitted cost studies, including Tshwane.
The metro and other municipalities such as Oudtshoorn, eThekwini, Bergrivier, Saldanha and Newcastle complied with the 2022 high court order on electricity tariff increases and the Electricity Regulation Act 4 of 2006.
The court order of October 2022 requires that a cost study be submitted as part of municipalities’ applications for tariff increases.
The new method was implemented as the high court found in October 2022 that the previous use of price bands and guidelines was illegal.
As such, the court ordered that municipalities whose cost studies are absent will have to continue charging electricity tariffs based on the existing rates.
The court also ordered on June 28 that the uncompliant municipalities’ applications should be reconsidered by the regulator provided the necessary cost studies are submitted within 60 days of the ruling.
This will be a blow for municipalities which have been subjected to an increase of 12.7% in the tariffs they must pay Eskom for their bulk electricity purchases.
Earlier this year it was announced that the regulator had approved a 12.72% increase in Eskom’s wholesale municipal tariffs.
This means municipalities have been paying Eskom 12.72% more for the electricity they are supplying to their customers since April 1.
The metro approved an increase of 12% in electricity tariffs for their clients.
This was announced by the MMC for Finance, Jacqui Uys, during the council’s meeting on June 4.
Metro spokesperson Lindela Mashigo confirmed to Rekord that the requisite study as required by law, a cost supply study, was done by the metro and submitted to the regulator with the application.
He confirmed the public participation process to discuss the cost of supply study was conducted from November 16 until December 5, 2023, with metro clients.
The consultations comprised 12 physical meetings and four online meetings. The physical meetings were conducted across all seven regions.
“The court’s finding is a great victory for civil rights. The court has now acknowledged anew that the regulator failed to protect consumers against unlawful applications for electricity tariff increases – something the law compels the regulator to do,” said Morné Mostert, spokesperson for AfriForum.
He trusted that the regulator would comply with the court order and that the applications of the municipalities whose required cost studies are absent would be scrapped.
According to Mostert, the use of a cost study for electricity tariff increases is critical because it gives a clear outline of what municipalities’ tariffs must be to deliver the service properly and maintain networks.
“The applications of municipalities that do not have cost studies are at this stage simply based on an estimate of what it costs to provide the service. However, applications for tariff increases must be made on accurately calculated figures that will ensure that fair tariff increases are passed on to consumers,” explained Mostert.
According to Nersa spokesperson, Charles Hlebela, the energy regulator will apply for leave to appeal the high court judgment.
– Click here to see the court order with the names of municipalities that can go ahead with tariff increases
– Click here to see the full report on the cost supply study by the City of Tshwane as submitted in the public participatory process.
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