Electricity price hikes challenged in court

 ·10 Jun 2024

Lobby group AfriForum has brought an urgent application in the High Court in Pretoria against the National Energy Regulator of South Africa (Nersa) in hopes of preventing the regulator from considering municipalities’ applications for electricity tariff increases.

AfriFourm said that the tariff hike decision, which is set to be implemented on 1 July, was done “without the required cost studies,” which a 2022 High Court stipulated is required as prescribed by the Electricity Regulation Act 4 of 2006. 

Morné Mostert, Manager of Local Government Affairs at AfriForum, said that “the use of a cost study for 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 simply based on an estimate of what it costs to provide the service,” said Mostert.

“However, applications for tariff increases must be made on accurately calculated figures that will ensure that fair tariff increases are passed on to consumers,” he added.

2023’s electricity price hike of 18.65% (significantly less than the 32.02% increase Eskom asked for), in combination with the coming hike, means that South Africans will have seen at least a 33.8% increase in the electricity price over the two-year period.

Although most municipal electricity price hikes are mostly in line with Eskom’s 12.72% increase approved by Nersa, metropolitans like Nelson Mandela Bay and eThekwini drafted hefty increases compared to other major metros – with the cities of Johannesburg and Cape Town managing to shield their residents slightly.

Nelson Mandela Bay tabled a harsh 15.7% electricity tariff increase – 2.98 percentage points higher than Eskom’s municipal hike – while eThekwini is set to increase by a notable 14%.

Nersa, traditionally relying on past tariffs and price bands for setting municipal tariff hikes, was mandated by a 2022 judgment to cease this practice from the 2024/2025 financial year starting July 1. They were given approximately a year to devise a new methodology.

Despite this order mandating the use of cost studies, AfriForum argues that Nersa is still relying on past tariffs.

“The regulator recently sent communications to municipalities in which the use of a revenue requirement template instead of the prescribed cost study was made available for tariff increase applications,” said Mostert.

“Fairness and transparency in the approval of municipal electricity rates is essential,” said AfriFourm’s local government affairs adviser Deidré Steffens.

“It appears as if NERSA’s current policy and process is not being carried out in accordance with the law and is therefore being applied to the detriment of consumers – and this is what we urgently need to stop,” added Steffens.

Read: Warning over delivery crisis in South Africa

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