Electricity refund on the cards for South Africans across 112 municipalities
AfriForum plans to force the National Energy Regulator of South Africa (Nersa) to reimburse consumers for electricity tariff hikes imposed as of July 2024.
This follows Nersa’s failed attempt to appeal a high court judgement that municipal hikes in levy prices without a cost-of-supply (COS) study are unlawful.
“A huge victory in the interest of millions of municipal electricity consumers was achieved in the Gauteng High Court today, says the civil rights organisation AfriForum.
“Nersa’s plans to push through unlawful and invalid municipal tariff hikes were prevented on Monday (19 August) when their application for leave to appeal was dismissed,” said AfriForum.
According to Morné Mostert, AfriForum’s Manager of Local Government Affairs, the submission of cost-of-supply studies is a required component of municipalities’ applications for tariff hikes as prescribed by the Electricity Regulation Act 4 of 2006.
Municipal power tariff increases were implemented nationwide at 178 licensed electricity distributors on 1 July this year, despite only 66 distributors having conducted cost-of-supply studies.
Therefore, for more than a month, at least 112 municipalities have been charging unlawful rates to millions of consumers.
Accordingly, all municipalities that have not submitted cost-of-supply studies must once again charge the electricity rates approved for the 2023/2024 financial year.
Applications for tariff increases for 2024/2025 will, according to the ruling, be reconsidered if the municipalities concerned submit the necessary cost-of-supply studies within 60 days.
“In the meantime, AfriForum will send an urgent letter to the energy regulator and demand a plan of action regarding the refund of over-recovery to consumers,” said AfriForum.
Nersa said it is currently studying the judgement.
“Once Nersa has thoroughly examined the judgement by the High Court, it will take a position on the matter, which will be communicated in due course,” it said.
Speaking to SABC News, energy expert and former Eskom executive Vally Padayachee said that this could mean trouble.
He noted that the municipalities that could be required to refund electricity consumers following the AfriForum court ruling may face significant financial strain, especially those already experiencing budgetary instability.
These municipalities are often already burdened with debt, have poor financial management, and lack the resources to meet basic service delivery demands.
Paying refunds further depletes their limited funds, potentially worsening their financial health.
This could lead to reduced public services, delayed infrastructure maintenance, and increased pressure to secure additional funding through loans or other means, further exacerbating their economic challenges.
The court ruling highlights the balance needed between regulatory compliance and municipal financial stability.
Municipal debt owed to Eskom continued to grow in the first half of the utility’s 2024 financial year, reaching R70 billion from R58.5 billion at the end of March.
Eskom said that municipal debt has continued to escalate from already unsustainably high levels.
In 2018, invoiced municipal debt totalled a mere R13.6 billion. By the end of 2023, it had grown to R70 billion, a 32% increase from the year before.
The payment levels of municipalities continued to deteriorate, declining by 2% in the 2023 financial year to 76%.
The top 20 defaulting municipalities pay less than half of their invoiced amount, with a 46% payment level.
In June 2024, AfriForum secured a significant legal victory in the Pretoria High Court, successfully halting the implementation of electricity tariff hikes by 112 municipalities in South Africa.
The court ruling came after these municipalities attempted to increase tariffs without submitting the required cost-of-supply (COS) studies to the National Energy Regulator of South Africa (NERSA).
The COS studies are essential as they provide a detailed breakdown of the actual costs involved in supplying electricity, ensuring that tariffs are fair and justifiable.
In the absence of these studies, the municipalities’ proposed tariff hikes were deemed unjustifiable and unlawful.
AfriForum challenged these increases, arguing that municipalities were burdening residents with higher electricity costs without the necessary regulatory oversight.
“We realise that 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 by inept municipalities,” said AfriForum.
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