Court case to stop electricity price hikes fails

The National Energy Regulator of South Africa (Nersa) has approved tariff hike applications from 178 licenced municipal and private electricity distributors.

This is despite AfriForum launching urgent legal action against the regulator in early June 2024 to block the price hikes.

AfriForum said a High Court ruling in October 2022 had declared Nersa’s old method for approving municipal electricity tariff adjustments unlawful.

It claims that few distributors have complied with the requirement to carry out cost studies to supplement their applications.

The regulator said the applications for the 2024/25 financial year were processed in accordance with the provisions of the Electricity Regulation Act and with the abovementioned court ruling.

The tariff adjustments will take effect on 1 July 2024.

“The applications were published on the Nersa website to solicit comments from affected parties, which were taken into consideration in the decision-making process,” the regulator said.

It added that distributors who applied without the required cost-of-supply studies were instructed to provide a breakdown of their electricity distribution-related costs.

AfriForum announced it was launching urgent legal action against Nersa on 9 June 2024.

It asked the Pretoria High Court to block the regulator from considering municipalities’ tariff adjustment applications if they did not include cost studies.

Citing the High Court ruling against Nersa in October 2022, AfriForum said the regulator had previously relied on prior years’ tariffs and price bands when considering tariff adjustments.

Effectively, the method only considered how municipalities’ biggest electricity supply cost elements increased.

This is despite the Electricity Regulation Act of 2006 prescribing that cost studies must supplement adjustments to determine the actual cost of providing electricity to customers.

The High Court order in 2022 instructed Nersa to develop a new methodology within one year.

However, in November 2023, it passed the buck to municipalities, ordering them to manage and carry out their own cost studies.

According to AfriForum, not many have complied with the order due to the high costs and logistics involved with cost studies.

Morne Mostert, AfriForum manager for local government affairs

AfriForum local government affairs manager Morné Mostert accused the regulator of disregarding the High Court order.

“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,” he said.

He explained that applications without cost studies are merely based on estimates of the cost of providing electricity.

“Applications for tariff increases must be made on accurately calculated figures that will ensure that fair tariff increases are passed on to consumers,” said Mostert.

AfriForum local government affairs advisor Deidré Steffens said his organisation submitted its court application to benefit South African consumers.

“Fairness and transparency in the approval of municipal electricity rates is essential,” he said.

“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.”

Reportedly, the regulator’s only option was to ask the court to let it use its only methodology again in 2024, based on legal advice it had received.

This was according to electricity regulation specialist law firm MC Botha Incorporated.

It’s important to note that the tariff applications approved by the energy regulator will only affect municipal customers’ tariffs.

These adjustments are applied annually in July, while customers who get electricity supplied directly from Eskom receive their annual increase in April each year.

Nersa has approved a 12.72% increase in the price of wholesale electricity that Eskom sells to municipalities.