Warning about electricity price increases in South Africa

The National Energy Regulator of South Africa (Nersa) has issued a notice informing all municipal power providers to submit their tariff adjustment applications for 2025/26 with an accompanying cost of supply study.

Failure to comply will result in no adjustment to the respective provider’s electricity tariffs for the upcoming financial year.

“All tariff applications are required to be supported by a cost of supply study,” the regulator stated.

“Tariff applications that are supported by cost of supply studies must be submitted to Nersa by 30 April 2025. This will facilitate processing and approval in time for the 1 July 2025 implementation date.”

Nersa added that failing to apply for approval of municipal electricity tariff adjustments is a breach of licence conditions and a violation of the Electricity Regulation Act (ERA) provisions.

“Section 15 of the ERA prevents any licensee from charging a tariff that is not approved by the Regulator,” it said.

To date, Nersa has received compliant tariff applications from the following licensees:

• City of Mbombela Municipality
• Dr Pixley ka Isaka Seme Municipality
• Matjhabeng Municipality
• Msukaligwa Municipality
• Overstrand Municipality
• Saldanha Bay Municipality
• Senqu Municipality
• Umsobomvu Municipality
• Witzenberg Municipality

The energy regulator failed to implement the cost of supply study requirement for municipal tariff adjustments for the 2024/25 financial year.

This prompted civil interest organisation Afriforum to launch an urgent legal application to block municipalities from implementing their increases on 1 July 2024.

In June 2024, it approached the Pretoria High Court to block Nersa from considering tariff applications if cost studies didn’t accompany them.

The basis of its legal challenge was an October 2022 High Court Ruling that declared Nersa’s old method for approving municipal electricity tariff adjustments unlawful.

The previous method relied on the year prior’s tariffs and price bands for each municipality to approve adjustments. It only considered how municipalities’ biggest electricity supply cost elements increased.

However, the Electricity Regulation Act 4 of 2006 prescribed that these adjustments must be based on cost studies determining distributors’ actual cost of providing electricity to their customers, including all relevant factors.

Urgent application to block tariff hikes fails

While the High Court ruled in favour of Afriforum, Nersa appealed to the Supreme Court and approved electricity price hikes for 178 municipalities.

This prompted Afriforum to apply to the High Court to enforce its judgment from 8 July 2024. However, the High Court dismissed its application in December 2024 as the matter was on appeal.

Afriforum now awaits the outcome of its appeal. If the Supreme Court of Appeal doesn’t find in Nersa’s favour, the regulator can still apply for access to appeal at the Constitutional Court.

If the Supreme Court does rule in favour of Afriforum, it could create an administrative crisis for municipal power providers, as they would have to refund customers.

According to Afriforum’s local government affairs manager, Morné Mostert, the urgent High Court application in June 2024 was based on the fact that most municipalities had yet to provide cost-of-supply studies.

“Our application is based on the legislative requirements as well as a court order obtained in 2022, which says all licensees must have a cost of supply document that informs the tariff,” he said.

“Without this document, we can’t determine what the tariff of a municipality should be.”

He said that the court order from October 2022 acknowledged that municipal licensees were overcharging consumers for the electricity they use.

“Municipalities have gotten away with not supplying any details with regard to the task of actually transmitting electricity and selling it to consumers,” said Mostert.

He added that they have made enormous profits by selling electricity to consumers without conducting the required due diligence.

Nersa said the 2024/25 financial year applications were processed according to the provisions of the Electricity Regulation Act and the above-mentioned court ruling.

The adjustments took 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.

Nersa added that distributors who failed to provide cost-of-supply studies were instructed to provide a breakdown of their electricity distribution-related costs.