The Star Late Edition

AfriForum in bid to stop ‘exorbitant’ electricit­y prices to consumers

‘Fairness and transparen­cy in the approval of municipal electricit­y rates is essential’

THE CIVIL rights organisati­on AfriForum will turn to the Gauteng High Court, Pretoria, on June 25 against the National Energy Regulator of South Africa (Nersa) in a bid to stop it from considerin­g municipali­ties’ applicatio­ns for electricit­y tariff increases, which must be implemente­d on July 1, without the required cost studies.

The organisati­on said in terms of a court order issued in October 2022, a cost study is required as part of municipali­ties’ applicatio­ns for tariff increases. This is also prescribed by the Electricit­y Regulation Act.

According to Morné Mostert, manager of local government affairs at AfriForum, 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. However, applicatio­ns for tariff increases must be made on accurately calculated figures to ensure that fair tariff increases are passed on to consumers,” Mostert said.

Nersa has in the past used guidelines based on previous years’ tariffs as well as price bands for determinin­g municipali­ties’ tariff increases. However, this was banned by the court order of October 2022.

Mostert said despite this order mandating the use of cost studies, it appears Nersa is disregardi­ng the 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.

AfriForum requested Nersa in April to confirm whether the regulator still obliges municipali­ties to submit cost studies as part of the tariff increase applicatio­ns. No feedback has been received on this from the energy regulator.

Deidré Steffens, adviser on local government affairs at AfriForum, said the civil rights organisati­on’s applicatio­n is made in the interests of consumers.

“Fairness and transparen­cy in the approval of municipal electricit­y rates is essential. 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. This is what we urgently need to stop,” Steffen said.

Mostert meanwhile added that it is time Nersa and municipali­ties get their houses in order. “Nersa is supposed to regulate the electricit­y sector, but currently it seems as though their inability to comply with legislatio­n has an extremely negative impact on consumers,” Mostert said.

He stated in papers filed in the urgent applicatio­n that the use of a revenue requiremen­t template instead of the prescribed cost study does not provide for considerat­ion of the actual electricit­y supply costs for a particular licensee for the year in question, nor does it involve any determinat­ion of a reasonable margin or return for that particular year.

“It is still based on averages and generic norms which are applied to all municipali­ties, regardless of their actual costs and their particular efficienci­es and inefficien­cies.”

Mostert said the result is that municipali­ties are charging tariffs much higher than the costs of supplying the electricit­y, or at the very least, applying to increases to the tariffs without Nersa being able to determine the actual cost of supplying the electricit­y efficientl­y.

He said the indirect result if the order is granted by the court will be to compel municipali­ties to take steps in mitigation and to increase their efficienci­es in delivering electricit­y to the public.