Nersa must get their act together for new municipal power tariff increase season

AfriForum is ready to take on the National Energy Regulator of South Africa (Nersa) again to prevent a repeat of the fiasco with last year’s municipal power tariff hikes. While the civil rights organisation is still awaiting the finalisation of Nersa’s appeal process regarding the unlawful and invalid power tariff increases that the regulator granted to at least 100 municipalities last year, AfriForum is demanding answers on how the regulator intends to ensure that municipalities carry out the prerequisite cost-of-supply studies as part of their applications for power tariff hikes this year.

The High Court in Pretoria ruled in AfriForum’s favour in June of last year and determined that Nersa’s approval of municipalities’ applications for power tariff increases without the required cost-of-supply studies was unlawful and invalid. This means that the regulator may not consider any applications for power tariff increases from municipalities unless the required cost-of-supply studies are also submitted. Despite the requirement for municipalities to submit cost-of-supply studies as part of their tariff increase applications under the Electricity Regulation Act 4 of 2006, Nersa continues to vigorously challenge this decision. Cost-of-supply studies are of critical importance because they give a clear outline of what municipalities’ tariffs should be to properly deliver the service and maintain networks.

In the letter sent to Nersa today, AfriForum emphasises that the High Court has already ruled that Nersa’s historical benchmarking approach to determining municipal power tariffs is unacceptable and that cost-of-supply studies are the only accepted method for this.

“Despite court rulings and legislation prescribing the use of cost-of-supply studies in this process, there are still municipalities that do not comply. Nersa may no longer facilitate the approval of unfair tariff hikes by municipalities in an unlawful manner,” emphasises Deidré Steffens, Local Government Advisor at AfriForum.

AfriForum insists that Nersa fulfils its responsibilities as a regulator and ensure that municipalities’ applications meet all the necessary legal prerequisites. To avoid a reoccurrence of last year’s unlawful tariff increases, AfriForum demands answers from Nersa regarding:

measures implemented by Nersa to enforce the submission of cost-of-supply studies as part of municipalities’ electricity tariff hike applications;
actions taken when a municipality fails to submit the required cost-of-supply study; and
plans for any additional steps to improve compliance and accountability in the tariff application process.

Morné Mostert, Manager of Local Government Affairs at AfriForum, says: “The use of cost-of-supply studies is the only way by which Nersa can really ensure that electricity tariffs are cost-effective, fair and in line with national policy objectives. It is unacceptable that municipalities attempt to escape liability by not complying with these regulations.”

“While we await the announcement of this year’s Eskom tariff hikes, the issue of compliance with cost-of-supply studies still looms. Nersa’s role as regulator is of critical importance to ensure transparency and fairness, and we call on Nersa to act decisively to uphold the rule of law and protect electricity consumers,” concludes Mostert.