This ruling has significant implications for municipalities that submitted their tariff applications without the mandated cost of supply studies, which provide a detailed financial outline necessary for establishing fair electricity charging rates. Picture: Supplied
The National Energy Regulator of South Africa (Nersa) has successfully navigated a crucial legal challenge from the advocacy group AfriForum, ensuring that municipal electricity tariffs for the 2024/2025 financial year will remain in effect.
This decision follows a recent ruling by the North Gauteng High Court, which dismissed AfriForum’s application aimed at enforcing a court order requiring Nersa to base tariffs exclusively on comprehensive cost-of-supply studies.
In a statement on Friday, Nersa confirmed that its approval of the tariff applications submitted by 178 licensed electricity distributors in July would not be altered by the court’s decision. Notably, only 66 of these distributors had completed the requisite cost-of-supply studies, raising questions about the legality of the approved tariffs.
“With the application having been dismissed, the June 2024 decisions of the Energy Regulator to approve municipal tariffs for the 2024/25 financial year remain valid,” Nersa said.
This ruling has significant implications for municipalities that submitted their tariff applications without the mandated cost of supply studies, which provide a detailed financial outline necessary for establishing fair electricity charging rates.
According to Nersa, municipalities that failed to prepare these studies can only continue charging the rates that were previously approved for the 2023/24 financial year.
The ongoing dispute stems from a prior court ruling in AfriForum’s favour, where it was determined that Nersa’s oversight in considering tariff hikes without the essential cost-of-supply studies was unlawful and invalid.
This ruling reinstated 2023/2024 electricity tariffs for all municipalities that neglected to submit the necessary financial documentation, leading AfriForum to assert that at least 112 municipalities have been overcharging consumers since Nersa’s tariff approval.
On 1 July this year, municipal power tariff increases were implemented nationwide at nearly 180 licensed electricity distributors, despite the fact that only about 70 distributors had conducted cost-of-supply studies.
AfriForum was seeking to have the High Court judgement of 8 July 2024 implemented whilst the appeal process that was granted to Nersa by the Supreme Court of Appeal was underway.
“Had the court granted AfriForum’s order, certain decisions of the Energy Regulator on municipal tariff applications made in June 2024 would have been invalid,” Nersa said.
Afriforum insisted that the cost-of-supply studies provided a clear outline of what municipalities should charge for electricity to deliver services and maintain networks properly.
It maintained that the applications of municipalities that do not have cost studies were 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 that will ensure that fair tariff increases are passed on to consumers.
AfriForum applied for the interdict on the grounds that a cost study must be completed as part of the municipal application for tariff increases, as prescribed by the Electricity Regulation Act 4 of 2006.
The organisation has accused Nersa of disregarding this legislation by allowing municipalities to apply for tariff increases without completing a cost-of-study.
Morné Mostert, AfriForum local government affairs manager, said the submission of cost-of-supply studies was a required component of municipalities’ applications for tariff hikes as prescribed by the Electricity Regulation Act.
BUSINESS REPORT