You will ‘no longer pay for stolen electricity’

You will 'no longer pay for stolen electricity'. City Press, 23 October 2022.

“Energy regulator Nersa took another beating last week when the High Court in Pretoria found that the way in which it had been setting municipal power tariffs for the past decade was illegal and invalid.”

Original article on CityPress

Energy regulator Nersa took another beating last week when the High Court in Pretoria found that the way in which it had been setting municipal power tariffs for the past decade was illegal and invalid. The court gave Nersa 12 months to develop a legal methodology.

This means that, from July 1 2024-25 consumers will no longer have to pay by way of power tariffs for inefficient operations of municipalities and other services that have nothing to do with electricity. So says MC Botha, tariff expert and instructing lawyer of the chambers of commerce that brought the court application.

Eskom supported this application.

Denise van Huyssteen, CEO for the Nelson Mandela Bay Business Chamber of Commerce, says the ruling will change the way power tariffs are set and benefit consumers and businesses. Melanie Veness, CEO of the Pietermaritzburg and Midlands Chamber of Business, says municipalities will no longer be allowed to charge tariffs to fund power losses that are the result of poor maintenance and power and cable theft.

In the past, Nersa published a guideline every year to indicate to municipalities by what percentage they may increase their power tariffs. Along with this, Nersa gave price bands to show what the rates for different user groups should be. The guideline is imposed on the percentage by which Eskom would increase its rates, the inflation rate at municipal level, a provision for wage increases and a few other cost items. The tariffs of municipalities that stayed within the recommended increase and price bands were approved without Nersa having considered what it cost them to supply power or how efficient their operations were. Nersa did not consult the public about this.

This was only done if municipalities wanted larger increases. The court found that this way of working is noncompliant to the Electricity Regulation Act (ERA). According to the ERA, the rates must be set in such a way that a licence holder (municipality) can recover its efficient cost of supply plus a reasonable margin. This is the basis on which Nersa sets Eskom’s tariffs. Moreover, cross-subsidisation between different groups of consumers, such as households and industries, must be transparent and fair.

The court found that Nersa failed to determine the cost of supply for each municipality and did not do the necessary calculations to determine what a reasonable margin would be. Eskom’s general manager for regulation, Hasha Tlhotlhalemaje, says it is essential that municipal electricity tariffs be based on the actual cost of supply and Nersa must base any adjustments in the tariffs on cost studies. There had been sufficient time to implement this, says Tlhotlhalemaje. Nersa recently missed its own deadline of September 30 for finalising a controversial new method it proposed for setting Eskom and municipal electricity tariffs.

The method attracted a lot of criticism and the Minerals Council warned it would make household costs skyrocket. Due to the delay, Nersa will continue to determine Eskom tariffs for at least the next two years according to the existing methodology, namely the cost of supply plus a reasonable margin. By the end of the year, Nersa must announce its decision on Eskom’s application to increase power
tariffs by 32% next year.

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