Another Nersa blunder, as court orders do-over of electricity tariffs for 4 municipalities

The National Energy Regulator of South Africa (Nersa) has been ordered to recalculate the electricity tariffs applied in 2024/25 for four municipalities.

The high court order came after several industrial power users approached the court for relief and applies to the City of Joburg, Ekurhuleni, Madibeng Municipality in Brits, and Msunduzi in Pietermaritzburg, as Moneyweb reports.

This may result in electricity users who were overcharged being credited and those who were undercharged having to make up the difference.

Stephen Grootes gets more detail from Melanie Veness, CEO of the Pietermaritzburg and Midlands Chamber of Business, which was involved in the court action.

Veness sketches the background to the tariff blunder in the case of the Msunduzi Municipality, which all revolves around the cost of supply which municipalities are required to submit for the determination of power tariffs.

"In 2022 we supported some court action against the regulator to challenge the methodology they employed to determine tariffs because, by law, municipalities are permitted to recover their efficiently incurred cost of supply and a small return on assets, and it has to be calculated per customer category, so they HAVE to submit that cost of supply to get an increase. In our case, the municipality were granted a 15% increase across tariff categories, without having looked at the real data per category."

In this case, industrial users appeared to be subsidising other tariff categories, Veness says, which is not only unfair but bad for the economy. "They are big employers... and our economy can't grow and our manufacturers can't compete if they're not getting a secure quality supply of electricity at a competitive rate."

She says that a proper consultation process was also not followed in determining the draft tariffs and then implementing them.

Following the court ruling, the municipality has ten days to resubmit the application and the business chamber will then have the opportunity to interrogate that cost of supply, to make comments and to "run a proper process which should have happened when the tariffs were first proposed and considered by Nersa".

Veness believes it is going to be very important for all sectors of society to engage with this cost of supply issue going forward.

"If you look at the municipalities' domestic tariffs, they are much higher than the domestic tariffs of Eskom while, essentially, they're giving the same service... It will be important to engage with that cost of supply and to ensure that we get fair cost-reflective tariffs for every customer category."

For more detail, listen to the interview audio at the top of the article