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AFRIFORUM has hailed as a victory the high court’s finding that the National Energy Regulator of South Africa’s decision to consider municipalities’ applications for electricity tariff increases without the requisite cost studies is “unlawful and invalid”.
Friday’s ruling by the High Court in Pretoria comes after the civil rights organisation challenged Nersa’s practices.
The court’s decision has implications for municipalities across the country, including the Northern Cape.
The court found that Nersa’s practice of evaluating tariff increase applications without considering cost studies violates legal requirements. As a result, Nersa is prohibited from considering any such applications until the necessary cost studies are submitted.
Municipalities that failed to provide cost studies will have to continue to charge electricity tariffs based on the rates approved for the 2023/24 fiscal year.
For the 2024/25 fiscal year, Nersa may reconsider municipalities’ applications for tariff increases, but only if they submit the required cost studies within the next 60 days.
“This is a great victory for civil rights – something AfriForum is fighting for. The court has now acknowledged anew that Nersa failed to protect consumers against unlawful applications for electricity tariff increases – something the law compels the regulator to do,” said Morné Mostert, the manager of local government affairs at AfriForum.
In a “premature” announcement on Friday, Nersa revealed that it had successfully reviewed and approved the tariff increase applications from all 178 licensed electricity distributors. It confirmed that the scheduled municipal electricity tariff increases will take effect on July 1.
However, only 66 of these municipalities submitted the necessary cost studies alongside their applications.
“That announcement was made prematurely. We trust that Nersa will comply with the court order and that the applications of the municipalities whose required cost studies are absent will be scrapped,” says Mostert.
AfriForum filed an urgent application with the court earlier this month, seeking to halt Nersa from proceeding with municipal tariff increase considerations. The crux of the matter lies in a high court order issued in October 2022. According to this ruling, municipalities’ applications for tariff increases must include a cost study. This requirement is further reinforced by the Electricity Regulation Act 4 of 2006.
According to Mostert, utilising a cost study for electricity tariff increases is crucial as it provides a clear framework for determining the appropriate tariffs that municipalities should implement to ensure proper service delivery and network maintenance.
“The applications of municipalities that do not have cost studies are at this stage 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,” explained Mostert.
Afrforum has, however, stressed that “the fight against unreasonable electricity tariff increases does not end with this court order”.
The organisation believes that communities, businesses and civil institutions now bear the “responsibility” of scrutinising their municipalities’ cost studies. Their vigilance is essential to prevent municipalities from deceiving or misleading consumers.
“The court case was done in the interest of consumers and to promote fairness and transparency in the approval of municipal electricity tariffs,” concluded Mostert.