Municipal electricity tariff decisions must pass transparency and public participation test, says court

New fixed decision making timelines were set in place for municipal electricity tariff decisions, which include that the National Energy Regulator of South Africa (Nersa) must in future by May 5 finalise all municipal tariff applications.

The order granted last week follows a judgment handed down in October by the Gauteng High Court, Pretoria, that Nersa’s approval of the implementation of municipal electricity tariffs without the use of proper cost-of-supply (COS) studies and public participation processes was unconstitutional.

Judge Etienne Labuschagne at the time issued a rule nisi, calling on the respondents, including all 158 municipalities, to show cause, if any, why the order regarding the proposed timelines should not be made.

The court has now imposed annual timelines on Nersa, Eskom, and all municipalities, which include that Eskom must submit its Retail Tariffs Structural Adjustments Application (ERTSA) annually by August 31.

Nersa must notify municipalities in writing by January 31 of the wholesale tariffs at which electricity will be supplied for the following financial year. Municipal electricity tariff applications must be submitted to Nersa by March 20, and it must make its final decision on each municipality’s tariffs by May 5 and communicate the reasons for the decision immediately.

In addition to setting this timeline, the court also ruled that all tariff applications and COS studies must be made public for public comment. Nersa must explicitly indicate instances where a COS study is absent from the application.

Judge Labuschagne ruled that no deviation from the court order is permitted without the court’s approval. AfriForum stated that this ruling is a milestone for electricity consumers across the country.

“The court has unequivocally found that Nersa’s long-standing, systemic and persistent failure to follow timely and transparent processes for tariff increases has completely undermined the public participation process. This new regulatory regime brings a permanent end to those malpractices and creates, for the first time, a system where consumers can truly and timely participate in decision-making on electricity tariffs,” Morné Mostert, Manager of Local Government Affairs at AfriForum, said.

This latest court ruling follows in the wake of AfriForum’s victory in which the High Court ruled that Nersa’s decision to consider municipalities’ applications for tariff increases without the required COS studies was unlawful and invalid.

In terms of that ruling, the setting of electricity tariffs must be based on transparent and complete COS data. Judge Labuschagne, in his October ruling, slammed Nersa on its argument that customers do not have the right to know what it costs municipalities to supply them with electricity. He remarked that “how the regulator could unilaterally declare a cost of supply study as confidential is beyond concerning".

The judgment followed an urgent application by AfriForum in which it disputed the process Nersa followed to determine all municipal tariffs for this financial year, ending June next year. Judge Labuschagne declared the electricity tariff approval process invalid for breaching constitutional and statutory obligations.

He granted AfriForum’s request for an interdict for specified timelines for future public participation processes. The new timelines in the municipal electricity increase process will ensure that the public has time to participate.

On the return day last week, Nersa argued that the imposition by the court of a timeline, or structural interdict, binding on it and the other parties constituted judicial overreach and that there should be a separation of powers.

But Judge Labuschagne said given Nersa’s consistent failure to finalise municipal tariffs timeously and undermining public participation and municipal budgeting, a structural interdict in terms of the Constitution would constitute a fair and equitable remedy. “Such relief would enforce accountability without dictating the substantive outcome of Nersa’s regulatory functions,” the judge said.

zelda.venter@inl.co.za