Ruling on tariff application process ursups Treasury powers, says Nersa

Banele Ginindza

The National Energy Regulator of South Africa (Nersa) has raised concerns that last week’s court judgment in its legal dispute with AfriForum over municipal electricity tariff timelines encroaches on the powers of the Minister of Finance as set out in the Municipal Finance Management Act (MFMA).

Nersa also noted that the ruling was delivered without the National Treasury’s participation, despite its central role in municipal budgeting processes.

Nomfundo Maseti, full-time regulator member for piped gas and acting member for electricity, said Nersa is likely to appeal the judgment but must, as a courtesy, inform the Minister of Finance of its implications, particularly the new court-imposed timelines, which she said are misaligned with MFMA requirements.

"The court has made out these orders without an opportunity for those that are given powers in the MFMA to have an opportunity to indicate whether these orders are going to be practical or not," Maseti said.

"They have not been heard. That on its own presents a challenge because again the issue the brought by Afriforum before the court, it seems to me in as far as the orders are concerned now, it goes beyond the issue that was brought in there." 

She was addressing municipalities at a workshop on the tariff application process for the 2026/27 financial year.

Maseti warned that the ruling introduces impracticalities for municipalities and proposes timelines that clash with legislation they are required to follow.

"The judgement does not speak to any findings that the provisions of the MFMA are unconstitutional. It has not pronounced on that and not made findings. One then asks themselves as to why would the court deviate from the timelines that are prescribed in the MFMA, sections 43 in particular," Maseti said.

"It is an issue that we mean to look into. Also, when one has powers to pronounce such as the Minister of Finance, he has the discretion in terms of the MFMA. It was not party in the proceedings yet there are certain court orders that, that party must now comply with without being heard, whether such orders would be practical and enforceable." 

The North Gauteng High Court ruled on 31 October that NERSA acted unconstitutionally by approving municipal electricity tariffs without proper cost-of-supply (COS) studies and adequate public participation.

It then imposed strict annual deadlines on Eskom, Nersa and municipalities, including:

• Eskom must submit its Retail Tariff Structural Adjustments Application (ERTSA) by 31 August each year.

• NERSA must notify municipalities of wholesale electricity tariffs by 31 January.

• Municipalities must submit their tariff applications to NERSA by 20 March.

• NERSA must issue final tariff decisions by 5 May, with immediate publication of reasons.

Maseti said Treasury would be drawn fully into upcoming engagements, given the regulatory and fiscal implications.

"In as much as there are these inconsistencies with regard to what the judgement is saying and what the MFMA is saying, because even if the judgement were to be taken on appeal or so, we are stuck with the deadlines and there is no time." Maseti said.

Nersa is also required to ensure 30 days of public consultation before making municipal tariff decisions. Maseti cautioned that with municipalities submitting by 20 March, the regulator would have only 40 days to process applications — a period she said is insufficient.

"If we stick to March 15, we would expect applications earlier but we don't know what the MFMA says about applications received after March 15th and then whether the tariff will it be applicable in that financial year," Maseti said.

Alongside the new timelines, the court ordered that all tariff applications and COS studies be published for public comment and that NERSA must explicitly indicate when a municipality has no COS study. No deviation from the order is allowed without the court’s permission.

AfriForum's manager for local government affairs, Morné Mostert, welcomed the ruling and described it as a “milestone for electricity consumers”, saying it ends years of delays and opaque tariff-setting processes.

“This ruling is a true 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," Mostert said. 

"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." 

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