Redo of old electricity tariffs kicks off in three municipalities

Energy regulator Nersa confirmed on Monday (2 February) that it received applications from three municipalities to redetermine their electricity tariffs for 2024/25, even though the period has already passed.

This may result in upward or downward adjustments to electricity tariffs for different consumer groups in future periods, and the expectation is that households in particular may have to cough up more.

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By submitting the applications, Ekurhuleni on Gauteng’s East Rand, Madibeng in Brits and Msunduzi in Pietermaritzburg complied with a court order issued on 14 January, which set aside the tariffs initially determined and implemented on the grounds that they were unlawfully set.

The City of Joburg’s tariffs for the same period were also set aside, and it was ordered to bring a new application, but no deadline was set for its submission. Nersa confirmed that it has not yet received a new application from the City of Joburg.

Nersa conceded that the tariffs were unlawful after several industrial clients complained that it had failed to follow a proper public participation process before determining the original tariffs.

They argued that the tariffs were calculated in a way that required undue subsidies from industrial users to enable municipalities to keep tariffs for households lower.

Households likely to bear higher costs

If this is rectified, industrial users are expected to be credited, while households may be required to settle the difference retrospectively.

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Nersa spokesperson Charles Hlebela says the regulator is currently assessing the three applications for completeness in terms of the Electricity Regulation Act.

“Once an application is confirmed to be complete, the regulator will publish the application for public consultation, invite written comments for a period of 30 days as required by the act, and consider the applications together with public submissions before making a determination,” he adds.

The applications must be published inclusive of the cost-of-supply (CoS) studies on which they are based, and Nersa is also compelled to hold a public hearing in each case before reaching a final decision.

The process must be completed before 30 June, presumably to allow any required adjustments to be made in the upcoming municipal financial year, which starts on 1 July.

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MC Botha, director of MC Botha Inc, who acted on behalf of the applicants, noted that the three municipalities managed to submit their applications within 10 days, as the court ordered, but were unable to submit compliant applications at first when they had much more time at their disposal.

He encouraged individuals and stakeholder bodies in the three municipalities to scrutinise the CoS studies.

This is the first time Nersa will publish CoS studies with municipal tariff applications, after the court rejected its contention that the studies are for the regulator’s eyes only.

As is the case with Eskom, municipalities are allowed to recover only the efficient cost of supplying electricity, plus a reasonable margin. This means consumers should ensure that the costs cited by municipalities do not include inefficiencies and fruitless or wasteful expenditure.

Multiple legal challenges 

The new applications come as Nersa and the Ekurhuleni metro are also facing a challenge to the reseller tariffs for the current financial year, which were set at a level that makes it impossible for body corporates to lawfully recover their bulk costs.

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Applications against the four municipalities were heard together, and the applicants – Autocast South Africa; the Casting, Forging and Machining Cluster of South Africa; and the Pietermaritzburg & Midlands Chamber of Business – have already lodged similar applications in relation to the current tariffs in the same four municipalities.

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Kouga Steel has lodged a similar application against the Nelson Mandela Bay metro’s electricity tariffs for 2025/26, Botha said.

R76bn mistake

Nersa is dealing with these applications while finalising the redetermination of Eskom’s tariffs for the period 1 April 2025 to 31 March 2028, following another court order against the regulator.

As with the four municipalities, Nersa conceded that it had made mistakes in this process.

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In the Eskom redetermination, Nersa put a price tag of R76 billion on the error. Any part of that amount that is eventually included in the redetermined tariffs will push electricity prices even higher.

The first impact may be seen on 1 April, when Eskom’s tariffs are adjusted for the new financial year.

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