AfriForum wants clarity from NERSA about compliance with court ruling

The civil rights organisation AfriForum requested that the National Energy Regulator of South Africa (NERSA) confirm whether it still obliges municipalities to submit cost of supply studies when they apply for tariff increases.

The High Court in Pretoria declared the use of price bands and guidelines illegal in October 2022. This ruling means that municipalities must now submit cost of supply studies before they may introduce rate increases.

The cost of supply framework was established to protect consumers from excessively high rates. Previously, NERSA annually passed on benchmarks and guidelines to municipalities, but the result of this was that municipalities did not review the actual cost of electricity supply. A cost of supply study determines what the current costs are for the supply of electricity and a tariff increase can then be more accurately determined accordingly.

However, it appears that NERSA is not complying with the court order as they have sent communication to municipalities where they are now providing municipalities with a new revenue requirement template that they can use when applying for rate increases – this instead of the cost of supply study as the court ordered.

According to Morné Mostert, Manager of Local Government Affairs at AfriForum, the use of an approved template rather than the cost of supply study is a concern as it could mean that NERSA acts contrary to the court order. “We are looking for verifiable figures to indicate what municipalities’ rates should be. A cost of supply study is the starting point to steer municipalities and NERSA in the right direction.”