NERSA’s appeal bid regarding municipal power tariff hikes fails

19 August 2024 

A huge victory in the interest of millions of municipal electricity consumers was achieved in the Gauteng High Court today, says the civil rights organisation AfriForum. The National Energy Regulator of South Africa’s (NERSA) plans to push through unlawful and invalid municipal tariff hikes were prevented this morning when their application for leave to appeal was dismissed.

This follows after the High Court ruled in AfriForum’s favour in June this year and confirmed that NERSA’s decision to consider municipalities’ applications for tariff hikes without the required cost-of-supply studies is unlawful and invalid.

According to Morné Mostert, AfriForum’s Manager of Local Government Affairs, the submission of cost-of-supply studies is a required component of municipalities’ applications for tariff hikes as prescribed by the Electricity Regulation Act 4 of 2006. Cost-of-supply studies are critical because they provide a clear outline of what municipalities should charge for electricity to deliver the service and maintain networks properly.

However, municipal power tariff increases were implemented nationwide at 178 licensed electricity distributors on 1 July this year, despite only 66 distributors having conducted cost-of-supply studies. At least 112 municipalities have therefore been charging unlawful rates to millions of consumers for more than a month.

Today’s judgment determines that the High Court ruling made in AfriForum’s favour in June must be implemented. Accordingly, all municipalities that have not submitted cost-of-supply studies must once again charge the electricity rates approved for the 2023/2024 financial year. Applications for tariff increases for 2024/2025 will, according to the ruling, be reconsidered if the municipalities concerned submit the necessary cost-of-supply studies within 60 days. 

In the meantime, AfriForum will send an urgent letter to the energy regulator and demand a plan of action regarding the refund of over-recovery to consumers. The organisation will also request a complete list of municipalities that have not yet submitted cost-of-supply studies so that the implementation of the court order can be monitored.

“NERSA has now caused an administrative nightmare due to mismanagement because, although the error can be relatively easily rectified in favour of municipal account holders, it will be much more difficult to rectify the error for consumers of prepaid electricity,” explains Mostert.

“We realise that this judgment will have a significant impact on municipalities’ budgets, but the line has now been drawn in the interest of consumers who have been milked as cash cows for years by inept municipalities,” concludes Mostert.

AfriForum is, meanwhile, investigating ways in which consumers can be assisted in the dispute process and will soon announce the way forward.

Issued by Morné Mostert, Manager: Local Government Affairs, AfriForum, 19 August 2024