Municipal electricity price increases calculated in an ‘unlawful’ manner, court rules

The Gauteng High Court has found that the National Energy Regulator of South Africa (Nersa) used an unlawful way to calculate annual electricity price increases for municipalities, declaring their guidelines and benchmarking method unconstitutional and giving them a year to fix it. 

Most municipalities were allowed to increase the cost of their electricity provision by about 7.7% this year.

The court heard that the application was brought to, among other things, bring an end to municipalities passing on to consumers the cost of their management failures, including a lack of infrastructure maintenance as well as rampant electricity and cable theft.

Consumers pay these increases in addition to increases relating to the cost of electricity itself that is requested by Eskom annually.

Up to now, Nersa did not require municipalities to show the relationship between its actual costs and the tariffs it is applying for, or the benchmark tariffs generally. It merely had to bring itself within a guideline for its application to be approved.

Read in Daily Maverick: “Nersa’s methodology for increasing electricity prices is ‘unlawful’, business chambers argue” 

The Nelson Mandela Bay Business Chamber and the Pietermaritzburg and Midlands Chamber argued that this has allowed for municipalities to load tariffs with costs for which the consumer should not be responsible.

The application by the chambers was supported by Eskom.

The chambers participated in consultations for more than a year on this issue, taking action when Nersa confirmed that it would not review its methodologies without a legal challenge.

Denise van Huyssteen, CEO of the Nelson Mandela Bay Business Chamber, said: “We are very pleased with the judgment which was delivered in our favour by the high court today. 

“We believe that this will have the necessary effect on changing the way electricity tariffs are set, and that in the near future municipalities will not be able to add on costs to consumers for their own inefficiencies.

“Furthermore, this case will potentially impact the determination and approval of electricity tariffs charged by municipalities across the entire country, ultimately benefiting all South African businesses and consumers.” 

This was the second time the Nelson Mandela Bay Business Chamber had taken on a case of this nature. 

“We were successful over a number of years in restricting both Eskom and municipal electricity increases, thus providing savings to businesses and consumers across the country.”

An ‘emphatic judgment’