Illegal and invalid: this is what the court says about NERSA’s review of municipal electricity tariff increases

The High Court in Pretoria today ruled that the decision of the National Energy Regulator of South Africa (NERSA) to consider applications for increases in electricity tariffs from municipalities without the required cost studies is unlawful and invalid. This means that the regulator cannot consider any applications for increases in electricity tariffs from municipalities unless the required cost studies are also submitted. As such, the court ordered that municipalities that do not have the required cost studies must continue to charge electricity tariffs based on the existing tariffs approved for the 2023/2024 financial year. Applications for increases in electricity tariffs from municipalities for the 2024/2025 financial year can indeed be reconsidered by NERSA provided that the necessary cost studies are submitted within 60 days from today.

“This is a major victory for civil rights, a cause that AfriForum has been fighting for. The Court has now acknowledged once again that NERSA has failed to protect consumers from unlawful demands for electricity tariff increases, which the regulator is required by law to do,” said Morné Mostert, AfriForum’s Head of Local Government Affairs.

The municipal electricity tariff increases are due to be implemented by 1 July. NERSA announced today that it had met this deadline and that applications for tariff increases from all 178 licensed electricity distributors had already been reviewed and approved. However, only 66 of these municipalities have submitted cost studies. “This announcement was made prematurely. We are confident that NERSA will comply with the court order and that applications from municipalities that do not have the required cost studies will be rejected,” Mostert said.

AfriForum filed an urgent application in court earlier this month to restrain NERSA from pursuing these considerations, as a High Court order of October 2022 requires a cost study to be submitted as part of municipalities’ tariff increase applications. This is also mandated by the Electricity Regulation Act No. 4 of 2006.

According to Mostert, the cost study is essential for electricity rate increases, because it allows a clear determination of the rates that municipalities must apply to properly provide service and maintain the networks. “Requests from municipalities which do not have a cost study are based at this stage simply on an estimate of the costs of providing the service. However, requests for tariff increases must be made on the basis of accurately calculated figures, to ensure that fair tariff increases are passed on to consumers,” says Mostert.

However, the fight against unreasonable increases in electricity rates does not end with this court decision. It is now up to communities, businesses and civil institutions to consider the content of their municipalities’ cost studies to ensure that they do not mislead or deceive consumers. “The lawsuit was filed in the interest of consumers and to promote fairness and transparency in the approval of municipal electricity rates,” Mostert concludes.