The Madibeng Municipality is one of a number of municipalities that are not allowed to increase its electricity tariffs this month, according to a High Court order. However, Madibeng disagrees.
The High Court in Pretoria on Friday found that the National Energy Regulator of South Africa’s (NERSA) decision to consider municipalities’ applications for electricity tariff increases without the required cost studies is unlawful and invalid. This means that the regulator may not consider any applications for electricity tariff increases from municipalities unless the required cost studies are also submitted. As such, the court ordered that municipalities whose cost studies are absent will have to continue charging electricity tariffs based on the existing rates approved for the 2023/2024 fiscal year. Municipalities’ applications for electricity tariff increases for the 2024/2025 fiscal year can indeed be reconsidered by NERSA provided the necessary cost studies are submitted within 60 days from today.
On Friday, the same day as the court order, NERSA announced that it has met this deadline and that all 178 licensed electricity distributors’ tariff increase applications have already been considered and approved. However, only 66 of these municipalities submitted cost studies, according to the court order. Madibeng is not one of the 66 municipalities listed.
“That announcement was made prematurely. We trust that NERSA will comply with the court order and that the applications of the municipalities whose required cost studies are absent will be scrapped,” said Morné Mostert, Manager of Local Government Affairs at AfriForum.
When requesting a response from the Madibeng Municipality, it said on Tuesday that the municipality has not increased electricity tariffs. “We are engaging with the South African Local Government Association (SALGA) regarding the cost study,” spokesperson Tumelo Tshabalala siad.
However, on Wednesday, the municipality said that it had received a letter from NERSA issued on Friday, allowing the planned 12.7% increase.
Questioning the municipality about this, it said: “Madibeng Local Municipality submitted tariff increases on 27 May 2024 with the NERSA tariff tool for increases for 1 July 2024 – 30 June 2024 with the view that the new cost of study will be done by 30 September 2024. The last cost of study by the municipality was done around 2020/2021 which has a validity of 5 years before another one is done. So Madibeng was approved by NERSA on 28 June 2024 with the additional directives the municipality should adhere to set out in the approval. (sic)”
According to Mostert the use of a cost study for electricity tariff increases is critical because it gives a clear outline of what municipalities’ tariffs must be to deliver the service properly and maintain networks. “The applications of municipalities that do not have cost studies are at this stage simply based on an estimate of what it costs to provide the service. However, applications for tariff increases must be made on accurately calculated figures that will ensure that fair tariff increases are passed on to consumers,” Mostert said.
The increases in municipal electricity tariffs must be implemented on 1 July. AfriForum submitted an urgent application to the court earlier this month to prevent NERSA from proceeding with these considerations, as a High Court order of October 2022 requires that a cost study be submitted as part of municipalities’ applications for tariff increases. This is also prescribed by the Electricity Regulation Act 4 of 2006.
“This is a great victory for civil rights – something AfriForum is fighting for. The court has now acknowledged anew that NERSA failed to protect consumers against unlawful applications for electricity tariff increases – something the law compels the regulator to do,” Mostert said. “However, the fight against unreasonable electricity tariff increases does not end with this court order. It is now the responsibility of communities, businesses and civil institutions to consider the content of their municipalities’ cost studies to ensure that municipalities do not deceive or mislead consumers. The court case was done in the interest of consumers and to promote fairness and transparency in the approval of municipal electricity tariffs,” he said.