City electricity cost hikes in court’s hands

The City maintained it was justified to charge higher electricity tariffs in 2022/2023 and 2023/2024 as its case against the National Energy Regulator (Nersa) concluded in the North Gauteng High Court.

The matter concerns the City charging more than the Nersa approved tariffs.

While the City had taken Nersa’s decision on judicial review at the time, Minister of Energy, Gwede Mantashe earlier this year said there was no interim court order received by the City to charge a tariff in excess of Nersa’s approved tariffs.

“The City of Cape Town Metro’s unilateral implementation of unapproved tariff is unlawful and in breach of its distribution licence condition,” the minister said at the time.

While Nersa approved a 7.4% tariff increase, Cape Town implemented a 9.6% increase in the 2022/23 financial year. In the 2023/24 financial year, Nersa approved a 15.1% increase, but the City implemented a 17.6% tariff hike.

“In 2022/2023 and 2023/2024, Nersa granted significantly higher increases to Eskom than it did for municipalities – 9,6% for Eskom vs 7.4% for municipalities 22/23, and 18.5% vs 15.1% for 23/24. In so doing, Nersa instructed all municipalities to implement one uniform increase while failing to consider Cape Town’s detailed cost-of-supply studies,” the City said.

The City’s mayoral committee member for Energy, Xanthea Limberg added: “Buying power from Eskom accounts for around 75% of our costs to run an electricity service, and there is no way we can absorb massive double-digit increases year-on-year while still hoping to offer a working electricity service to Capetonians.

“Cape Town is one of a handful of municipalities that bases our own tariff asks to Nersa on detailed cost-of supply studies. The courts have repeatedly affirmed that tariff asks must be underpinned by detailed studies and data, and has ordered Nersa, Eskom and non-compliant municipalities to follow suit.”

Nersa spokesperson, Charles Hlebela said they could not comment at this stage as they were waiting for a court judgment.

The GOOD Party on Wednesday protested outside the court against the City.

GOOD secretary-general, Brett Herron said the case would have far reaching implications because it tests Nersa’s regulatory authority to determine a licensed distributor’s tariffs.

“In court the City is arguing that Nersa failed to consider the City’s projected drop in electricity sales due to load shedding and consumers going off the grid. The drop in sales affected their ability to cover their ‘cost of supply’ and ‘make a reasonable return’.

If Nersa’s authority can be defied, then what is to stop Eskom making the same claim of cost of supply and proceed to charge whatever it likes?

Likewise the same can be said for all municipalities that have distribution licenses,” he said.

According to Herron, the revenue issue stems from incentivising consumers to go off the grid, which many could not afford.

“It is expensive to go off grid. So while big businesses and the wealthy are not affected by this tariff battle, because they could afford to go solar, it is small businesses, middle-income and poor families who have been and will continue to carry the financial burden,” he said.

Cape Times