- The High Court in Pretoria has rejected Nersa and Salga’s appeal, blocking tariff increases for over 100 municipalities and potentially requiring refunds for charges since July 1, 2024.
- AfriForum’s challenge to Nersa’s deviation from cost-of-supply studies has resulted in a court order mandating a review of municipal tariffs and a halt on unauthorised rate increases.
The High Court in Pretoria has denied the electricity regulator, National Energy Regulator of South Africa (Nersa), and the South African Local Government Association (Salga) leave to appeal its decision prohibiting Nersa from approving tariff increases for over 100 municipalities. This ruling places at least 112 towns at risk of having to refund excess charges billed since the implementation of new tariffs on July 1, 2024.
The legal dispute originated when AfriForum challenged Nersa’s January decision to alter its approach to municipal tariff applications for 2024/25. Previously, Nersa required municipalities to base tariff applications on cost-of-supply (CoS) studies. However, in January, Nersa provided an alternative method for municipalities that had not completed these studies. This shift was contested as it deviated from a 2022 court order mandating that all tariff increases be based on CoS studies.
The 2022 ruling had directed Nersa to abandon its previous guideline-and-benchmark method and adhere to CoS studies for tariff approval, giving municipalities a year to comply. Despite this, over 100 of the 257 towns failed to meet the CoS requirement, and Nersa did not develop a new compliant methodology.
The recent court decision upheld AfriForum’s position that Nersa was not authorised to approve tariff increases without CoS studies. Municipalities were given 60 days to submit compliant applications or request additional time from the court. The court dismissed Nersa and Salga’s appeals, emphasising that the legislative requirement for CoS studies has been in place since 2008 and was reaffirmed by the 2022 ruling.
The Pretoria court also rejected Salga’s request to suspend the order indefinitely, which would have allowed municipalities to continue with the tariff increases despite non-compliance with CoS requirements. The court highlighted that Salga failed to provide evidence of financial hardship or potential bankruptcy resulting from the ruling and underscored that previous tariff approvals without CoS studies had led to unaffordable electricity costs.
AfriForum’s manager for local government affairs, Morné Mostert, stated that CoS studies are essential for setting fair electricity rates and maintaining service standards. He noted that municipal tariff increases were applied nationwide as of July 1, 2024, even though only 66 out of 178 licensed distributors had conducted CoS studies. This has led to many municipalities charging unlawful rates.
Mostert called for municipalities to revert to 2023/24 tariff rates and for a thorough review of tariff applications for 2024/25 once the necessary CoS studies are submitted. AfriForum will also seek an urgent action plan from Nersa regarding consumer refunds and request a list of non-compliant municipalities to ensure adherence to the court order.