While the Sol Plaatje Municipality in Kimberley insists its cost of supply study was approved by the Energy Regulator of South Africa (Nersa) before the latest tariff increases, the Northern Cape Chamber of Commerce and Industry (Nocci) expressed its disappointment about the increase of more than 10 %.
The municipality confirmed that its increase in electricity tariffs will be 10,60 % from 1 July “which falls below the Nersa threshold of 12,78 %.”
Thabo Mothibi, municipal spokesperson, says the “municipality is part of a 178 municipal and private distributors of electricity whose tariff increase applications for the financial year 2024-’25 were approved by the energy regulatory authority on Friday, 28 June.
“We duly complied with Nersa’s application requirement in having submitted a Cost of Supply (Cos) study.”
Mothibi says the municipality was not cited as a respondent by AfriForum in a recent court application against Nersa, the South African Local Government Association (Salga), Eskom and other municipalities.
“The required Cos study we did two years ago is valid for five years, and we are therefore compliant. Because we did our study long before, we are not the subject of the latest court application against some municipalities,” Mothibi says.
AfriForum wanted to prevent Nersa to approve municipal electricity tariff increases without the required cost studies. Nersa has allegedly allowed municipalities to use a revenue-requirement template instead.
According to AfriForum this practice lacks transparency and fairness, negatively impacting consumers, and seeks to enforce compliance with the legal requirements.
‘Only 66 municipalities have cost studies’
Morné Mostert, manager of local government affairs at AfriForum, says that 178 licensed electricity distributors’ tariff increase applications have already been considered and approved.
“However, only 66 of these municipalities have carried out cost studies. We trust that Nersa will comply with the order and that the applications of the municipalities whose required cost studies are missing will be deleted,” says Mostert.
The High Court in Pretoria on 28 June found Nersa’s decision to consider municipalities’ applications for power tariff increases without the required cost studies unlawful and invalid. The regulator may not consider any applications for power tariff increases from municipalities unless the required cost studies are also submitted.
The court ordered that municipalities whose cost studies are missing will have to continue charging power rates based on the existing rates approved for the 2023-’24 fiscal year.
Municipalities’ applications for power tariff increases for the 2024-’25 financial year can be reconsidered by Nersa provided the necessary cost studies are submitted within 60 days within the court order date.
‘Clarification needed’
In a statement Nocci says the court order stipulated that only the 66 Municipal Licensed Electricity Distributors that have submitted their cost of supply studies would be allowed to increase electricity tariffs on 1 July 2024.
“The remaining municipalities would have to submit Cos studies within 60 days of the date of the order, only after which Nersa would then approve such electricity tariff applications by municipalities within one month of receipt.
“Nocci urges the Sol Plaatje Municipality to clarify the above, and desist from implementing any electricity tariff increases until all the facts regarding the above have been established and the court order has been fully complied with.”
In his response, Chris Whittaker, DA councillor, says “the apparent failure of the municipality to submit the Cos study for the 2024-’25 financial year, coupled with the court judgment will have serious consequences.
“With the tariff increase at 10,6 %, and electrical service charges to residents projected to make up 37,16 % of revenue, the sale of electricity is the biggest contributor to income generated.”
A budget and benchmarking engagement held in April already classified the financial health of the municipality as “fragile” he says.
“In its annual budget for the 2024-’25 financial year, the municipality seems to acknowledge that the study was not submitted. This is supported as the Sol Plaatje Municipality is not amongst the list of 66 municipalities and service providers which received approval by the court to increase tariffs.
“By the municipality’s own admission, an audit query is already anticipated. While there is much talk of consequence management and corrective measures, accept adverse findings are treated as the norm, not an anomaly.”
