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Chamber’s Electricity Challenge Goes to Court Today

2022-06-09  Sibongile Dimbaza

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Chamber’s Electricity Challenge Goes to Court Today 

The Nelson Mandela Bay Business Chamber is legally challenging the National Energy Regulator’s (Nersa) municipal tariff methodology which is used to determine and approve electricity tariffs charged by municipalities.  

We are pursuing this course of action due to the high and uncompetitive Municipal electricity tariffs, which impact upon the sustainability of businesses. It is our view that the electricity regulation requires tariffs to be fair and reflective of efficient costs, including a reasonable return to the distributor. Nersa’s current methodology for municipal tariff determination allows the municipalities to deviate from that principle, thus burdening the productive economy and further impacting upon unemployment levels.

Electricity tariffs to industry in municipalities are specifically much higher than similar tariffs which Eskom charges to their direct customers. Due to Municipalities becoming increasingly dysfunctional and inefficient, electricity losses through theft and meter tampering have become out of control and render the municipal electricity distribution function uneconomical. We have reasons to believe that some 40% of the Nelson Mandela Bay Municipality’s electricity meters are tampered with.

The Nelson Mandela Bay Municipality is budgeting for electricity losses for the current financial year to be above 25%, putting the financial value of these losses above the 1.2 billion mark. Furthermore, the municipal electricity distribution will lose close to R800 Million for the 2022/23 financial year, mainly as a result of the excessive and uncontrolled losses.  This in turn and in all likelihood will result in the Municipality attempting to further transfer this burden to the productive economy by increasing tariffs above the Nersa guideline.

Our court case thus will attempt to set aside Nersa’s municipal tariff determination methodology, while representing an important a step in preventing Municipal inefficiencies from being incentivised through high tariffs.

Eskom supports our legal challenge and will also join the hearing. The reason for this is that this situation within municipalities is equally untenable for Eskom, and as of end September 2021, Municipalities owed Eskom R40.9 Billion, an increase of R 8 Billion from the previous year.

Our end goal is to ensure that business and industry which operates in the municipalities remain competitive and are not burdened by municipal dysfunctionality through the charging of excessive electricity tariffs. We also need to see enforcement of compliance, which in turn should exert pressure on municipalities and state owned enterprises to deliver efficient services to the communities and to business.

The Business Chamber believes that the Municipality’s institutional failures are of such a nature that they are unable to run an efficient electricity distribution function. This is reflected in high tariffs to compensate for their excessive losses, and also through the increasing and recurring power interruptions which are occurring as a result of their infrastructure issues, which in turn affects the viability of businesses in Nelson Mandela Bay.

Furthermore, the Chamber submitted a request to Nersa at the beginning of May, motivating for the revocation of the Municipality’s distribution license. The motivation is based on the continued failure of the Municipality to comply to their basic license conditions.

We encourage businesses to get active in our cluster and Adopt A Sub-Station initiatives, with the preservation and security of basic infrastructure as one of our primary goals. 

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