Wednesday, March 04, 2015

NERSA Consultation Paper: Municipal tariff guideline, benchmarks and proposed timelines for the municipal tariff approval process for the 2015/16 financial year

The NERSA decision on the municipal guideline increase with effect from 1 July 2015 was expected on 29 January 2015 and to this end, a document has subsequently been published on the NERSA website [REGULATOR DECISIONS > Electricity] that is titled `RFD on the municipal tariff guideline and benchmarks for 2015/16’. Notice 134 of 2015 was also published in Government Gazette No. 38478 on 20 February 2015 confirming the NERSA decision.

This `Reasons for Decision’ (RFD) document confirms that the National Energy Regulator (NERSA) decided on 27 January 2015 that (as proposed in the consultation paper):

  • A guideline increase of 12.20% will be approved for the 2015/16 municipal tariff review process. The guideline increase is based on the following assumptions:
    • 1.1 bulk purchases have been increased by 14.24% in line with Eskom’s tariff increase to municipalities;
    • 1.2 a consumer price index (CPI) of 6.3%;
    • 1.3 salary and wage increases of CPI plus 1%; and
    • 1.4 repairs and maintenance, capital charges and other costs have been increased by the CPI
It also details the benchmarks decided for a number of tariffs.

In section 13 (page 9) of the document under the section on `THE OBJECTORS AND OTHER INTERVENING PARTIES’, it is stated that `The key comments received have been summarised in Annexure 1’ . Unfortunately there is no Annexure 1, the document ending after the `Conclusion’ on page 22 (of 22)!

The RFD is also silent on the timelines for the municipal tariff approval process which the consultation paper stresses is the 15th March. NERSA contends that this deadline is specified in terms of sections 43 (1) and (2) of the Municipal Finance Management Act (MFMA). A detailed submission by Mr J G Louw, Executive Manager: Infrastructure Services of Drakenstein Municipality, questions the NERSA position on this matter and suggests (section 3(i)) that `NERSA can therefore not determine the deadline of tariff applications as 15 March as this is the deadline for NERSA to issue capping detail to Municipalities as per Section 43(2)(a).’ In his recommendations to NERSA, Mr Louw proposed, inter-alia, that:

  • Municipalities submit applications to NERSA before 3 April 2015; and
  • NERSA approves/comments on tariffs by 15 May 2015.
It is interesting to note that municipalities do not appear to have received their normal letter from NERSA informing the City/Municipal Manager of its decision regarding the guideline electricity tariff increase. In the meantime, some media articles have questioned the possibility that NERSA will grant Eskom an additional tariff increase (over and above the current 12.69%) to be effective on 1 April 2015 in order to assist it with the huge diesel costs being incurred in operating the OCGTs to meet electricity demand. Could this be why the letters have not been forthcoming? If this situation came to pass, the bulk purchase costs for municipalities would no doubt increase and the guideline increase would also have to be adjusted. Is it possible that NERSA will approve Eskom’s TOU structural adjustment (see article above) which may also mean a change to this RFD decision on the guideline increase?

Copies of the NERSA RFD, Gazette No. 38478 and comment on the deadline date for municipal tariff approval in terms of the MFMA are available at

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