Another mistake with electricity tariffs

Resellers weigh legal costs against the prospect of effective relief. The Electricity Resellers Association of South Africa (Erasa) faces a difficult choice: go back to court and incur huge legal costs, or accept electricity tariffs that will force its members in Ekurhuleni to operate at a significant loss. This comes against the backdrop of a case currently before the High Court in Pretoria, where Judge RG Tolmay has asked legal teams to formulate a remedy to prevent a “flood of [court] applications” over unlawful tariffs set by Nersa. In the case before Tolmay, Nersa has conceded that the tariffs it set for the City of Johannesburg, City of Ekurhuleni, Nelson Mandela Bay, Madibeng and Emfuleni for 2025/26 were unlawful. Many of the same applicants previously had the tariffs approved by Nersa for Johannesburg, Ekurhuleni, Madibeng and Msunduzi for 2023/24 declared invalid and set aside. The court remitted the tariff determinations to Nersa, but the regulator has failed to redetermine them. Tolmay also presided over last year’s case in which Erasa successfully challenged Ekurhuleni’s electricity reseller tariff for 2025/26, which was declared constitutionally invalid and set aside. Nersa’s repeated errors Erasa’s current issue is that when Nersa set the reseller tariffs for 2026/27 in July, it repeated the same mistakes that the court ruled on last year. This reinforces the pattern Tolmay has identified and hopes to address decisively: Nersa acts unlawfully when determining tariffs, aggrieved parties approach the courts, the courts rule against Nersa, but the regulator fails to comply with the orders. The applicants are consequently left without an effective remedy, despite winning their cases. “The lawyers make money and the taxpayers pay for it. Every few weeks there is another court application. The legal position is clear, but how does that help anyone?” she asked the legal teams on Monday, 9 November. “This cannot go on indefinitely.” How resellers operate Electricity resellers buy electricity in bulk and supply it to individual units, mainly in sectional title complexes – be it residential, commercial or industrial. The local distributor, usually a municipality, delivers electricity to the complex’s entrance. Internal distribution is handled by the developer, which appoints a reseller to own and operate the electricity meters in individual units and common areas. By law, resellers may charge consumers only a tariff equivalent to what they would have paid had they bought electricity directly from the licensed distributor. Municipalities therefore set a special bulk tariff for resellers, which allows for a margin when they sell electricity to consumers at the same tariffs charged by the municipality. In Ekurhuleni last year, there was a complete mismatch between these two tariffs, making the reseller business model unworkable. Mounting financial pressure According to Johan Hopley, chair of Erasa, the organisation participated in the consultation process for Ekurhuleni’s 2026/27 tariff setting and expected a workable tariff structure. “When Nersa considered Ekurhuleni’s tariffs for the current year, it however reduced the retail tariff, which left us with no margin,” he said. Hopley calculated that, in some complexes, this would turn a 15% margin into a 17% loss over the course of a year. However, it is not only resellers who are at risk. In Ekurhuleni, the electricity account is held in the name of the body corporate. If the revenue the body corporate earns from electricity sales is less that the bulk account, it may fall into arrears and face disconnection that will affect all units. The difficulty is that the previous litigation cost Erasa R1.5 million – a lot of money for an industry body. Should it spend the money again and return to court in the hope of securing an effective remedy? Or will court applications become an annual exercise? “It is chaos,” Hopley says of the electricity tariff situation. “Nothing is right, but what do you do?” He says the situation is not improving. “But it is getting worse. You [Nersa] haven’t even fixed the first mistake, then you make the next one!” Another Nersa tariff dispute The high court refused to confirm a controversial settlement reached between Eskom and Nersa to “fix” a R54 billion error in calculating the revenue the utility would be allowed to recover from consumers through tariffs over the three years ending 31 March 2028. In December last year, it remitted the decision to Nersa, which reached exactly the same determination following public participation. The decision added 3.4 percentage points to Eskom’s average tariff increase this year. AfriForum is challenging the redetermination in court. The matter has yet to be heard. This article was republished from Moneyweb. Read the original here.