Nersa rejects Tshwane’s fixed charges and proposed power tariffs

Energy regulator Nersa last week rejected the City of Tshwane’s controversial electricity tariff application for 2019/20 and decided to allow it to simply add 13.07% to the previous financial year’s tariffs for the current financial year.

That is exactly what pressure group AfriForum asked Nersa to do during the round of public hearings in July – on the steps of the court after it stopped Tshwane’s unlawful implementation of tariffs that did not have Nersa’s approval.

Nersa also indicated that it would set up a tribunal to deal with Tshwane’s non-compliance with the Electricity Regulation Act. While the tribunal would have the power to fine the city for every day the non-compliance continues, from discussions during Nersa’s electricity sub-committee meeting, it seems the focus will be on ensuring that Tshwane refunds customers who have been overcharged.

The tariffs that Tshwane proposed and unlawfully implemented from July 1 included a basic charge of R56 for residential customers and R250 for those paying agricultural tariffs. These charges had been included in the city’s approved budget at R200 and R610 respectively, but were hastily reduced following public pressure.

After reaching a settlement with AfriForum the city reverted to last year’s tariffs and the monthly bills for July were finalised on that basis. 

Prepaid customers, however, paid the R56 basic charge in July – and although the city stopped this, it continued to levy prepaid customers on increased and unapproved tariffs per unit consumed.

Some resellers even proceeded to charge households in sectional title complexes a R200 basic charge, since the city seemingly overlooked this when it reduced the basic charge for households buying prepaid electricity directly from the municipality.

Legal conundrum

It is still unclear from what date the Nersa-approved tariffs will apply or how the city will be able to get around the provisions of the Municipal Finance Management Act (MFMA), which requires public participation and approval of tariffs before the beginning of the financial year on July 1.

The MFMA specifically stipulates that municipalities may only adjust tariffs on July 1 and not during the year.

Municipal governance expert advocate Werner Zybrands says the law will not allow retrospective tariff adjustments if consumers are being prejudiced, which is what an increase would boil down to.

He also says that should the city continue with the implementation of the Nersa-approved tariffs now, any group of consumers that wants to challenge this on the basis of non-compliance with the MFMA, and can show substantial prejudice, will most probably succeed in court.

A senior source in National Treasury confirmed that implementation of the tariffs now would be in contravention of the MFMA.

However, Mare-Lize Fourie, Tshwane MMC for finance and herself an expert on the MFMA, sees no problem.

She says there is a precedent for the implementation of new tariffs after the start of the financial year and that the increase of 13.07% Nersa has given Tshwane is in line with what was communicated to the public during the budget process.

Post-paid customers may have to cough up

If the implementation goes ahead and the approved tariffs are applied retrospectively from July 1, Tshwane’s post-paid customers who were billed at the previous years’ tariffs will have to pay the amount by which they were undercharged in July.

This would also apply to end users in residential complexes who buy their electricity from resellers who are members of the Electricity Resellers Association of South Africa (Erasa). Erasa members stuck to the tariffs that applied in the previous financial year in an effort to stay on the right side of the law. 

Its members have not yet billed post-paid customers for July and are waiting to get detail from the City of Tshwane about the implementation of the Nersa-approved tariffs before doing so.