Ekurhuleni accused of manipulating data to inflate electricity prices
· Citizen
The City of Ekurhuleni in Gauteng has allegedly inflated its 2024/25 electricity tariff application by at least R13 billion by manipulating supporting information submitted as part of the process, according to a group of industrial users.
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Energy regulator Nersa was apparently prepared to allow this to pass without checking the figures, they say.
Although this is Ekurhuleni’s third attempt to secure a lawful tariff determination for a period that has long since passed, it remains riddled with errors, so much so that the regulator will once again have to reject it, argued the Casting, Forging and Machining Cluster of South Africa (CFMC) on Monday, 15 June.
The group says these errors also underpin Ekurhuleni’s 2026/27 tariff application, which has already been approved by Nersa and is due to take effect on 1 July. As a result, it is also questioning the legality of those tariffs.
It further suspects that tariff calculations submitted by other municipalities are not much better.
The cluster’s managing director, Steve Jardine, and its attorney, MC Botha, an executive consultant at TRM Tax Attorneys, dismantled Ekurhuleni’s tariff application during a public hearing before the energy regulator.
The dispute is the latest chapter in a saga that suggests incompetence on the part of both the metro council and the regulator.
The industrial users initially approached the courts to have Ekurhuleni’s 2024/25 tariffs, approved by Nersa, set aside.
Ekurhuleni’s tariff process
In January this year, the Pretoria High Court ruled that Nersa’s approval was unlawful and set it aside. In the same judgment, the 2024/25 tariffs of Johannesburg, Madibeng and Msunduzi were also set aside.
The matter was referred back to Nersa for redetermination and like the other three municipalities, Ekurhuleni had to prepare a fresh application and submit it to the regulator.
This was done, but Nersa rejected Ekurhuleni’s revised application after industrial users pointed out, among other issues, an error of R7 billion. Madibeng’s application suffered the same fate.
Both municipalities then submitted amended applications, leading to a public hearing on 15 June, during which Jardine and Botha presented their arguments.
They claim to have identified a further R6.6 billion in errors in Ekurhuleni’s application.
According to Botha, had Nersa approved the application without correcting these mistakes, electricity tariffs in Ekurhuleni would have been set unnecessarily high to recover the combined R13 billion linked to the two alleged errors from consumers.
‘Artificially inflated’
He explains that the metro’s calculations for 2024/25 are based on a cost-of-supply (CoS) study in which tariff revenue from industrial consumers and time-of-use (TOU) customers is significantly understated.
The result is that the tariff increase that appears necessary to balance the books is artificially inflated.
According to the cluster’s calculations, the 19.1% increase sought by the council for this category of users should in fact be only 8.6%. In one specific tariff sub-category, it argues there should actually be a reduction of almost 14%.
The exact opposite is being done for households, says the cluster. One specific residential tariff that the council proposes to reduce by 13.3% should, in Botha’s view, be increased by 52.1% to reflect the true cost of supply.
Members of Nersa’s regulatory panel sounded astonished during the hearing at the errors, which according to the cluster, make it impossible for them to determine a lawful tariff.
They indicated that they do not see the detailed figures contained in such applications – that is the administration’s responsibility.
They proposed a meeting between Botha, Jardine, Nersa and representatives of Ekurhuleni.
“I am not sure what they hope to achieve with that,” says Botha.
When the court set aside the tariff in January, the order provided for a “default position”. This means that if Nersa has not determined a new 2024/25 tariff by 30 June, the previous year’s tariffs will apply.
However, this is only for the parties that were before the court.
The fact that the tariffs for that year were found to be unlawful therefore makes no difference to what consumers actually paid, and there will be no adjustments.
Applications ‘full of mistakes’
As far as Ekurhuleni’s 2026/27 tariffs are concerned, Botha says now that Nersa has been alerted to the flawed calculations, it should itself approach the courts to have its decision set aside so that a lawful tariff can be determined.
The regulator cannot simply reverse its own decision.
According to Botha, Madibeng’s latest tariff application is “an even bigger mess”.
He says there is no information available to determine the true cost of supplying electricity, and this is the only basis on which a lawful tariff may be calculated.
Deon Conradie, an electricity pricing expert, says that – without detracting from municipalities that do perform well – he has no doubt that many other municipalities’ tariff applications are just as full of mistakes.
He notes that litigation brought by the Nelson Mandela Bay Business Chamber and AfriForum has provided clarity on the methodology that Nersa is required to follow when determining electricity tariffs.
He adds that, for the first time this year, the information underpinning tariff decisions has been made available for public scrutiny.
While acknowledging that these are complex documents, he encourages communities to review them to ensure that their tariffs are not unnecessarily inflated.
Calls for strong verification by Nersa
Conradie says Nersa should itself review and verify the figures before they are published for public comment, but argues that this does not appear to happen.
Furthermore, responsibility for correct decisions ultimately rests with the regulator itself and cannot simply be shifted onto officials. If administrative processes fall short, these shortcomings should be addressed internally by the regulator, he says.
In his view, Nersa does not have sufficient resources to thoroughly verify the quality of tariff applications.
This article was republished from Moneyweb. Read the original here.