Cape Town - A landmark judgment in the Gauteng High Court could see ratepayers across South Africa breath a sigh of relief after the court ruled that the benchmark and methodology used for tariff increases were unlawful.
This means ratepayers no longer have to bear the brunt of massive tariff hikes due to crumbling infrastructure and electricity theft after the court ruled in favour of the Nelson Mandela Bay Business Chamber and the Pietermaritzburg and Midlands Chamber of Commerce.
Ratepayers were made to carry the cost of electricity theft and infrastructure, which significantly hiked the electricity tariff every year.
The judgment is a culmination of the legal battle mounted by the Nelson Mandela Bay Business Chamber and the Pietermaritzburg and Midlands Chamber of commerce in 2021.
The two chambers challenged the methodology used to determine the tariffs, arguing municipalities were making residents pay for their inefficiencies.
In the court papers, Nersa was listed as the first respondent, while the South African Local Government Association(SALGA) and energy utility Eskom were listed as respondents.
All municipalities in South Africa, including the City of Cape Town, were also listed as respondents.
Every year, municipalities across South Africa purchase electricity from Eskom at a wholesale price but sell the electricity to residents at a marked-up price.
The methodology being challenged by the chambers allowed municipalities to implement excessive tariffs and then use the money to fund escalating electricity losses, which were a result of inefficiencies.
It was being used instead of the basis of cost of supply that is stipulated in legislation.
This is referred to as the COS method, but municipalities have to apply to use this process more than a year in advance.
High court judge Elizabeth Kubushi found the benchmarking and methodology adopted by Nersa in approving electricity increases to be unlawful.
For as long as the lawfulness of the method remains unresolved, municipal tariff approvals will remain contentious.
It is evident that the guidelines and benchmarking methodology adopted by Nersa in approving municipal electricity increases are unlawful.
As a result, final relief, as requested in the notice of motion, can be granted on the papers as they stand, according to Kubushi.
Mayco member for energy Beverley van Reenen said the City would study the judgment.
"The City was a respondent in the matter as, like all other municipalities, it is an affected party. The City chose not to actively participate in the case but to abide by the Court's ruling.
"The City is studying the judgment, which appears to confirm the City’s view on a number of aspects and is thus considered to be positive for the City. Unfortunately, we cannot comment any further at this point in time," van Reenen said.
The business chambers, along with the Cape Chamber of Commerce and Industry, all welcomed the judgment.
Denise van Huyssteen, CEO of the Nelson Mandela Bay Business Chamber, stated that the judgment would have the necessary effect in changing the way tariffs are set.
"In the near future, municipalities will not be able to add on costs to consumers for their own inefficiencies."
"This case will potentially impact the determination and approval of electricity tariffs by municipalities across the country. Ultimately, this affects all South African businesses and consumers, "van Huyssteen said.
Melanie Veness, CEO of the Pietermaritzburg and Midlands Chamber of Commerce, described the decision as a positive development because it means that the methodology for determining
Municipal tariffs would be based on the efficient cost of distributing electricity.
"Municipalities will not be permitted to implement excessive tariffs and to utilise this income to fund escalating electricity losses, which are the result of their own inefficiencies, which include the lack of maintenance of infrastructure.
Cape Chamber of Commerce and Industry president Jacques Moolman said the court decision was a huge step forward both in the quest for government accountability and the delivery of equitable and efficient services.
Victory for the two business chambers is also a victory for civil society and shows the importance of an active citizenry. It illustrates the power of civil society to affect change by flagging instances where government policy impacts on growth and development – in this case, a policy that results in prohibitively expensive tariffs.
"We believe the court ruling will ultimately encourage municipalities to address some of the current inefficiencies in electricity supply."
Moolman said addressing the failure to protect electricity infrastructure and the failure to deal with illegal connections would bring down the cost of supply.
"We acknowledge the service delivery challenges faced by municipalities in difficult economic times. However, as a business community, we believe government needs to address inefficiencies, "Moolman said.