Transnet wins surprise tariff hike on pipeline
The National Energy Regulator of SA (Nersa) ruled on Tuesday that Transnet Pipelines could claw back more revenue on the new multi-product pipeline pumping fuel inland from the coast to smooth future increases, although Transnet had applied for a decrease.
The regulator’s ruling would effectively increase the pipeline tariff by 0.30%. Transnet’s application would have resulted in a 7.87% decrease.
This tariff influences the price that consumers pay for fuel at the petrol pump, although there is no direct correlation since different regions pay different prices for fuel, depending on how it is delivered. SA imports about two-thirds of its liquid fuel with Sasol synthesising the rest.
Nersa said if the minister of energy used the pipeline tariff as a proxy for the cost of transporting fuel from Durban to Johannesburg, which is the normal practice, it would add 0.11c/litre to the levy.
The tariff relates to the new multi-products pipeline, a 555km pipeline under construction from Durban to Johannesburg. The pipeline is about eight years behind schedule and its costs have doubled, according to a report last June, to about R25.3bn, from R11.1bn originally. Transnet will recover its investment through an additional charge on the fuel price.
Nersa said Transnet had applied for a decrease in its allowable revenue for the pipeline for April 5 2017 to March 31 2018, to R3.8bn from R4.13bn allowed last year because its coastal and inland terminals were not operating.
Instead, Nersa decided to increase the allowable revenue for the pipeline by 1.43% to smooth expected hikes in future years, when Transnet will be able to fully claw back its investment. The increase in tariffs this year would limit the increase in tariffs over 2017-18 and 2018-19, Nersa said.
“In arriving at its decision, the energy regulator weighed a variety of factors including public interest, regulatory certainty and Transnet’s forecasts for the completion of certain aspects of its [pipeline] project.”
“We welcome the regulator’s decision which is in accordance with the agreed tariff methodology,” Transnet spokesman Molatwane Likhethe said.
“Transnet supports the regulator’s view on smoothing of tariffs to ensure a stable and a predictable tariff path.”
Nersa said there appeared to be more scope to move fuel volumes from road and rail to the pipeline, which would bring down the tariff and have safety and environmental benefits.
The price of petrol would decrease by 8c/litre from Wednesday, March 1, and diesel by 2c/litre because of the rand strengthening against the dollar, partly offset by higher international oil prices, the Department of Energy said on Friday.
The reopening of the Elandsfontein Intermodal Terminal in Germiston would enhance SA’s rail competitiveness, Barloworld Logistics said on Tuesday.
The terminal recently received railed cargo for the first time in almost four years. This is the result of a six-month project to revitalise the facility and is part of a broader objective by ArcelorMittal SA to move steel it dispatches from road to rail.
Barloworld Logistics — with Transnet Freight Rail, ArcelorMittal SA, Grindrod Terminals and Newlyn Properties — co-ordinated the refurbishing.
It was established to migrate ArcelorMittal SA’s final product steel dispatches from road to rail from its production facilities in Newcastle in KwaZulu-Natal and Saldanha in the Western Cape to customers in Gauteng.
Mathys Enslin, managing executive at Barloworld Logistics, said on Tuesday that the change would reduce carbon emissions, road congestion and improve delivery time for steel products.
The annual rail delivery of about 700,000 tonnes of ArcelorMittal SA products from production plants would result in the reduction of more than 42,000 long-haul road vehicle movements, Barloworld said.
The project fits in with Transnet’s broader market demand strategy, a massive capital expenditure programme started in 2012 aimed at shifting, where possible, freight from roads to rail.
Transnet has adjusted to the weak economic environment by rescheduling parts of its capital spending plans. Over the next seven years, it plans capital investments of R273bn in rail, ports and pipelines. Transnet reported freight rail volume of 214.2-million tonnes, down from 226.6-million tonnes in the prior year, according to the February Budget Review.
ArcelorMittal SA CEO Wim de Klerk said the establishment of the Elandsfontein centre was the first stage in a long-term strategic initiative to migrate all domestic steel dispatches from road to rail. The second stage of the initiative would entail the migration of steel dispatches into sub-Saharan Africa from road to rail through the establishment of distribution hubs in regional locations.
Trade and Industry Minister Rob Davies said the department anticipated that the co-operation between the parties could lead to more road-to-rail migration.