BUSINESS CHAMBER TO CHALLENGE POWER TARIFFS

The Pietermaritzburg & Midlands Chamber of Business (PMCB) has filed legal papers to challenge the way municipal power tariffs are calculated.

Working in conjunction with the Nelson Mandela Bay Business Chamber (NMBBC) they are prepared to meet the National Energy Regulator (Nersa) in court if they must to demand an explanation for the methodology which is used to determine and approve electricity tariffs charged by municipalities.

According to Melanie Veness, the chief executive officer of the PMCB, Nersa’s calculations are based on guidelines and benchmarking, rather than on the cost of supply as stipulated in the legislation.

This methodology, the chambers say, enables municipalities to implement excessive tariffs and fund escalating electricity losses caused by lack of maintenance of infrastructure and rampant cable theft.

The net result, they say, has led to tariff differentials between distributors in South Africa being as high as 60%.

Denise van Huyssteen, CEO of the NMBBC, said business is under tremendous pressure in relation to electricity pricing as Eskom is currently applying for increases exceeding 20%.

“In such an environment, continued excessive mark-ups from municipalities will exacerbate pressure on municipal consumers and in particular on businesses, who are dependent on electricity for the continuity of their operations,” she added.

“This is clearly an unsustainable situation for businesses who are reeling from the economic repercussions of the pandemic and the July civil unrest.”

The two chambers, which have spent a year consulting on the issue, and believe they have no choice but to embark on a legal challenge “to halt the implementation of unlawfully high tariffs, which will result in industry paying for inherent inefficiencies in the system,” said Veness.

She added that electricity income accounts for a substantial portion of the total revenue of municipalities.

“If tariffs are approved without the efficiency of the costs being interrogated, there is no real incentive for municipalities to spend electricity income on infrastructure or to address theft, waste, fraud and corruption in the electricity system,” Veness added.

“The private sector is simply expected to carry the cost of these losses and inefficiencies. With Eskom’s tariffs having increased by around 180% in real terms over the last 15 years, municipal tariffs have to be limited to efficiently incurred costs.

The legal challenge is being funded by member businesses of the two chambers.