The City of Cape Town is currently presenting its case before the North Gauteng High Court, seeking a review of the National Energy Regulator of South Africa (Nersa’s) failure to consider the municipality’s detailed cost-of-supply studies when approving electricity tariffs for the 2022/23 and 2023/24 financial years, Cape {town} Etc reports.
The application underscores the critical issue of Nersa’s non-compliance with legal and regulatory standards that require electricity tariffs to be grounded in detailed cost-of-supply studies.
According to the City, Nersa’s decision-making process for the aforementioned years was inconsistent with legal rulings from the High Court and has undermined the City’s efforts to maintain an efficient and sustainable energy service.
A significant part of the City’s argument stems from a 2021 High Court ruling that invalidated Nersa’s blanket ‘tariff guideline’ method for municipalities.
This ruling mandated that Nersa assess individual cost-of-supply studies when determining tariffs for each municipality. Yet, in this instance, Nersa disregarded the City’s own comprehensive studies, instead approving uniform tariff increases across the board.
This resulted in Cape Town being treated unfairly compared to Eskom, which received higher tariff increases. In 2023/24, for example, Eskom’s increase was set at 18.5%, while municipalities like Cape Town were capped at 15.1%.
Xanthea Limberg, the City’s mayoral committee member for Energy, emphasised the dire consequences of Nersa’s actions: ‘Buying power from Eskom accounts for around 75% of our costs to run an electricity service, and there is no way we can absorb massive double-digit increases year-on-year while still hoping to offer a working electricity service to Capetonians,’ she said.
The City contends that had it adhered to Nersa’s flawed tariff approach, it would have faced an estimated R500 million shortfall in 2023/24 alone, potentially jeopardising critical service delivery and infrastructure investments. To mitigate the impact, Cape Town absorbed R50 million of the Eskom increase, passing on 17.6% to customers.
Despite these challenges, Cape Town has been actively investing in the future of its energy grid, committing R4 billion over three years to modernise the infrastructure. The City is also pursuing alternative energy sources to reduce reliance on Eskom and avoid future price hikes.
‘We are investing heavily in securing affordable power on the open market and reducing our dependency on Eskom’s ever-increasing tariffs,’ Limberg said. ‘Our efforts are focused on securing long-term energy sustainability for Cape Town and shielding our residents from the impact of Eskom’s escalating prices.’
Cape Town is also lauded for its pro-poor initiatives, such as its expansive Lifeline electricity programme, which helps protect low-income households from electricity price hikes.
The City offers the widest qualifying criteria for Lifeline electricity in South Africa, with significant subsidies for vulnerable groups. Notably, in the 2024/25 financial year, Lifeline customers using 600 units a month will pay R113.94 less than they did in 2022/23.
The City’s application comes at a time when Nersa is also evaluating Eskom’s request for a 44% tariff hike for the 2025/26 period.
Cape Town has filed strong objections, arguing that Eskom’s financial data is flawed and that consumers should not bear the burden of inefficiencies related to Independent Power Producers (IPPs) and coal contracts.
The City contends that Eskom’s business practices—such as maximizing profit from its generation assets—are incompatible with the public interest, especially during a period of widespread economic hardship.
‘The law does not allow Eskom to recover the costs of inefficient operations from consumers,’ Limberg stated, criticizing the proposed tariff hikes as unjustifiable. ‘Eskom must find internal cost-saving measures and explore new revenue streams instead of penalizing South African households and businesses.’
Cape Town’s case against Nersa is being heard over three days, with a decision expected soon after. The City hopes the review will lead to fairer, more transparent tariff-setting processes that better align with legal requirements and safeguard the sustainability of municipal electricity services.
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https://www.capetownetc.com/news/aws-team-responds-to-surge-in-distressed-pets-ahead-of-festive-season/
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