Nersa: Unlawful Electricity Tariffs in Ekurhuleni Acknowledged by Regulator

• Nersa has repeatedly set unlawful electricity tariffs, including for the City of Ekurhuleni, leading to ongoing legal challenges.
• Judge RG Tolmay has highlighted Nersa's consistent pattern of non-compliance with court orders, leaving successful applicants without effective remedies.
• The Electricity Resellers Association of South Africa (Erasa) faces significant financial losses due to Nersa's latest tariff determinations for Ekurhuleni, which eliminated reseller margins.
• Previous litigation against Nersa cost Erasa R1.5 million, prompting a difficult choice between further legal action and accepting unprofitable tariffs.
• Body corporates in Ekurhuleni are at risk of falling into arrears and facing disconnections if electricity revenue cannot cover bulk supply costs due to the tariff discrepancies.

Despite repeated court victories, the regulator's consistent failure to comply with orders leaves affected parties without an effective remedy, perpetuating a cycle of litigation and financial instability.

The Electricity Resellers Association of South Africa (Erasa) currently faces a critical decision regarding the Nersa unlawful electricity tariffs Ekurhuleni: either pursue further costly litigation or accept tariff structures that will render their members' operations in Ekurhuleni unprofitable. This dilemma unfolds against the backdrop of an ongoing case in the High Court in Pretoria, where Judge RG Tolmay has urged legal teams to devise a solution to prevent a deluge of court applications concerning unlawfully determined tariffs by Nersa.

In the specific matter before Judge Tolmay, Nersa has acknowledged that the tariffs it established for the City of Johannesburg, City of Ekurhuleni, Nelson Mandela Bay, Madibeng, and Emfuleni for the 2025/26 period were indeed unlawful. This follows a pattern where many of the same applicants previously succeeded in having Nersa's approved tariffs for Johannesburg, Ekurhuleni, Madibeng, and Msunduzi for 2023/24 declared invalid and subsequently set aside. Despite the court remitting these tariff determinations back to Nersa for redetermination, the regulator has failed to comply with these orders.

Electricity resellers play a crucial role in supplying power to individual units, predominantly within sectional title complexes, encompassing residential, commercial, and industrial properties. The process involves the local distributor, typically a municipality, delivering electricity to the complex's main entrance. Subsequently, the internal distribution network is managed by the developer, who then appoints a reseller to oversee the ownership and operation of electricity meters for individual units and shared areas.

Under existing regulations, resellers are legally mandated to charge consumers a tariff equivalent to what they would pay if they purchased electricity directly from the licensed distributor. To facilitate this model, municipalities are required to establish a specific bulk tariff for resellers, which is designed to provide a viable margin when they sell electricity to consumers at the standard municipal rates. However, a significant discrepancy between these two tariff structures in Ekurhuleni last year rendered the reseller business model unsustainable, highlighting the ongoing issues with Nersa tariff determination errors.

Erasa's current predicament stems from Nersa's actions in July when it set the reseller tariffs for 2026/27, replicating the same errors that were the subject of last year's court rulings. This reinforces a concerning pattern identified by Judge RG Tolmay: Nersa consistently acts unlawfully in its tariff determinations, aggrieved parties initiate Erasa court challenge Nersa actions, courts rule against the regulator, yet Nersa repeatedly fails to adhere to these judicial orders. Consequently, successful applicants are left without an effective remedy, despite winning their cases.

Johan Hopley, Erasa's chair, noted that while the organization participated in the consultation process for Ekurhuleni's 2026/27 tariff setting, Nersa's subsequent reduction of the retail tariff for the current year eliminated any operational margin. Hopley's calculations indicate that this could transform a typical 15% margin into a 17% loss for some complexes over a year. The financial risk extends beyond resellers; in Ekurhuleni, body corporates hold the electricity account, meaning revenue shortfalls from electricity sales could lead to arrears and potential disconnections affecting all units. The previous litigation alone cost Erasa R1.5 million, raising difficult questions about the cost-benefit of repeated legal action in the face of Nersa's persistent non-compliance.

The current situation, described by Hopley as 'chaos,' underscores a profound systemic failure where legal clarity does not translate into practical resolution. Despite repeated court victories, the regulator's consistent failure to comply with orders leaves affected parties without an effective remedy, perpetuating a cycle of litigation and financial instability. Judge Tolmay herself questioned the efficacy of frequent court applications, noting that while lawyers benefit, taxpayers ultimately bear the cost, and the fundamental issue remains unresolved.

This ongoing cycle forces organizations like Erasa to weigh the significant financial burden of further litigation against the prospect of operating at a substantial loss, with no guarantee of a lasting solution. The lack of improvement in the situation suggests that court challenges risk becoming an annual, yet ultimately ineffective, exercise. This environment creates considerable compliance exposure for all stakeholders, including electricity resellers, body corporates, and municipalities, necessitating strategic advice on navigating these persistent regulatory challenges.

Lawyers advising electricity resellers, body corporates, or municipalities in affected areas (e.g., Ekurhuleni, Johannesburg) must be aware of Nersa's repeated failure to comply with court orders regarding unlawful electricity tariffs. This creates a significant compliance exposure for clients due to potential financial losses and disconnections, necessitating strategic advice on enforcement mechanisms beyond initial court victories and the cost-benefit of repeated litigation.

Source: Original reporting via provided source material