Nersa announces petroleum pipelines tariff hike

16th March 2018 By: Simone Liedtke - Writer

The National Energy Regulator of South Africa (Nersa) has granted freight logistics group Transnet a lower-than-requested allowable revenue increase for the 2018/19 tariff period to cushion end-users from the impact of recent fuel levy and value-added-tax increases.

The State-owned group applied for an increase in allowable revenue of 36% to R5.68-billion in 2018/19, which would have pushed up pipeline tariffs by 28%. However, Nersa has approved only a 26% increase in allowable revenue, which translates to a 19% tariff increase for the Durban-to-Alrode pipeline.

Should the Minister of Energy decide to use the pipeline tariff as a proxy for the cost of transporting fuel from Durban to Johannesburg, as has been the case in the past, the petroleum transportation levy would increase by about 6.57 c/l, Nersa stated on Friday

Nersa explained that Transnet had cited the commissioning of its tightlining assets at the Island View terminal (TM1), in Durban, and its inland terminal assets, as well as the anticipated clawback adjustment owing to the timing or date at which these assets were admitted into the regulatory asset base (RAB) as justification for the request for a 36% increase in allowable revenue.

The energy regulator, however, decided to limit tariff increases and used the clawback mechanism to do so.

Nersa has deferred a net giveback totalling R254.34-million due to Transnet in the 2018/19 tariff period, emanating mainly from the commissioning of the TM1 four months earlier than Transnet's projection in the 2017/18 tariff application, as well as the increase in the cost of some New Multi-Product Pipeline (NMPP) assets allowed in the 2017/18 tariff decision.

However, Nersa highlighted that the RAB would still be subjected to further audit, verification and prudency assessment, as part of its process.

The deferment of the net giveback resulted in a 26% increase in allowable revenue from R4.19-billion in 2017/18, to R5.28-billion in 2018/19. The Alrode tariff will increase to 41.18c/l.

In arriving at its decision, the energy regulator said that it weighed a variety of factors, including public interest, regulatory certainty, and Transnet's forecasts for the completion of certain aspects of its NMPP project.

"As there still appears to be scope to shift volumes away from road and rail, Nersa will continue to monitor the transition of these volumes to the generally most cost-effective mode of transportation of petroleum and petroleum products from the coast to the inland area, namely the pipeline system," the energy regulator said.

The tariffs are set for a period of one year from April 4, 2019 to April 2, 2019.