Nersa approves Transnet petroleum tariff

1st March 2021 By: Simone Liedtke - Writer

The National Energy Regulator of South Africa (Nersa) has set the Petroleum Pipelines System tariff, which will allow State-owned rail entity Transnet to realise an 11.15% decrease in allowable revenue (AR) compared with the 2020/21 tariff period.

However, owing to a forecasted reduction in the volumes of petroleum products transported, this translates to a 2.39% tariff increase for the Durban-to-Alrode (JHB) route.

Should Mineral Resources and Energy Minister Gwede Mantashe 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 consequent tariff increase of 2.39% will result in an increase of about 1.22 c/ℓ in the petroleum transportation levy for the Durban-to-Alrode route.

In September last year, the energy regulator received Transnet’s tariff application for the 2021/22 tariff period, as a condition of its licence to operate its Petroleum Pipelines System.

The Transnet tariff is set for a period of one year, from April 1, 2021, to March 31, 2022.

Transnet applied for a decrease of 11.15% in allowable revenue, mainly as a result of a lower weighted average cost of capital of 6.36% in 2021/22 versus 7.89% in 2020/21.

The increase in the tariff is owing to the decrease in volumes from the 17.6-billion litres forecasted for 2020/21 to 15.8-billion litres.

Nersa decided on the allowable revenue of R5.5-billion, which is said to be “negligibly lower than Transnet’s own application” and settled on the same tariff increase of 2.39%.

The negligible difference may be attributed to the energy regulator’s robust pre-application engagements to educate licensees on its tariff methodologies, procedures and rules.