The National Energy Regulator of South Africa (Nersa) will host a public hearing on June 3 into applications by those municipalities applying for average tariff increases above the guideline of 19% and 22%, which could be implemented from July 1.

Nersa provided the guideline for this category of municipalities, among other guidelines, on March 25, when announcing its decision on Eskom's required revenue application for the second multiyear price determination period, which will run from April 1, 2010, until March 31, 2013.

The utility was granted increases of 24,8% for 2010/11, 25,8% for 2011/12 and 25,9% for 2012/13. But Nersa also stated that, for municipal distributors that implemented a 34% increase in 2009/10, a guideline increase of 15,33% had been approved for implementation from July 1, which could be followed by increases of 16,03% and 16,16 % for 2011/12 and 2012/13 respectively.

Nersa also stated that, for those municipal distributors that implemented a different increase, Nersa would consider applications on a case-by-case basis. The guideline for a number of municipalities, including several megacities, was for increases of between 19% and 22%.

On June 3, some 30 proposed municipal increases will be considered by the regulator, including the 24,6% proposed by the City of Cape Town, the 25% application by the eThekwini municipality and the 28,9% proposed by the Ekurhuleni municipality. The hearing would take place at Kulawula House, in Pretoria, from 09:00 until 16:30.

The stakes for municipal consumers are high - a fact highlighted recently by NUS Consulting South Africa. The company, which operates in 13 countries and serves over 10 000 clients, has warned that many South African municipal clients could end up facing substantially higher increases than those granted to Eskom should municipalities implement increases, in percentage terms, higher than Eskom's approved increase.

It notes that, while an Eskom bulk user would receive increases of about 8,5c/kWh, the average municipal bulk user faces increases of about 13,5c/ kWh, or more, which translates to a 60% higher increase in rand terms than those faced by Eskom's customers.

Therefore, GM Stephan Dolk has warned that, unless municipal increases are kept to below 20%, the disparity between an Eskom client and a municipal client could grow substantially.

"If municipalities increase their tariffs at the same rate as Eskom over the next five years, an Eskom client will be paying R1,34/kWh, while a municipal client will pay R2,06/kWh," Dolk asserts, arguing that any municipal increase above 20% should be "put forward an exceptional motivation".

However, Cooperative Governance and Traditional Affairs Minister Sicelo Shiceka has argued previously that Nersa is exceeding its mandate by ordering municipalities to cap electricity charges.

"Nersa has said it gives a cap that municipalities can't charge more than 16% in terms of their own surcharges. We believe from our side that it is a bit beyond their mandate," he said in late March.

However, Nersa has consistently maintained that its mandate and authority is premised on the Electricity Regulation Act of 2006, and has pointed in particular to section 4a (ii), which stipulates: "The Regulator must regulate prices and tariffs".

Dolk says that the increasing brazenness of some municipalities towards Nersa's authority it is of concern.

"There are many municipalities that have implemented tariffs not approved by Nersa and/or where requested increases have not been approved, charges (such as demand-side management levies and municipal surcharges) supposedly outside of Nersa's authority, have been introduced to simply make up the shortfall," he highlights.