On 13 March 2012, the National Energy Regulator of South Africa (NERSA) amended Transnet Limited’s licence to operate its petroleum pipeline system by setting tariffs, as a condition of that licence, for the period from 03 April 2013 to 01 April 2014.
If the Minister of Energy decides 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 petrol price rise is expected to be 1.4 cents per litre (c/l), which represents a 0.1% increase in the February 2013 retail price of 93 octane petrol in Gauteng. The 1.4 c/l tariff increase in the pipeline tariff from Durban to Johannesburg represents a 6.4% increase in the pipeline tariff. Transnet applied for a 22.6% increase in its allowable revenue, which would have resulted in a 4.72 c/l increase in inland petroleum product prices had it been granted.
NERSA published a draft tariff determination for public comment proposing a 7.3% increase in allowable revenue. Further information came to light during the process of public consultation. In arriving at its decision, NERSA weighed a variety of factors, including the public interest, regulatory certainty, the New Multi-Product Pipeline (NMPP) project reaching its capital expenditure peak and current and future debt funding.
Consequently, NERSA has set petroleum pipeline tariffs that will allow Transnet to realise an 8.53% increase in allowable revenue compared to the 2012/13 tariff period. This is an increase from R2,575.92 million in 2012/13 to R2,795.61 million in 2012/13. In NERSA’s view, this will strike a satisfactory balance between the various factors that NERSA had to consider.
NERSA was concerned to see that Transnet Pipelines reported a 7.1% reduction in total petroleum volumes pumped from 2010/11 to 2011/12 (from 18.025 billion litres in 2010/11 to 16.741 billion litres in 2011/12) in Transnet Limited's annual report for 2011/12. NERSA is collaborating with the Department of Energy in investigating the causes of this trend and to see what, if anything can be done about reversing it. However, Transnet has forecast an overall 4.6% increase in volumes to be pumped in the 2013/14 financial year (from 16.9 billion litres in 2012/13 to 17.7 billion litres for 2013/14).
This includes an approximate 5.96% increase in petroleum product volumes transported from the coast to the inland region as a result of the new pipeline capacity that Transnet has brought into operation. A welcome consequence of this is a corresponding reduction in the volumes of petroleum products that need to be transported by road and rail, thus reducing health, safety and environmental risks.
NERSA will continue to monitor the transition of volumes away from road and rail to pipeline transport, as there is still scope to move more volumes away from road and rail transport to pipeline transport. Increased pipeline volumes are desirable as this lowers tariffs and also reduces the health, safety and environmental risks associated with road and rail transport.
With the view to improve pipeline efficiencies, NERSA decided that Transnet should provide NERSA with a proposed system of penalties to be included in future tariffs. The idea is to penalise Transnet's customers who cause inefficiencies in the operation of the pipeline system by, for example, not delivering slugs to the pipeline on schedule or by failing to take delivery of slugs of petroleum on schedule.
Last year, NERSA welcomed Transnet's stated intention to apply for a multi-year tariff decision in its next application, as this would enable longer term price signals to be sent to customers, financiers and other stakeholders. Regrettably, Transnet decided not to proceed with this intention.