Nersa reduces tariffs on petroleum transportation

Monday, May 4, 2009

Pretoria - The National Energy Regulator of South Africa (Nersa) has reduced tariffs by 10.38 percent for petroleum transportation through Transnet's pipelines for the 2009/10 financial year.

According to NERSA, this translated into a 1.37 cents per litre reduction in the price of petrol in Gauteng.

However, since the first month of Transnet's financial year (April) had already ended, the adjustment would be spread over 11 months, resulting in an actual tariff reduction of 11.17 percent over the remaining months of the tariff period, Nersa said in a statement.

The new tariffs would apply from Wednesday.

According to Nersa, the Department of Minerals and Energy will determine how this adjustment will be incorporated into the prices of regulated petroleum products.

It affirmed that changes to the current tariff structure would affect the "locational advantage" of inland refiners and thereby the relative competitive positions of competing oil companies.

"These are complex matters and the Energy Regulator will engage in further public consultations on the tariff structure during 2009 in preparation for the next tariff review," it stated.

The full decision by the Energy Regulator and the Reasons for the Decision will be published on Nersa's website soon.

In setting the tariffs, Nersa used a tariff methodology for the Petroleum Pipelines Industry as well as written comments submitted by the public and stakeholders'public hearings which were held on 26 February 2009 and 16 April 2009.

In its initial tariff application in November 2008, Transnet applied for a tariff increase of 82.5 percent and it attributed much of that increase to its need to finance the construction of its new multi-product pipeline (NMPP) between Durban and Gauteng.

Revisions made by Transnet to its NMPP construction schedule resulted in Transnet submitting a revised application for a tariff increase of 74.42 percent.

This revised application was presented by Transnet at the Nersa public hearing on 26 February 2009. A second public hearing was held on 16 April 2009, to provide stakeholders with an opportunity to comment on Transnet's revised tariff application.

Nersa said the single largest factor contributing to the difference between its decision and Transnet's application (as revised) is that the law does not allow Nersa to set tariffs for existing pipelines to enable a licensee to recover the costs (including financing costs) of pipelines which are still in the process of being constructed