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Johannesburg - South Africa's state-owned logistics utility Transnet on Thursday submitted an updated tariff application to the National Energy Regulator of South Africa (Nersa), suggesting that its controversial new pipeline tariffs be structured so as to ameliorate the locational advantage that would have been afforded to inland refiners under its previous applications.
In its updated application, Transnet noted that most of the stakeholders' complaints related to the new pipeline tariffs centred on the specific tariff structure proposed by Nersa.
Now, the utility has put forward that Nersa applies a tariff structure that spreads the load of recovering the required revenues equitably.
"This would result in lower tariffs ex-Durban and a much reduced locational advantage compared to the Nersa draft tariffs," Transnet said.
Transnet Pipelines, which owns the existing Durban to-Johannesburg pipeline, has asked Nersa for a tariff increase of 82.5% this year and 73.5% next year.
It argued that the increase in tariff was necessary to help cover the cost of the construction of a planned R12.3bn new multi-product pipeline between the coast and Johannesburg and Pretoria.
Seen as forming the backbone of fuel supply infrastructure to Gauteng and other parts of the inland market for the next 50 years, the new pipeline is scheduled to start carrying product from the latter half of 2010.
But existing pipeline users, like BP Africa, have bemoaned the tariff hikes, saying existing users should not foot the cost of building a new pipeline.
BP Africa's call for the tariff application to be revisited was dismissed as "highly irresponsible, unhelpful and misleading" by Transnet, but the petrol company's call has since been echoed by the Automobile Association and the SA Petroleum Industry Association, which stressed the impact the increased tariff would have on the consumer and the economy.
While Transnet made no substantial changes to the principles in the application, it has introduced the "F-factor" to cover borrowing costs.
It explained that the F-factor is an element that may be applied by Nersa in calculating the allowable revenue formula and consequently the tariff.
"The specific purpose of the F-factor in the tariff methodology is to provide for the possibility of an adjustment in order to protect the licensee's debt cover requirements," Transnet said in its application.
Transnet said stakeholders were "overwhelmingly supportive" of the construction of the new multi-product pipeline but were concerned about the adverse impact of changes to the structure of the tariffs.
It said the capital investment required to construct the pipeline would result in higher tariffs, and the imposition of a levy, as proposed by stakeholders, might reduce the level of increases required.
But it stressed that no levy mechanism is currently in place and pointed out that considerations bearing on a levy would, in the circumstances, be outside Nersa's jurisdiction.
"The F-factor is permitted by law and must be included in the allowable revenue, and not be treated as a loan, to ensure the maintenance of debt service cover ratio acceptable to international rating agencies and funders," it argued.
To conclude, it said Nersa could structure tariffs in a manner that ensures that Transnet still achieves its required revenue while substantially minimising the locational advantage to the inland refiners.
"This would ensure that Nersa's decision is equitable and in the public interest," Transnet said.
- I-Net Bridge
