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AA likes motorists' tariff cut

Johannesburg - The Automobile Association (AA) has applauded the decision by the National Energy Regulator of South Africa (Nersa) to reduce the tariff originally applied for by state-owned transport utility Transnet.

Instead of being increased by 74.4% as applied for by Transnet, the original tariff is set to decrease by 10.83% resulting in a saving to the Gauteng motorist of 1.37 cents per litre.

Transnet had originally applied for an 82.5% tariff increase but later revised this to 74.4% so that it could fund the construction of a new R12.3bn multi-product pipeline between Durban and Gauteng.

Nersa said that the single largest factor contributing to the difference between Nersa's decision and Transnet's application 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.

"The decision by Nersa has been enthusiastically welcomed by the AA as it would appear that common sense has prevailed on this issue. What has also become clear during the process is that the built in checks and balances have been applied and the rules adhered to", said AA spokesperson Gary Ronald.

"In effect, precedent has now been established where new projects may not be funded through a levy or tax on existing infrastructure."

Following Nersa's announcement on Monday, Transnet spokesperson John Dludlu told media that Transnet applied for a tariff increase to fund the operation of its existing pipeline network and support the construction of the New Multi-Product Pipeline (NMPP) - which is to replace the Durban-to-Johannesburg (DJP) pipeline.

"The National Energy Regulator of South Africa (Nersa) has decided to set tariffs only for the operation of the existing system which is now running at full capacity. Accordingly, Transnet is in talks with the Government regarding an alternative funding mechanism for the portion of the NMPP which is responsible for ensuring security of fuel supply to the inland market."

He said that once these talks are finalised, a detailed announcement will be made.

"The Nersa determination, which results in an aggregate 10% decrease in tariffs, appears to be based on an inconsistent application of the tariff methodology compared to the previous year. This, together with a commercially unacceptably low return on capital employed, will not enable sustainable pipeline operations and needs urgent review," he said.

- Fin24.com

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