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Transnet bemoans Nersa verdict

Mar 26 2010 17:50 Sikonathi Mantshantsha

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Johannesburg - Freight and logistics company Transnet on Friday expressed "concern" at energy regulator Nersa's decision to grant it a 12% revenue increase "only" for the year to March 2011.

Nersa has granted Transnet Pipeline an 11.86% increase, thwarting the company's aspirations of a 51.3% hike on what it charges to transport fuel through its pipelines from refineries on the coastal areas. The 11.86% revenue surge translates to 6.89% in tariff increases.

"The requested increase was largely due to new assets being commissioned in this coming financial year, as well as the application of sound technical and widely accepted regulatory principles," said Transnet spokesperson John Dludlu.

He said Transnet is studying the Nersa decision and assessing its implications "on the business and the funding of the investment in new pipeline infrastructure". Transnet will comment in greater detail once it has received Nersa's reasons for the decision.

Announcing the tariff decision, Nersa said it would have granted Transnet a 20.1% increase had Transnet's other new pipelines "that were supposed to come into operation in the previous tariff period [year to March 2010]" not been delayed.

Those were pipelines under the company's New Multi Products Pipeline project. "Transnet now expects them to commence operation in about June 2010 and provision for this has been made in this tariff decision," said Nersa.

The regulator said it was "concerned about the unpredictable nature" of Transnet tariffs as a result of delays in the commissioning of new pipelines, and regular increases in the forecast cost of the New Multi Products Pipeline project.

War of words

However, Transnet is not convinced. It instead blamed Nersa's history of tariff decisions, which it said do "not factor in any claw back that has been announced by the regulator in its decision today". Transnet said "tariffs have not increased in real terms" since the 2008 financial year.

"It is not possible to make proper investment decisions when such uncertainty prevails on cash flows and constantly changing parameters are used," fumed Transnet. "It is in South Africa's interest that we establish some regulatory certainty as soon as possible."

The war of words between the regulator and Transnet stems from a clause in the laws governing Nersa, which is interpreted by Nersa to mean it does not have the authority to grant tariff increases for infrastructure that is still in development.

According to Nersa, energy users must only pay for assets they already use, and consequently it claws back from Transnet whatever tariff hikes it had granted based on pipelines that should have entered service but did not. But Transnet reckons it needs revenues upfront to pay for its infrastructure investments.

"Nersa is concerned about Transnet's tariff structure. It does not appear to be underpinned by any systematic approach," said Nersa.

- Fin24.com

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