Johannesburg - Transnet Pipelines, Transnet’s pipeline division, has asked the National Energy Regulator of SA (Nersa) to approve a 25.8 percent increase in allowable revenue in the 2016/17 financial year.

The revenue increase, if approved, will result in a 21.3 percent increase in Transnet Pipelines’ tariffs.

Read: Transnet will boost capacity to export coal

Consumers and the company’s customers, who include all of South Africa’s major fuel companies, will bear the brunt of the increase.

Transnet Pipelines owns, maintains and operates a network of 3 800km of pipelines transporting 17.1 billion litres of petroleum annually.

Increases in the tariffs lifts fuel costs. “In 2015, a 6.9 percent increase in these Transnet tariffs led to a 1.89c per litre increase in the petrol price in Gauteng. All other things being equal, the new increase, if awarded, could increase petrol prices by just over 5c a litre,” NKC African Economists’ head of research François Conradie said yesterday.

Allowable revenue

According to a Nersa discussion document, Transnet Pipelines originally submitted an application in September in which it requested a 40.01 percent increase in allowable revenue.

That would have increased tariffs by 36.49 percent.

Nersa said the main reason for the 40 percent hike was an increase in Transnet Pipelines’ regulatory asset base, which is the net value of a company’s regulated assets used in price regulation.

But Transnet later asked Nersa to stop assessing the application until there was clarity on the completion dates of its Durban Accumulation Facility’s tanks and the Inland Accumulation Facility.

In a subsequent application, Transnet said operations at the facilities would now commence in November this year. Commenting on the withdrawal of the application, Transnet spokesman Siboniso Sigonyela said: “Transnet resubmitted its application for various reasons, including ensuring that we got all the necessary approvals relating to sharing of information in the public domain.”

The calibre of information Transnet has previously supplied to Nersa has also come under the regulator’s spotlight.

In the discussion paper, Nersa said Transnet had previously been “notoriously” inaccurate in forecasting the dates at which its new assets become operational and in estimating the value of those assets.

“The changes in completion dates of assets and the changes in their values have a significant impact on the tariffs and increase tariff volatility. All tariffs are based on forecasts and if these forecasts are significantly out, an over- or under-recovery in allowable revenue occurs.

“This then has to be clawed back or given back in the following year, which can either ameliorate or exacerbate tariff increases in the following year,” Nersa said.

Nersa also voiced concerns about the rising costs of Transnet’s new multi-product pipeline project and has initiated an investigation into whether the costs have been prudently incurred. Sigonyela said the company was co-operating fully with the probe.

“The cost and schedule of the entire project has been affected by various factors including contractor performance, contract management on our part, inclement weather- and industrial action-related delays.

“Transnet has, in accordance with its construction licence, kept Nersa abreast of the project, including the developments around costs and schedule. Nersa has also conducted site visits to validate progress,” Sigonyela said.

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