File picture: Ben Merghart

Johannesburg - The National Energy Regulator of South Africa (Nersa) said on Tuesday that its maximum price methodology would remain valid after PG Group and six other companies failed in their high court bid to review the methodology.

PG Group, SAB, Consol Glass, Nampak, Mondi, Distribution and Warehousing Network, and Illovo Sugar SA are customers of Sasol Gas, the dominant player in the South African piped gas market.

Commenting on the court’s ruling, which was handed down earlier this month, the Nersa member responsible for piped gas, Nomfundo Maseti, said on Tuesday: “Nersa will, therefore, continue to implement the current methodology, as well as monitor and enforce compliance with its decisions taken applying the methodology.”

In October 2013, the companies, which are members of the Gas Users’ Group, took Nersa and Sasol Gas to the North Gauteng High Court. They wanted the court to review and set aside the maximum price methodology, as well as Nersa’s March 2013 decision to approve Sasol Gas’s margin and the regulator’s approval of Sasol Gas’s transmission tariffs application for maximum gas prices and trading.

Gas Act

Maseti said the companies had argued that Nersa misrepresented the Gas Act because it developed the methodology before it determined the existence of inadequate competition.

As a result, Sasol Gas could charge excessive prices.

The companies also argued that the maximum price methodology was irrational as it permitted Sasol Gas to charge an average gas price that was double the price the company had charged under the previous market value pricing regime.

While the methodology was a reviewable decision, the seven companies brought their application outside the required 180 days since the adoption of the methodology. Nersa adopted the methodology in October 2011, while the companies brought their action in October 2013.

The court ruled that the delay in bringing the application was unreasonable. “The applicants set out no facts which prevented them from taking the methodology on review timeously,” the court said.

Maseti said Nersa could review the methodology should the South African gas market mature. At the moment, the regulator used alternatives such as liquefied natural gas (LPG), coal, diesel and electricity to determine the maximum prices. It said that mainly due to the reduction in the price of diesel gas prices had fallen to about R130 per gigajoule since the introduction of the methodology.

She said gas prices could decrease further if new players entered the industry. At the moment Sasol Gas dominates the industry as it has a presence in the upstream, midstream and downstream segments of the South African gas market.

Maseti said consumers were eventually on the receiving end of high gas prices “because the gas that we regulate is sold to industrial users”. Higher gas prices were ultimately passed on to consumers, she said.

She said she was not aware if the companies would appeal the decision.