Transnet in talks with govt over tariffs

Transnet was in talks with government over alternative funding after the National Energy Regulator (Nersa) announced that the tariff to transport petroleum through its pipelines for the 2009/10 financial year will be reduced by about 10,38%.

Once the talks were finalised, Transnet would make a more detailed announcement, it said in a statement.

“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,” Transnet said.

“Transnet is assessing these matters and will take such action as is appropriate once the review has been completed.”

The reduction translated into a 1,37 cents per litre drop in the Gauteng petrol price.

In view of the fact that the first month of Transnet’s financial year (April) had already ended, the adjustment would be spread over 11 months, resulting in an actual tariff reduction of 11,17 % over the remaining months of the tariff period, Nersa said.

The new tariffs would apply from Wednesday.

In its initial November 2008 tariff application Transnet asked for an increase of 82,5%.

“Transnet attributed much of that increase to its need to finance the construction of its new multi-product pipeline [NMPP] between Durban and Gauteng.”

Changes made by Transnet to its construction schedule resulted in a revised application for an increase of 74,42%.

The law did not allow Nersa to set tariffs that would allow licensees to recover pipeline construction and financing costs, Nersa said, justifying its decision.
It had opted instead for an across-the-board average percentage tariff adjustment.

Nersa’s decision on Transnet’s pipeline tariff was welcomed by oil company BP.

It said Nersa had recognised the legal compliance and anti-competitive effects of Transnet’s proposed tariff increase.

“Any funding mechanism must take into account macro-economic effects such as the impact on employment and inflation.

“It must avoid delivering windfall profits to inland refiners and pipeline charges should be benchmarked against global rates,” the company said.

BP added that a new pipeline remained vital to South Africa’s energy delivery infrastructure.

“We look forward to continuing to work with Transnet and the authorities on finding an equitable method of funding the pipeline, including a possible national levy, to deliver this much needed infrastructure project on time.”—Sapa

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