Picture: RUSSELL ROBERTS
Picture: RUSSELL ROBERTS

BUSINESSES are concerned that the National Energy Regulator of SA (Nersa) will approve an application by Sasol for substantially higher prices at which companies can sell piped gas in South Africa.

Sasol Gas is South Africa’s biggest wholesale and retail supplier of gas — and it owns the country’s gas pipelines. It says new, standard prices will see some customers paying more for gas, but most would pay less from next year.

The Manufacturing Circle said on Monday that Sasol’s application to Nersa could mean that certain industrial users could see their gas costs rocket by 30%-40%.

The organisation, which represents 44 of the largest manufacturers, is also pressuring Nersa to reject Eskom’s application for a 16% rise in electricity prices over the next five years.

It has asked Nersa for an extension to public hearings on Sasol’s application, to start on Tuesday.

Manufacturing Circle executive director Coenraad Bezuidenhout said Nersa replied that it could submit an application for another hearing.

Last year, Nersa set maximum prices for gas after it determined that there was insufficient competition in the piped gas market.

The Gas Act of 2001 empowers Nersa to monitor and approve — and, if necessary, regulate — transmission and storage tariffs for piped gas.

Included in the act is a special regulatory dispensation for Sasol Gas, formulated to enable its project to pipe gas from Mozambique to South Africa. The dispensation was in force for 10 years, ending in March next year.

The pre-planning of gas prices should end this year, the Manufacturing Circle argued.

Mr Bezuidenhout said they were concerned that if Nersa approved Sasol’s application, the energy company’s pricing power would be too strong. "It is true that this application only defines maximum price and Sasol could offer a lower price," he said.

"However, once such a tariff mechanism is implemented and approved, Sasol would have regulatory approval to price up to the maximum with very little recourse open to users.

"In some cases, the maximum price could be in excess of 30% of current arrangements. Sasol, in fact, has asked for an allowance to offer transitional discounts to be applied for users who will receive an increase of more than 15% so it can be phased in over several quarters to reduce the price shock."

Sasol spokesman Alex Anderson said on Monday that participants in the gas industry had been engaging with Nersa over the past two years on the establishment of revised pricing and tariff methodologies.

He said Sasol had sought to balance price and customer retention, while maintaining a sustainable gas industry. Sasol Gas had submitted applications to secure a maximum price in line with Nersa’s methodology.

"The actual price which Sasol Gas intends to charge will be lower than the ceiling price for which it has applied. The new price mechanism is based on standard prices per customer class differentiated on volume," he said. "The implementation of new, standard prices will result in some customers paying more, with the majority paying less than the prevailing prices on March 25 2014."

Mr Anderson said Sasol Gas proposed that customers who faced higher gas prices be allowed to "transition" to the new prices over two years. Sasol had also asked for transmission tariffs — the charge for transporting gas — based on three geographic zones.