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SA's industrial gas users face 228% price hike, take energy regulator to court

11 January 2022 8:21 PM
Tags:
SASOL
Nersa
The Money Show
Bruce Whitfield
Manufacturing industry
National Energy Regulator of South Africa
Gas price
Industrial Gas Users Association of Southern Africa
Jaco Human
Igua-SA
gas prices
Igua

The Industrial Gas Users Association of SA's Jaco Human explains why Nersa's pricing methodology is irrational on The Money Show.

Large industrial gas users are taking the National Energy Regulator of SA (Nersa) to court over the methodology used to set gas prices.

The Industrial Gas Users Association of Southern Africa (Igua-SA) wants the High Courts to set aside the approval of Sasol Gas' maximum prices for the period March 2014 to June 2023.

"Between the third quarter of 2022 and the second quarter of 2023 alone, the second methodology will result in a cost to gas users and the economy of around an additional R8.9 billion" according to Igua-SA.

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The Association says the increase will adversely impact South African inflation, investment and global competitiveness.

[It will not only] substantially prejudice downstream gas users, but it will also harm the manufacturing industry, which is vital to the future growth and development of South Africa's fragile economy

Jaco Human, Executive Officer - Industrial Gas Users Association of Southern Africa

Bruce Whitfield interviews Igua-SA CEO Jaco Human.

The industrial gas user market is quite a significant energy sector in South Africa, with many of our manufacturers deeply reliant on natural gas energy... With the various large industrial consumers it really forms the backbone of our manufacturing sector.

Jaco Human, Executive Officer - Industrial Gas Users Association of Southern Africa

This is piped or natural gas, not the LPG [liquefied petroleum gas] that we're all accustomed to in our lives.

Jaco Human, Executive Officer - Industrial Gas Users Association of Southern Africa

He notes that Sasol is the monopoly supplier in South Africa and explains why Igua-SA finds Nersa's pricing methodology irrational and therefore unreasonable.

Nersa was instructed by the Constitutional Court in 2019 to go back to the drawing board and set a new pricing mechanism... Nersa did exactly that and came up with a price that is linked to international benchmarking...

Jaco Human, Executive Officer - Industrial Gas Users Association of Southern Africa

However, the guidelines provided by the ConCourt were not followed Human says.

He uses the example of Nersa linking local prices to international markets.

For example, Nersa was supposed to emulate the price that would have prevailed in a competitive environment in South Africa... and we've got no price that is fully linked to the dynamics in international markets. There are dynamics playing out in those markets that have no bearing on industrial gas users in South Africa!

Jaco Human, Executive Officer - Industrial Gas Users Association of Southern Africa

The second issue is that this new price generates a monopoly price that is far higher than what it was in the previous round of Nersa's methodology which was found to be irrational by the Constitutional Court.

Jaco Human, Executive Officer - Industrial Gas Users Association of Southern Africa

For more detail, listen to the interview below:




11 January 2022 8:21 PM
Tags:
SASOL
Nersa
The Money Show
Bruce Whitfield
Manufacturing industry
National Energy Regulator of South Africa
Gas price
Industrial Gas Users Association of Southern Africa
Jaco Human
Igua-SA
gas prices
Igua

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