The National Energy Regulator of South Africa (NERSA) has proposed revising the tariff methodology used to determine Transnet's petroleum pipeline tariffs with a hybrid model, saying changes in the country's fuel market warrant a review of the current approach.
The draft proposal, published by NERSA for a second round of public consultation, recommends retaining the existing rolled-in tariff system while introducing differentiated tariffs where material differences exist between pipelines. Stakeholders have until August 5 to comment.
The review was prompted by significant changes in South Africa's petroleum sector since the rolled-in tariff approach was adopted in 2011, the regulator said. These include the country's growing reliance on imported refined fuels following refinery closures, changes in pipeline utilisation, the termination of the Natref Variation Agreement, litigation involving Sasol Oil and Transnet, and rising costs associated with the Multi-Product Pipeline.
Under the proposed hybrid approach, Transnet's overall allowable revenue would continue to be calculated across the pipeline system, but tariffs could be differentiated where justified by material differences in the cost of service, operational characteristics or the function of individual pipelines. NERSA said the approach sought to improve cost reflectivity while retaining the stability and broader public interest benefits of the current methodology.
South Africa's transition from a refining-based market to a net importer of refined petroleum products had fundamentally changed the role of the country's pipeline infrastructure, NERSA said. With the closure or mothballing of several refineries, the movement of imported fuel from coastal terminals to inland markets has become increasingly important.
NERSA is also seeking stakeholder views on how different tariff approaches could affect pipeline utilisation, competition, affordability and security of fuel supply. Among the issues raised is whether higher, more cost-reflective tariffs could encourage a shift from pipeline transport to road or rail, reducing pipeline volumes and ultimately increasing costs for remaining users.
The review also highlights the escalating cost of Transnet's Multi-Product Pipeline project, which was initially expected to cost about R11.1bn but is now estimated at R28.2bn. Completion has also been delayed from an original target of 2010 to November 2027.
