War of words erupts over 'massive' pipeline tariff hike

A war of words has erupted

over Transnet’s application for

a massive tariff increase for its

pipeline division.

Until March 7, this is up

for public comments to the

National Energy Regulator of

SA (Nersa).

In this battle, FTW reader

Francois Nortje, a property

developer specialising in

logistics, accused the pricing

policy at TP, which runs

the multiproduct pipeline

corridor between Gauteng and

Durban, of being “destructive

communism”.

“Are you aware,” he asked

FTW, “of Transnet’s utterly

unbelievable arrogant

application to increase the

petroleum pipeline tariffs by

21.3%?”

This he blamed on a

combination of the pipeline

tariff being based on a costrecovery

principle, and the

R13 billion overspend on the

pipeline, which he felt should be

“ripped out of Transnet’s cost”.

While Nersa has not

suggested the cost removal

from Transnet’s budget, it did

express worry about its evergrowing

costs. In its discussion

document on the tariff

application it said: “Nersa has

been concerned for some years

about the escalating costs of

the new multi-purpose pipeline

(NMPP) and has commissioned

an investigation into whether or

not those costs were ‘prudently

acquired’. This investigation is

still under way. In the interim

Nersa has allowed those costs.”

But Transnet believes

its policy is justified, and

spokesman Mboniso

Sigonyela was adamant that

the application was based

on Nersa’s approved tariff

methodology for petroleum

pipelines. “A methodology,”

he said, “designed to ensure

that Transnet makes a return

commensurate with risk, and

recovers the cost of operations

and the investments it has

made on the system.”

Sigonyela was also none too

sure about Nortje’s figures. He

informed FTW that Transnet

had submitted an application to

Nersa “but requesting a 25.8%

increase in allowable revenue

for the 2016/2017 financial

year”.

“This,” he added, “will result

in an increase of 6.18 cents

per litre in the fuel price in

Gauteng.”

But, said Nersa in a

clarifying note: “Transnet

requested a 25.8% increase in

AR, which will in turn result in

a 21.3% increase in tariffs.”

Returning to cost-recovery,

Nortje referred to Transnet’s

submission to Nersa. “This

clearly showed how the

petroleum pipeline volumes

had dropped in the 2014/2015

fiscal year,” Nortje added.

“This as a result of the rapid

decline in diesel prices –

which has made it easier for

road transport companies to

compete with the pipeline.”

Sigonyela denied Nortje’s

statement that pipeline

volumes had dropped in

2014/2015. “Indeed, in the

year to March 30, 2015,” he

told FTW, “Transnet reported

a 3.6% increase in volumes to

17.18 billion litres from 16.58

billion litres.”

However this is contradicted

by Transnet’s own figures

in the Nersa discussion

document. Here, the volume in

2013/14 was declared as 771.28

mega litres, while in 2014/15

it was 640 .033ml. It is also

expected to still be down in

2015/16, for which Transnet’s

latest estimate is 683.457ml.

INSERT & CAPTION

The application was

based on Nersa’s

approved tariff

methodology for

petroleum pipelines.

– Mboniso Sigonyela