The National Energy Regulator of South Africa (Nersa) is making efforts to communicate its recently approved maximum gas energy (GE) price of R117.69/GJ, which opens the way for Sasol Gas to enter into contractual negotiations with its customers ahead of implementation on March 26, 2014.

Nersa piped gas member Ethèl Teljeur said at a media briefing in Johannesburg that Sasol Gas’ application was not for a price increase, but for a comprehensive price restructuring from market-value pricing to maximum prices in terms of the Gas Act.

“Analyses have shown that many smaller customers will experience immediate price decreases, some prices will remain the same and some large costumers will experience price increases,” she stated, adding that price increases in excess of 15% would be phased in over time.

The regulator permitted a quarterly adjustment of the overall maximum GE price by the changes in the actual maximum GE price, lagged by one quarter until June 30, 2017.

As at March 26, the maximum GE prices were R108.86/GJ for Class 1 (400 GJ/y), as well as for Class 2 (401 GJ/y to 4 000 GJ/y), following a 7.5% reduction.

Class 3 (4 001 GJ/y to 40 000 GJ/y) would pay R100.04/GJ after a 15% reduction, while Class 4 (40 001 GJ/y to 400 000 GJ/y) would fork out R91.21/GJ after a 22.5% reduction and Class 5 (400 001 GJ/y to 4 000 000 GJ/y) would enjoy a 30% reduction and pay R82.38/GJ. Customers in Class 6 (4 000 0001 GJ/y and higher) will have to pay R73.56/GJ after a 37.5% reduction was implemented.

An additional discount to traders equivalent to 50% of Sasol Gas’ trading margin would be applied, applicable to each customer class. A discount of R4.11/GJ would be afforded for the period March 26 to June 30, 2014, while a discount of R5.20/GJ would be implemented for the period July 1, 2014 to June 30, 2015.

Sasol Gas’ trading margin for March 26, 2014 to June 30, 2015 was set at R8.21/GJ during the first phase of the period and R10.40/GJ during the second phase.

Nersa also approved a transitional mechanism, as applied for in terms of the Gas Act, for price increases, where these were required to achieve non-discrimination and comply with the approved maximum prices.

“Once a maximum price is approved for a customer category, Sasol will offer actual prices to customers. Nondiscrimination does not mean ‘one price fits all’, several factors will inform an actual price. It is expected that within a category larger customers will receive more favourable prices,” Teljeur indicated.

From March 26 this year to June 30, 2017, Sasol Gas would have to provide Nersa with quarterly updates of the prices offered and demonstrate compliance with the price differentiation as contemplated in Section 22 of the Gas Act.

Teljeur noted that Sasol Gas would also have to demonstrate revenue neutrality between yearly revenues based on prevailing prices between March 26 this year to March 25 next year, as well as the forecast revenues for the period based on the approved maximum prices as at 26 March 2014, minus any revenue foregone, owing to the transitional mechanism.

Meanwhile, Nersa also approved Sasol Gas’ piped-gas transmission tariffs for the period March 26, 2014 to June 30, 2015.

The tariff was divided into two tariff periods aligned with the end of the special regulatory dispensation period and Sasol Gas’ financial year. The first tariff period was, therefore, defined to be from March 26 to June 30, 2014, while the second tariff period was from July 1, 2014 to June 30, 2015.

Sasol Gas applied for a tariff for three zones in its transmission pipeline network, with one tariff applicable to each zone. Zone 1 refers to the Secunda–Gauteng–Sasolburg network, Zone 2 to the Witbank–Middelburg network and Zone 3 to the KwaZulu-Natal network.

For Zone 1, a transmission tariff of R5.09/GJ was approved for the first tariff period, which would increase to R5.13/GJ during the second tariff period.

In Zone 2, R14.20/GJ was approved for the initial period, but this would go down to R13.36 the second phase.

Further, customers would pay R5.61/GJ in Zone 3 during the first tariff period, which would grow to R5.95 in the second tariff period.

Looking ahead, Teljeur noted that shale gas could have bearing on South Africa’s gas transmission systems, but that this might only become commercially viable in a few years’ time.