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The Energy Regulator, at its meeting held on Thursday, 23 February 2017, has set petroleum pipeline tariffs that will allow Transnet Pipelines to realise a 1.43% increase in Allowable Revenue (AR) compared to the 2016/17 tariff period. This translates into a tariff increase of 0.30%.
If the Minister of Energy decides to use the pipeline tariff as a proxy for the cost of transporting fuel from Durban to Johannesburg, as has been the case in the past, the consequent increase of 0.30% will result in a 0.11 cents per litre (c/l) increase in the petroleum transportation levy for the Durban to Alrode destination.

On 1 November 2016, the Energy Regulator received the Transnet Pipelines System tariff application for the 2017/18 tariff period, as a condition of its licence to operate its petroleum pipelines system (PPL.p.F3/20/1/2006). The tariffs are set for a period of one year, from 5 April 2017 to 31 March 2018.

Transnet Pipelines applied for a decrease in AR from R4 130 million as approved by Energy Regulator in the 2016/17 tariff period to R3 848 million in 2017/18 tariff period. This translated into a 6.83% decrease in AR, which would have resulted in a 7.87% decrease in the tariffs. With regards to the Durban to Alrode destination tariff, which is used to determine the transportation levy, Transnet applied for a tariff of 31.79 cents per litre. The Energy Regulator set the Durban to Alrode destination tariff at 34.61 cents per litre.

The reduction in AR, as applied for by Transnet, was due to the Coastal Terminal (TM 1) and Inland Terminal (TM 2) assets not being operationalised by Transnet as envisaged and resulted in a clawback of R687.96 million.

The Energy Regulator, concerned with higher tariff increases in future years, due to the admission of the New Multi Product Pipeline (NMPP) assets, decided to smooth the tariff increase to ensure a stable and predictable price path by utilising the clawback mechanism. The Energy Regulator will spread the clawback over a period of two years, deducting 50% of the total clawback from the 2017/18 AR with the balance to be deducted from the AR for 2018/19.

In arriving at its decision, the Energy Regulator weighed a variety of factors, including public interest, regulatory certainty, and Transnet's forecasts for the completion of certain aspects of its NMPP project.

The Energy Regulator will continue to monitor the transition of volumes away from road and rail to pipeline transport, as there still appears to be scope to move more volumes to pipeline transport. Increased pipeline volumes are desirable as this lowers tariffs and also reduces the health, safety and environmental risks associated with road and rail transport.
 

Issued by NERSA