Sasol's 'excessive' gas price increases under the spotlight

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Nersa says multiple stakeholders have raised concerns over gas prices.
Nersa says multiple stakeholders have raised concerns over gas prices.
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  • South Africa's energy regulator is set to investigate concerns around "excessive" gas price increases announced by Sasol Gas.
  • Nersa will review its pricing methodology and probe the possibility of unreasonable pricing by licensees.
  • Sasol says the increases are still below the maximum allowable price in terms of Nersa's decision.
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The National Energy Regulator of South Africa (Nersa) will look into concerns raised by multiple stakeholders about "excessive" gas price increases announced by one of its licensees, Sasol Gas.

In a statement issued on Thursday, Nersa said it had not approved "such increases". The country's piped gas industry is regulated by Nersa in terms of the Gas Act. 

Nersa's pricing methodology is being legally challenged by the Industrial Gas Users Association - Southern Africa (IGUA-SA), whose members include steelmaker ArcelorMittal and packaging company Nampak. IGUA-SA contends that the methodology used by Nersa will benefit Sasol Gas, which is the monopoly natural gas supplier in the country.

IGUA-SA raised concerns that gas prices would increase 220%, Fin24 previously reported.

In its statement, Nersa said that in March 2021 it had approved maximum gas prices for Sasol Gas. According to Nersa, it ensured that margins would be kept at a "reasonable" levels.

"The maximum price envisaged by the Methodology to Approve Maximum Price of Gas in South Africa is well below R100 per gigajoule (GJ), from which the licensee (Sasol Gas) was expected to discount …," the statement read.

However, Nersa noted that there had been an "unprecedented surge" in the international gas prices, which has affected domestic prices. Nersa has now undertaken to review and refine its methodology to protect South Africa's gas industry. 

The regulator also plans to investigate possible excessive pricing."Nersa does not expect licensees to exploit the current international gas price crisis to the detriment of consumers and the industry. Therefore, Nersa will investigate any possible unreasonable or excessive pricing cases and further collaborate with other administrative bodies that have concurrent jurisdiction on this matter," it added.

Full-time regulator member responsible for piped-gas, Nomfundo Maseti added that Nersa would also make sure that its previous pricing decision – taken before the international energy crisis – is not detrimental to consumers and the industry.

Below maximum price 

In a written response to questions, Sasol spokesperson Alex Anderson said that its gas business had informed Nersa and customers that the price of piped gas would increase to R133.34/GJ. However, Anderson noted that this is far below the maximum allowable price of R273.43/GJ, determined in Nersa's methodology. 

Anderson said:

Sasol Gas recognises the impact of the increase in prices on customers, therefore Sasol has not applied the maximum allowable price determined in terms of the 2021 Nersa Maximum Gas Price Decision.

Sasol Gas also informed Nersa in May 2022 of a price revision. It also requested confirmation from the regulator that the revision still complied with the 2021 maximum gas price decision.

"In its efforts to confirm its compliance, Sasol Gas also engaged with Nersa on several occasions after this submission," Anderson said.

Sasol said it believes the gas price implemented complies with Nersa's decision. "Sasol Gas has abided and continues to abide by the Nersa 2021 Maximum Price Decision that applies to the period April 2014 to 30 June 2023," said Anderson.

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