The National Energy Regulator of South Africa (NERSA) has reaffirmed Sasol’s monopoly in the South African piped gas industry in its latest consultation document, which highlights the ongoing inadequacy of competition in the market. The document, now open for public commentary, points out that NERSA will continue to set maximum gas prices due to lack of sufficient competition.
This development follows a recent Constitutional Court ruling that rejected Sasol’s appeal in a long-running legal dispute with the Industrial Gas Users Association of South Africa (IGUA-SA) and NERSA concerning gas price regulation. On July 24, Sasol announced plans to appeal a North Gauteng High Court ruling, which declared NERSA’s method for setting maximum gas prices was unlawful. The court, supporting IGUA-SA, criticised NERSA’s reliance on international benchmarking, arguing that it was inappropriate, given Sasol’s market dominance, and disconnected from actual costs in the South African context.
In response to the court’s decision, NERSA revised its pricing approach, moving to a “cost-plus” methodology that calculates the maximum gas price based on Sasol’s costs.
Despite legal challenges and shifts in pricing methodology, the energy giant remains the dominant supplier, controlling the flow of gas to local customers via the 865 km ROMPCO pipeline from its fields in Mozambique.
“Essentially, this monopoly has not changed in 25 years,” Jaco Human, Executive Officer of IGUA-SA said. He acknowledged that, while this new method has introduced greater price stability, it remains in its early stages and its long-term effectiveness has yet to be seen.
“Several court judgments have found that the pricing methodology NERSA used was flawed and this final ruling reaffirmed those findings,” Chris Yelland, Managing Director of EE Business Intelligence, told Energize.
Market diversification depended on significant gas discoveries by TotalEnergies off the Southern Cape. However, that is now off the table, said Yelland. Potential competition vanished when TotalEnergies deemed the project economically unviable and decided to abandon it.
The consultation document is available on the NERSA website. Written comments on the document must be sent to Nersa's Executive Manager for Piped-Gas Regulation, Mr Thulebona Nxumalo at gcm@nersa.org.za before September 9.