Persuading the Energy Regulator to allow alternate tariff calculation methodologies

Jan 30, 2014

Sunrise Energy is building an LPG import terminal at Saldanha Bay in the Western Cape. The terminal will compete against other transport options for delivering LPG to the Western Cape and therefore needs to structure its pricing so as to be competitive with the expected price path of its competitors. This will require it to maintain a fixed real price path over the project life (i.e. an inflation index tariff). The current NERSA Rate of Return (TOC) tariff methodology did not allow for this approach.

Project Description

Meridian was appointed to prepare the Sunrise tariff application. However, given that Sunrise required a levelised cost tariff (an inflation indexed tariff) we first had to engage NERSA around the methodology that Sunrise wished to use for the application. After extensive engagements and exchanges of letters on the technicalities of our proposed approach (and demonstrating its NPV equivalence to the NERSA Rate of Return approach) we were able to reach a point where the tariff application could proceed on a levelised cost basis.