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    Brakes put on Sasol gas price hikes

    May 19, 2023 - Business Day


      Tribunal puts brakes on Sasol gas price hikes

      Watchdog finds that an increase to Sasol Gas’ price for natural gas, as per the Nersa maximum pricing methodology, would result in an excessive price

      Industrial ReporterThe Competition Tribunal has barred Sasol Gas from increasing prices of piped natural gas above R68.39/GJ for the next six months, granting gas-reliant industries a reprieve pending the conclusion of investigations into allegations of anticompetitive practices.

      The tribunal, which adjudicates antitrust cases from the Competition Commission, concluded that the Competition Act and the Gas Act created a system of concurrent jurisdiction, crushing Sasol’s bid for an order suspending the legal validity and effect of a summons issued to it by the commission.

      The tribunal said it had ruled that members of the Industrial Gas Users’ Association of Southern Africa (IGUA-SA) had shown prima facie to the commission that an increase in Sasol Gas’s price for natural gas would result in an excessive prices.

      Subsequently, the authorities placed a moratorium on Sasol’s increase in the price of natural gas for six months, saying Sasol would have to give two months’ notice before any proposed increment, pending the conclusion of the commission’s probe.

      "Within the six-month period, Sasol Gas may not increase its natural gas price above R68.39/GJ, unless it first gives IGUA-SA at least two months’ written notice of its intention to do so," the tribunal said. "Such notice must specify the price which Sasol Gas intends to charge its customers, whether that price has been approved by Nersa [the National Energy Regulator of SA] and, if so, when it was approved."

      IGUA-SA, whose members rely heavily on natural gas as an essential input for industrial use, initially lodged a complaint with the Competition Commission after Sasol Gas in August 2022 told customers that it intended to nearly double its price for natural gas to R133.34/GJ.

      The association alleged that Sasol was abusing its dominant position in the market by charging an excessive price for gas to the detriment of consumers and customers.

      With the threat looming of a price increment being implemented while the commission was still investigating, the association approached the tribunal for interim relief interdicting Sasol from increasing its current price of R68.00/GJ for half a year, or until the commission’s investigation into its excessive pricing complaint against Sasol is concluded.

      But Sasol Gas moved to have that interdict thrown out, arguing that not only was the matter out of the competition authorities’ jurisdiction to hear the application, but additionally its pricing fell within the maximum price determined by Nersa.

      The R147bn New York Stock Exchange- and JSE-listed Sasol, a regulated entity under the gas act and the monopoly supplier in the piped gas industry, argued that its gas price was determined using the calculation methodology prescribed in the 2021 Nersa maximum gas price decision for Sasol Gas.

      The tribunal concluded that the Competition Act and the Gas Act created a system of concurrent jurisdiction and progressed to determine whether IGUA-SA had established a basis for interim relief, which it had now granted.

      Sasol spokesperson Alex Anderson said: "We await the final decision and will consider our next steps."

      IGUA-SA executive officer Jaco Human said: "By and large we welcome the outcome of this and it basically provides an avenue of protection to the consumer in the absence of Nersa’s methodology ability to do so."

      He said the Nersa methodology that Sasol relied on, which was linked to foreign benchmarks, was found to be problematic as it did not give an accurate picture of the local situation and dramatically increased prices by up to 300%.


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