The Supreme Court of Appeal decided that a decision by the National Energy Regulator of South Africa to determine gas prices was not reviewable at the stage when NERSA decided on a methodology to determine the prices, but was reviewable when NERSA subsequently determined the prices imposed on customers.
In February 2012, NERSA concluded that there was inadequate competition in the pipe-gas industry and decided on a methodology to determine maximum gas prices that licensees might charge. As a result it applied a mark-up in respect of the cost price of gas that increased the mark-up from the previous 227% to 398%.
The Promotion of Administrative Justice Act 2000 allows the review of administrative action which ‘adversely affects the rights of any person and which has a direct, external legal effect’. Determining the pricing methodology did not have a direct external legal effect until NERSA determined what the maximum prices should be. Their methodology decision did not bind any party and did not constitute administrative action.
The determination of the maximum prices was set aside as irrational because the increased mark-up was not rationally connected to the purpose for which the decision was taken, namely to create a price as if in a competitive market and to avoid overly high prices. The decision did the very opposite and determined a much more expensive price and was therefore not a reasonable or rational decision.
The case is PG Group & Others v NERSA.