1. Introduction

The National Energy Regulator of South Africa (NERSA) is the statutory regulator responsible for regulating important parts of South Africa’s electricity, gas and petroleum-pipeline sectors. Its decisions can have significant consequences for consumers, municipalities, electricity distributors, industrial users and energy companies. Because NERSA exercises public statutory power, its decisions are subject to constitutional and administrative-law review.

Judicial review does not ordinarily permit a court simply to substitute its own preferred tariff, regulatory methodology or technical judgment for that of NERSA. Instead, the court examines whether NERSA acted within its statutory powers, followed a lawful and fair process, considered relevant factors, avoided irrelevant considerations, and reached a decision rationally connected to the information and objectives governing the decision.

The leading authorities include NERSA v Borbet SA, PG Group v NERSA, NERSA v PG Group, and subsequent cases concerning municipal electricity tariffs and public participation. (Supreme Court of Appeal)

2. Legal Framework for Reviewing NERSA

Judicial review of NERSA decisions primarily operates through:

Section 33 of the Constitution of South Africa, which protects the right to lawful, reasonable and procedurally fair administrative action;

the Promotion of Administrative Justice Act 3 of 2000 (PAJA);

the relevant empowering legislation, particularly the Electricity Regulation Act 4 of 2006 (ERA), the Gas Act 48 of 2001, and the Petroleum Pipelines Act 60 of 2003;

the principle of constitutional rationality, where applicable; and

the constitutional requirement that public power be exercised lawfully and rationally.

For example, electricity tariff regulation must be consistent with statutory requirements concerning matters such as efficiency, transparency and equity. Recent litigation concerning municipal tariffs has also emphasised NERSA's constitutional obligations concerning timely and meaningful administrative processes. (SAFLII)

3. Grounds of Judicial Review

A. Illegality and Excess of Power

The first question is whether NERSA possessed legal authority to make the challenged decision.

A decision may be reviewed where NERSA:

acts outside its statutory mandate;

misconstrues its empowering legislation;

imposes requirements not authorised by statute;

fails to comply with mandatory statutory requirements; or

exercises a power for an improper purpose.

The court therefore examines the relationship between the decision and the empowering statute.

This is particularly important in tariff regulation because NERSA's discretion is broad but not unlimited.

4. Irrationality

A central ground in NERSA litigation is rationality.

A regulatory decision must have a rational connection between:

the information before NERSA;

the statutory purpose;

the regulatory methodology;

the factors considered; and

the ultimate decision.

The Constitutional Court's judgment in NERSA v PG Group (Pty) Ltd and Others [2019] ZACC 28 is particularly important.

National Energy Regulator of South Africa's decision concerning maximum gas prices was challenged after Sasol's gas prices increased substantially. The Constitutional Court held that the Maximum Price Decision was separate from the underlying methodology and therefore could itself be reviewed. More importantly, the Court held that rationality analysis could require consideration of the process by which the decision was reached. (Concourt)

The Court found that NERSA had failed to consider marginal costs, an important input for regulating the pricing power of a monopolist. The missing consideration produced a defective connection between the regulatory means and its intended objective. The Maximum Price Decision was therefore irrational and had to be set aside. (Concourt)

Principle

Specialised expertise does not immunise NERSA from rationality review.

5. Relevant and Irrelevant Considerations

NERSA must take account of considerations that the governing legislation requires it to consider.

Conversely, it should not base its decision on irrelevant considerations.

This issue arose in Casting, Forging and Machining Cluster of South Africa NPC v NERSA [2022] ZAGPPHC 927.

The applicants challenged NERSA's approval of City Power's municipal electricity tariffs. Among other things, they argued that NERSA had used inappropriate benchmarks and failed to consider the cost of supply for particular customer categories. (SAFLII)

The High Court relied upon the reasoning in PG Group, holding that cost information was a necessary input into the tariff-setting process. Without that information, there was a defective link between the regulatory means and the intended objective. The NERSA decision was consequently declared unlawful, unconstitutional and invalid. (SAFLII)

This illustrates that judicial review may examine whether the regulator had the necessary evidentiary foundation for its decision.

6. Procedural Fairness

NERSA must comply with applicable procedural requirements.

This may include:

adequate notice;

opportunity for affected parties to make representations;

proper consideration of submissions;

disclosure or accessibility of relevant information where required;

compliance with PAJA procedures; and

meaningful public participation where legislation or the Constitution requires it.

Procedural fairness is especially important in tariff decisions because tariffs directly affect consumers, municipalities and businesses.

Afriforum v NERSA

Recent litigation has reinforced this principle. In Afriforum NPC v NERSA and Others, the Gauteng High Court found NERSA's implementation of its notice-and-comment public-participation process for 2025/26 municipal tariff applications invalid. The court relied on constitutional and PAJA principles concerning participation and accountability. (SAFLII)

Importantly, the court's order declared the process invalid but did not immediately set aside the tariff approvals, demonstrating the importance of tailoring judicial remedies to the circumstances. (SAFLII)

7. Reasonableness and Technical Expertise

NERSA deals with highly technical matters involving:

electricity pricing;

generation and transmission;

network costs;

gas markets;

petroleum pipelines;

economic regulation;

market structure; and

energy infrastructure.

Courts therefore recognise the importance of judicial restraint and institutional competence.

The principle is that courts should generally respect the specialised expertise of regulators when evaluating technical regulatory choices. However, deference does not mean that NERSA decisions are beyond review.

The recent Afriforum judgment expressly recognised that judicial deference is particularly relevant where administrative decisions involve highly technical subject matter, while also emphasising that deference cannot prevent courts from enforcing constitutional requirements. (SAFLII)

Thus:

Deference is not immunity from judicial review.

8. NERSA v Borbet SA (2017)

One of the most significant authorities is National Energy Regulator of South Africa v Borbet SA (Pty) Ltd [2017] ZASCA 87.

The dispute concerned NERSA's approval of an additional 1.4% electricity tariff increase sought by Eskom. The affected businesses challenged NERSA's decision. (Supreme Court of Appeal)

The Supreme Court of Appeal considered whether NERSA's tariff adjudication constituted administrative action and whether its decision could be reviewed under PAJA.

The SCA confirmed that NERSA's decision was not immune from judicial scrutiny merely because it involved policy and specialised economic regulation. (Supreme Court of Appeal)

At the same time, the case illustrates the importance of judicial restraint when reviewing an expert regulator.

Significance

The case establishes that:

NERSA's tariff decisions can constitute reviewable administrative action;

policy content does not automatically exclude judicial review;

technical expertise deserves appropriate judicial respect; and

the court should examine legality, rationality and procedural fairness rather than simply substitute its own economic preference.

9. PG Group v NERSA (2018) and NERSA v PG Group (2019)

The litigation between the PG Group and NERSA is particularly important because it travelled from the High Court to the SCA and ultimately the Constitutional Court.

The dispute concerned NERSA's determination of maximum gas prices and transmission tariffs involving Sasol.

The SCA concluded that NERSA's Maximum Price Decision was reviewable and set it aside. (Supreme Court of Appeal)

The Constitutional Court subsequently refined the analysis in NERSA v PG Group [2019] ZACC 28.

The Constitutional Court distinguished between:

the methodology used by NERSA; and

the actual regulatory decision applying that methodology.

The Court held that the Maximum Price Decision was independently reviewable. (Concourt)

The Court's reasoning demonstrates that a regulator cannot avoid review merely by characterising a challenged decision as the implementation of an earlier methodology.

10. Judicial Review of Tariff Decisions

Tariff decisions represent one of the most important categories of NERSA review.

A court may examine whether NERSA:

used an authorised methodology;

relied upon adequate cost information;

considered the statutory objectives;

considered the economic consequences where relevant;

treated affected parties lawfully;

followed required consultation procedures;

provided adequate reasons; and

maintained a rational relationship between evidence, regulatory objectives and the final tariff.

However, the court normally does not determine what the tariff should have been simply because another tariff might appear economically preferable.

The distinction is between review and appeal.

Review

The question is essentially:

Was NERSA's decision lawful, rational and procedurally fair?

Appeal

The question would more closely resemble:

Was NERSA's substantive decision correct?

Judicial review primarily performs the former function.

11. Reasons and the Record of Decision

A regulator's reasons are particularly important in judicial review.

The court may examine the record to determine:

what information was available;

which considerations NERSA addressed;

what methodology was applied;

whether mandatory considerations were ignored;

whether representations were considered; and

how the regulator moved from evidence to conclusion.

In technical regulation, the written decision therefore provides an important mechanism of accountability.

A decision that cannot demonstrate a rational connection between its evidentiary foundation and its outcome becomes vulnerable to review.

12. Public Participation and Transparency

NERSA's regulatory functions affect a large number of stakeholders.

Consequently, transparency and participation can become significant grounds of review.

The recent Afriforum litigation illustrates the constitutional importance attached to participation in NERSA's municipal tariff process. The High Court emphasised that procedural discipline is distinct from judicial determination of the substantive tariff itself. (SAFLII)

This distinction is important:

Courts can enforce the procedural requirements governing NERSA without themselves becoming the energy regulator.

13. Remedies

Where a NERSA decision is unlawful or irrational, courts have several possible remedies.

These may include:

declaring the decision invalid;

reviewing and setting aside the decision;

remitting the matter to NERSA for reconsideration;

suspending the declaration of invalidity;

issuing a structural or supervisory order in appropriate circumstances; or

granting other just and equitable relief.

The appropriate remedy depends upon factors such as:

seriousness of the defect;

consequences for consumers;

effect on electricity supply;

interests of municipalities;

disruption to energy markets;

possibility of correcting the defect; and

separation-of-powers considerations.

The Afriforum litigation provides a useful example: although the participation process was declared invalid, the tariff approvals were not automatically set aside. (SAFLII)

14. Important Case Laws

15. Relationship Between Judicial Review and Separation of Powers

NERSA is an expert regulatory institution. Excessive judicial intervention could undermine the statutory allocation of regulatory functions.

At the same time, NERSA cannot claim institutional expertise as a complete defence against judicial review.

The constitutional balance is therefore:

Parliament → establishes NERSA's statutory powers

NERSA → exercises specialised regulatory discretion

Courts → ensure that that discretion remains lawful, rational, procedurally fair and constitutionally compliant

The courts do not ordinarily become substitute energy regulators. Their role is to ensure that regulatory power remains within legal and constitutional boundaries.

16. Conclusion

Judicial review of NERSA decisions represents an important balance between regulatory expertise and constitutional accountability. NERSA possesses substantial discretion in technically complex areas such as electricity tariffs, gas pricing and petroleum infrastructure, but that discretion must be exercised within the limits established by legislation, PAJA and the Constitution.

The major lesson from Borbet is that NERSA's specialised and policy-oriented functions do not place its decisions beyond judicial review. PG Group demonstrates that rationality review can examine whether there is a genuine connection between the information, regulatory methodology, statutory objectives and final decision. Casting, Forging illustrates the importance of adequate cost information in tariff regulation, while recent Afriforum litigation demonstrates that procedural fairness and public participation remain independently enforceable requirements. (Supreme Court of Appeal)

Accordingly, judicial review of NERSA is best understood not as judicial substitution of regulatory judgment, but as a mechanism for ensuring legality, rationality, procedural fairness, transparency, accountability and constitutionally compliant energy regulation.