| (1) | The Authority may, when setting tariffs for petroleum pipelines— |
| (a) | require tariffs to follow the general principle of increasing with increasing distance over which petroleum products are or will be transported; |
| (c) | consider funding requirements and debt service requirements of the licensee by adjusting the licensee's allowed revenue to enable the licensee's debt service cover ratio to be maintained at a reasonable level; and |
| (d) | consider any other relevant matter. |
| (2) | The tariffs set by the Authority must enable an efficient licensee to— |
| (a) | recover the reasonable operational and maintenance expenses of the pipeline in the year in which they are incurred; |
| (b) | recover capital investment and make profit thereon commensurate with the risk; and |
| (c) | rehabilitate land used in connection with a licensed activity. |
| (3) | lf the recovery of expenses contemplated in subregulation (2)(a) results in an increase of real tariffs by more than 10%, the Authority may direct that the recovery of such expenses be effected over a period of more than a year. |
| (4) | The tariffs set by the Authority must relate to investment in, operation and maintenance of and profits arising only from those parts of a licensed activity for which tariffs are being set. |
| (5) | The allowable rate of return for licensees must be determined by using the expected efficient weighted average cost of capital (WACC). WACC must be calculated using the weighted average of the licensee's— |
| (a) | average cost of debt that can realistically be attained during the period under review; and |
| (b) | cost of equity capital calculated by means of the capital asset pricing model or any other appropriate model. |
| (6) | The allowed revenue to be derived from tariffs contemplated in subregulation (2) must include— |
| (a) | reasonable operating expenses; |
| (b) | reasonable maintenance expenses; |
| (c) | [Subregulation (6)(c) deleted by section 3(a) of Notice No. R. 765 of 2015]; |
| (d) | reasonable working capital; |
| (e) | reasonable real return on the regulatory asset base which should be determined in accordance with section 28(2)(a) of the Act; and |
[Subregulation (6)(e) substituted by section 3(b) of Notice No. R. 765 of 2015];
| (f) | other applicable obligations. |
| (7) | The regulatory asset base contemplated in Regulation 4(6)(e) must— |
| (a) | be calculated as the total investment in the regulatory asset base; |
| (aA) | fairly reflect the investment in the regulatory asset base; |
[Subregulation (7)(aA) inserted by section 3(c) of Notice No. R. 765 of 2015];
| (b) | for assets in operation at the time of promulgation of these Regulations and for which historical cost records do not exist, an estimated value that the Authority accepts as most closely approximating their historical cost; and |
| (c) | include only those assets that are prudently acquired. |
| (8) | [Subregulation (8) deleted by section 3(d) of Notice No. R. 765 of 2015]; |
| (9) | The Authority must as appropriate— |
| (a) | during the term of the licence; and |
| (b) | at the end of the term of the licence or at any other time if the need arises, |
conduct a comprehensive tariff setting exercise in the manner contemplated in subregulation (2).
[Subregulation (9) substituted by section 3(e) of Notice No. R. 765 of 2015]
