Eskom vs municipalities that owe billions: ConCourt to rule on 'human catastrophe'

24th May 2022 By: News24Wire

Eskom has approached the Constitutional Court to argue that it should not be compelled to provide two of South Africa's most indebted municipalities with more electricity than provided for in supply agreements. 

The power utility is seeking leave to appeal a high court ruling from August 2020 that directed it to increase the amount of electricity it provides to the struggling Ngwathe Municipality in the Free State and the Lekwa Municipality in Mpumalanga.

Together, the two municipalities owe Eskom a total of R2.8-billion. Ngwatha owes R1.31-billion, while Lekwa owes R1.51-billion, according to Eskom data. 

Eskom in 2020 reduced its bulk electricity supply to the two municipalities to the maximum level contained in supply contacts, known as Notified Maximum Demand (NMD) agreements.

These agreements set a ceiling on the amount of power a municipality can draw from Eskom and include a sliding scale of penalties for when municipalities exceed this. 

NMD agreements can only be renegotiated if municipalities do not owe Eskom any money. 

After Eskom throttled back the power it was providing, ratepayers for the two municipalities took it to court. They won an urgent interdict in the North Gauteng High Court in Pretoria in August 2020, compelling Eskom to keep providing them with "full" power. 

The ratepayers argued that while residents paid electricity fees on time via pay-as-you-go meters, these were not being paid on to Eskom by the municipalities. 

They added that Eskom's decision to reduce its bulk supply caused a "human catastrophe", including untreated effluent washing into the Vaal Dam after sewage systems packed up from constant electricity outages. 

The ratepayers argued that it wasn't their fault that the municipalities had not been paying Eskom. Their case was later upheld by the Supreme Court of Appeal. 

'Deep dysfunction'

On Monday, Eskom put it to the Constitutional Court justices that its 2020 decision to throttle power was legal, and the courts had erred in directing it to restore an "uninterrupted supply".  

According to Eskom lawyer Sydwell Shangisa, the deep dysfunction of the two municipalities means that they cannot pay for the electricity they receive. 

He added that the municipalities had been unable or unwilling to remove illegal connections siphoning off power and had not improved infrastructure to allow higher loads to be transmitted.

"The structural and institutional problems of the two municipalities cannot be placed at the doorstep of Eskom," he said.

For Eskom to "restore" power, he said, it would have to spend hundreds of millions of rands improving the electricity infrastructure of the two municipalities, which had become degraded by lack of investment and poor upkeep. 

'It got taken away'

Herman van Eeden, SC, for the two ratepayers' associations, told the court his clients were in full agreement that the two municipalities should pay for electricity.  

However, it was not the fault of his clients that the municipalities did not pay Eskom. 

"They collect the money from the residents – just about everybody is on pre-paid. 

"We don't know why it is not paid over to Eskom."

While the municipalities had been cited as respondents in the matter, they had not made any filings and played no part in Monday's deliberations. 

What was particularly galling for his clients, said Van Eeden, was that for years Eskom had been supplying them with electricity in excess of what was stipulated in the NMD. 

"Our clients were receiving something that then got taken away," he said. 

He also questioned whether Eskom really had the capacity constraints it is arguing it had. 

"The history of the matter reflects that there were not capacity constraints," he said. "For years Eskom supplied electricity without a problem."

He said that when power was reduced in 2020, his clients were told it was for reasons of non-payment.  

"Eskom can safely supply both municipalities at levels before the interruption," he said. 

Asked whether he could envision a scenario where Eskom could legally reduce bulk power to municipalities - Van Eeden said this happened all the time with load shedding. 

"What Eskom cannot do is what it did in this matter – it reduced legitimate supply to paying residents without fair notice."

Judgment was reserved.