Eskom hails court ruling that allows it to cut off delinquent municipalities
Durban - Eskom has hailed a Johannesburg High Court ruling as a “landmark judgment which has affirmed the validity and lawfulness” of its rights, powers and entitlement to interrupt the supply of electricity to a delinquent customer, in this case a municipality.
The judgment brings to the fore Eskom’s perpetual battle with defaulting municipalities that owed it a total of R43.9billion, of which R30.9bn was overdue debt, at the end of June 2020, according to figures recently presented in Parliament by Public Enterprises Minister Pravin Gordhan.
KwaZulu-Natal municipalities are among those that owe the power utility.
The KZN Co-operative Governance and Traditional Affairs Department (Cogta) said yesterday that there were currently seven municipalities, namely Mpofana, Mthonjaneni, AbaQulusi, Newcastle, Ulundi, Inkosi Langalibalele and Msunduzi, which collectively owed Eskom R550million in arrears.
Cogta spokesperson Senzo Mzila said the department had consistently appealed to municipal residents who were able to do so to pay their service charges, without which municipalities could not be expected to deliver services.
“In principle, the department recognises the right of Eskom to disconnect non-paying customers, provided such customers are not indigent residents who are unable to pay for municipal services.”
He added that KZN Cogta was assisting those municipalities in arrears with negotiating repayment agreements with Eskom, six of which were already in place and being honoured by municipalities.
“The seventh repayment agreement, concerning Msunduzi, has recently been submitted to Eskom for approval.”
Eskom said it welcomed the judgment as the court had set the important legal principle that it was only obliged to supply electricity to paying customers.
“The Electricity Regulation Act of 2006 entitles Eskom to interrupt electricity supply to a non-paying customer, and in this matter Eskom had taken proper preliminary steps and due process that did not entitle the applicant to the interim interdict,” Eskom said.
The matter was brought to court by Pioneer Foods, which challenged the power utility’s right to interrupt or terminate its electricity supply despite the fact that the firm had paid its power bill to the indebted municipality, the Walter Sisulu Municipality in the Eastern Cape.
“The court also held that Eskom’s interruptions of supply to the defaulting municipality were important and necessary for Eskom’s survival as it could not be expected to continue supplying electricity to a non-paying customer,” the power utility said.
Eskom spokesperson Sikonathi Mantshantsha yesterday said the supply of electricity was not a “legal right” in South Africa, and the ruling could have far-reaching implications enabling the state-owned entity to collect overdue debt by cutting the power supply to other defaulting municipalities. This would in effect affect end users including businesses and individual consumers.
Eskom won the legal battle after the court dismissed with costs Pioneer Foods’ application to force Eskom to supply power directly to it after the municipality had failed to pay the debt it owes the power utility.
In his ruling, the judge affirmed Eskom’s right to interrupt or terminate electricity supply to non-paying customers after Pioneer Foods sought to review and set aside Eskom’s 2018 decision to interrupt electricity supply to the Walter Sisulu Municipality due to its failure to pay for electricity in terms of its agreement with Eskom.
The court ruled that Pioneer Foods had no standing in the electricity supply agreement between Eskom and the municipality, and dismissed the application with costs. It ruled that Pioneer Foods as a customer of the municipality had no “locus standi” (legal right) to bring the case against Eskom to court.
Mantshantsha said Eskom had lost a similar case in the Pretoria High Court in August after businesses of the defaulting Lekwa Municipality in Limpopo had taken it to court.
He said the court had granted Eskom leave to appeal the matter in the Supreme Court of Appeal, which could now be faced with making a decision on two conflicting high court rulings.
Pioneer Foods yesterday said it was considering its legal options as it was not viable to run its Aliwal North mill and depot, which employed 130 people, on standby electricity.
“We are busy studying the judgment together with our external legal counsel in order to decide on the appropriate next steps. In addition, we have been a responsible citizen and diligently paid our electricity bill to the municipality over the years,” Pioneer Foods said.
“At this stage the electricity remains on, however we clearly can’t run the plant if the supply to the town is cut off. Due to the continuous nature of the milling process, the lost production capacity, and therefore inability to service the market, extends beyond the actual duration of interruption.”
Energy analyst Ted Blom said Eskom had been overcharging South Africans for the past 12 years.
“This to and fro between municipalities and Eskom is playing with deck chairs while the Titanic is sinking. I am aware of other legal action that I can’t comment on because it is sub judice, in which a municipality has launched a massive counter-claim against Eskom,” Blom said.