CONSTITUTIONAL COURT OF SOUTH AFRICA
Eskom Holdings SOC Limited and Vaal River Development Association (Pty) Limited and Others
CCT 44/22 Date of hearing: 23 May 2022 ________________________________________________________________________
MEDIA SUMMARY
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The following explanatory note is provided to assist the media in reporting this case and is not binding on the Constitutional Court or any member of the Court.
On Monday, 23 May 2022 at 10h00, the Constitutional Court will hear an urgent application for leave to appeal brought by Eskom, the applicant, against the judgment and order of the Supreme Court of Appeal which dismissed an appeal against the judgment and order of the High Court of South Africa, Gauteng Division, Pretoria (High Court).
The urgent application concerns whether Eskom was, in terms of an interim order, compelled to supply electricity to indebted municipalities above the contracted Notified Maximum Demand (NMD) stipulated in the supply agreements concluded between Eskom and the respective municipalities.
The matter originates from two urgent applications that were joined together before the High Court. In both applications Eskom is the applicant. In the first application, the first respondent is the Vaal River Development Association (Pty) Limited, a non-profit organisation representing the residents of Ngwathe Local Municipality. In the second application, the first respondent is Lekwa Ratepayers Association, a non-profit organisation representing the residents of Lekwa Local Municipality. In both applications, the second to sixth respondents (being the two municipalities, the National Energy Regulator of South Africa (NERSA), the Minister of Energy, the Premiers of the Free State and Mpumalanga and the Members of the Executive Council for Cooperative Governance and Traditional Affairs for the Free State and Mpumalanga) have not filed any submissions before the Constitutional Court.
On 28 September 2008, Eskom concluded a supply agreement with Nwathe Local Municipality in terms of which it would supply bulk electricity to the municipality in
accordance with the NMD stipulated in the supply agreement. On 7 January 1981, Eskom concluded a supply agreement with Lekwa Local Municipality in terms of which it would supply bulk electricity to the municipality in accordance with the NMD stipulated in the supply agreement. In 2010, the contracted NMD for Lekwa Local Municipality was increased.
Since 2008 and 2010 there has been no increase in NMD in terms of the supply agreements for either municipalities. However, the municipalities’ consumption of and need for electricity exceed the NMD supply levels agreed to in terms of the supply agreements. Eskom has been supplying electricity in excess of the contracted NMD to both municipalities for an extended period of time. Thus far, Eskom has been charging penalties to the municipalities each time they exceeded the agreed upon electricity use. The municipalities applied for increases to their NMD supply levels but Eskom refused to agree to these increases.
In 2020, Eskom decided to reduce the bulk electricity supply to the municipalities to the NMD levels set out in the supply agreements. This meant that it would no longer supply electricity in excess of the contracted NMD levels. It informed the municipalities, but did not inform the residents. The implementation of this decision resulted in rotational load shedding in the respective municipalities (due to the decreased electricity supply), in addition to national load shedding. This had a significant impact on essential services such as water supply and the functioning of sewage works. Efforts on the part of the Ngwathe and Lekwa residents to engage with Eskom, the municipalities and members of the executive in the respective provinces were unsuccessful. Furthermore, negotiations between Eskom and the two municipalities to increase their contractually agreed NMD supply levels yielded no results. Thus, the Ngwathe and Lekwa residents, represented by the Vaal River Development Association and Lekwa Ratepayers Association (Associations), instituted urgent applications before the High Court.
Before the High Court, the Associations brought urgent applications and sought interim orders pending the institution of review proceedings to compel Eskom, to, amongst other things, restore the supply of electricity to the levels enjoyed before the electricity supply was reduced.
The High Court held the prima facie view that the applications were urgent and thus merited a hearing. In respect of the interim interdict sought, with reference to the requirements for granting an interim interdict in LF Boshoff Investments v Cape Town Municipality, the Court granted the interim interdict on the grounds that: (a) sufficient supply of electricity is intertwined with the right to healthcare, food, water and social security; (b) limited electrical supply had an adverse effect on all basic municipal services; (c) for an extended period of time before the implementation of the NMD limitations, Eskom provided both municipalities with electricity in excess of the contracted NMD and; (d) Eskom has a monopoly over the supply of bulk electricity. The residents of the municipalities thus had no other recourse than to approach the Court for relief.
The High Court ordered Eskom to increase, alternatively restore the maximum electricity load supply to the level supplied prior to its decision. The order of the High Court was to operate as an interim interdict pending final adjudication of the Associations’ application for a review of Eskom’s decision in terms of the Promotion of Justice Act (PAJA) and/or legality.
Aggrieved, Eskom sought leave to appeal to the Supreme Court of Appeal.
The question for determination on appeal was whether the High Court was correct in finding that the Associations had established a prima facie right to the interim interdictory relief. It was common cause that the matter was one of those exceptional cases where the interests of justice demanded that the interim interdicts granted by the High Court were appealable. The Court, relying on Resilient Properties (Pty) Ltd v Eskom Holdings Soc Ltd and Others (Resilient), held that given the nature and source of Eskom’s power, the exercise of this power amounted to administrative action for the purposes of section 33 of the Constitution and PAJA. It rejected Eskom’s argument that the matter before it was distinguishable from Resilient because that matter pertained to phased interruptions and ultimate terminations; whereas the matter before the Court pertained to a reduction of bulk electricity supply to contractually agreed NMD supply levels. The Supreme Court of Appeal held that any attempts to distinguish Resilient from the case before it was artificial because the facts in Resilient were similar to the case before it and the principles enunciated therein were of equal application to the case before it. The Court held that all the requirements for granting interim interdictory relief were established and that the High Court correctly granted the interim interdicts. The appeal was dismissed.
In the urgent application for leave to appeal before the Constitutional Court, Eskom submits that the issue pertaining to NMD raises a novel point in law. Eskom submits that a dispute regarding the (adequate) amount of NMD to be supplied, ought to be decided by NERSA as a specialist regulator and that courts are not suited to adjudicate such disputes.
Eskom argues that the lower courts failed to take into account that any increase to NMD levels must be in accordance with the relevant rules. Additionally, a dispute pertaining to NMD must be decided in accordance with the Electricity Regulation Act and not general legislation such as the Intergovernmental Relations Framework Act. Eskom submits that there are different forms of interruptions to the supply of electricity and that it is still supplying electricity, albeit strictly in accordance with the contracted NMD. These are legitimate interruptions that fall outside the purview of Resilient where the interruptions occurred with the aim of terminating electricity supply.
Eskom submits further that the Supreme Court of Appeal compelling it to supply sufficient electricity is at odds with the Constitutional Court’s decision in Mazibuko and Others v City of Johannesburgwhere the Court held that section 26(2) of the Constitution stipulates that the state must take reasonable legislative and other measures progressively to realise the right of access to adequate housing within available resources. Eskom submits that providing sufficient electricity does not require the state on demand to provide electricity. Eskom contends that the lower courts failed to consider that it does
not have excess electricity and that supplying electricity exceeding the contracted NMD levels puts a strain on the infrastructure and Eskom’s network. Additionally, Eskom contends that the municipalities have, as a result of the lower courts’ decisions, been absolved of their constitutional obligations.
The Associations submit that Eskom has not raised a constitutional matter or an arguable point of law of general public importance outside the law settled in Resilient. The Associations submit that in Resilient, Eskom reduced electricity supply to the municipalities to effect payment. That is the case in this instance as well. The Associations submit that the order of the High Court does not compel Eskom to exceed the agreed upon NMD; rather it is an interim decision pending a review of Eskom’s decision to decrease the electricity supplied to the municipalities. The Associations submit that the following questions are central to the appeal: (a) whether Eskom’s contractual rights against a delinquent municipality oust its public law obligations as an organ of state and; (b) whether Eskom’s decision to reduce or interrupt bulk electricity supply to a delinquent municipality is a decision that affects the basic public law rights of ordinary citizens and thus subject to PAJA? The Associations submit that Eskom has created an impossible situation where it knows that the municipalities’ electricity demands are much higher than the contracted NMD amounts, refuses to revise the supply agreements to make provision for the increased demand and then makes the argument that it is merely acting in accordance with the supply agreements. Additionally, the Associations submit that Eskom has been supplying electricity to the municipalities in excess of the contracted NMD over an extended period of time and the residents are pre-paid users who have been paying for their electricity.
