Independent power producers catch a break

Rights highlighted in court action intended to hinder them.
Let there be light … even though the current Eskom power crisis had no bearing on the outcome of the court’s decision, it was an opportune time for the rights of the IPPs and the validity of the PPAs to be cemented in a court decision. Photographer: Dean Hutton/Bloomberg

In 2008 cabinet accepted that the use of coal as a power source would decline from 2030 onwards, and in 2011/12 the energy minister and the National Energy Regulator of South Africa (Nersa) determined that electricity generated from renewable energy sources – wind, concentrated solar power, solar photovoltaic, biogas and so on – could be procured through a tender process.

This led to Eskom signing power purchase agreements (PPAs) – with all but three of the independent power producers (IPPs) whose applications were successful – in 2018.

The government’s energy policy had in fact been developed over nearly two decades of extensive public participation and stakeholder involvement. While South Africa has large coal reserves and coal will remain the primary source of energy for the foreseeable future, it has negative consequences such as the emission of greenhouse gases, leading to an energy policy that “supports and promotes the development of renewable energy to achieve a more sustainable energy mix”. The Integrated Resource Plan 2010-2030 (IRP) was established to give effect to national policy within the framework of the government’s electricity policy framework, including the establishment and procurement of new generation capacity.

Rights and duties

The PPAs that all this led to govern the rights and duties of the parties regarding the generation and sale of electricity, have a lifespan of 20 years from the commercial operation date of the power plant concerned, may not be disputed, and are non-negotiable in that bidders must accept the terms.

A public participation process that included public hearings was followed for each project – and Nersa issued a written decision along with an electricity generation licence to each successful IPP bidder. 

Thus it would seem that all the required legal processes were followed.

Not so, according to the Coal Transporters Forum (CTF), which applied to the North Gauteng High Court to interdict Eskom from entering into PPAs with the three IPPs who had not yet signed agreements, and to have all the PPAs that had already been signed declared null and void. 

The respondents to this action – Eskom, Nersa, the minister of energy, and some 38 IPPs – were represented by a weighty legal team. It was going to be an interesting battle.

Arguments without evidence

The CTF, which represents some 50 coal transport companies, argued that Nersa’s decisions and the reasons for the decisions were not available.

It did not, however, offer any evidence to back up its claim, and argued that the burden of proving that Nersa had already taken the decisions lay with the respondents.

The court held that CTF “bears the burden of establishing that it is entitled to the relief it seeks”.

CTF further argued that Nersa must determine the prices and terms upon which the IPPs would sell their electricity to Eskom. In its judgment, the court held that: “There is simply no merit in CTF’s argument that the Regulator must first determine these matters before Eskom may enter into PPAs with the IPPs”.

Read: Truckers lose court challenge against solar arrays and wind farms

An important finding

The court made an important finding that will have bearing on future judicial reviews of administrative decisions: “Finally, it bears mentioning that the process and procedure in challenging and setting aside administrative action is by means of legality review proceedings or review proceedings under PAJA [the Promotion of Administrative Justice Act of 2000], and not proceedings wherein a party merely seeks that the contract concluded be set aside by a court of law or declared null and void.

“Section 172(1)(a) of the Constitution makes it mandatory for a court to declare conduct that is inconsistent with the Constitution invalid and s 172(1)(b) gives the court the further power to make any order that is ‘just and equitable’.

“Section 8 of PAJA empowers a court, in proceedings for judicial review under PAJA, to ‘grant any order that is just and equitable’.”

Case dismissed

The court then dismissed CTF’s application and ordered that it pay the legal costs of all the respondents.

Even though the current Eskom power crisis had no bearing on the outcome of the court’s decision, it was an opportune time for the rights of the IPPs and the validity of the PPAs to be cemented in a court decision.

It is essential for the economic wellbeing of South Africa that an uninterrupted power supply is secured by whatever means. After the mayhem caused by the recent power disruptions, most South Africans would be in agreement.



Sort by:
  • Oldest first
  • Newest first
  • Top voted

You must be signed in to comment.


Finally. Some sanity prevails and it took the courts to find that the unions (because it is indirectly them) behavior is contrary to the constitution and the well being of ALL OTHER South Africans. South African unions will literally hold a gun to the head of the country’s economic growth and millions of people’s jobs just to fend off any progress that might have an outside chance of impacting a small number of their members. They would rather have us using spades to load coal into stoves to keep warm as the coal powered stations fail and run out of coal rather than try and keep up with the rest of the world and future proof our economy.

Too true, ifitwalks. In the past the employers used to be the oppressors. Now the unions are, desperately trying to maintain their own comfortable positions (i.e. workers’ dues), and to hell with the rest of South Africa, SADTU have wrecked the education and the futures of millions of Black kids. They should be banned, and positions of headmasters and teachers made on merit. NUM is the same. Irwin Jim and his cohorts are trying to ignore the facts staring them in the face – that coal is a dying, filthy industry worldwide, and that renewables have so declined in price that that are an obvious solution to SA’s energy problems. “But no, we will strike.” Can’t see beyond the end of their noses. Unbelievable.

End of comments.





Follow us:

Search Articles:Advanced Search
Click a Company: