Eskom’s decision to restrict the supply of electricity to the Lekwa (Standerton) and Ngwathe (Parys) local municipalities has resulted in the raw sewage of 500 000 people polluting the Vaal River, which is the main water source for the whole of Gauteng.
This was one of the arguments forwarded on Tuesday in a digital hearing of the Johannesburg High Court, in support of applications to restore the electricity to previous levels. The two applications were heard together.
Eskom, on the other hand, maintained that it is merely acting in accordance with the electricity supply agreements with the two municipalities and that problems in this regard should be addressed to the municipalities.
The applications were brought by the Lekwa Ratepayers’ Association and the Vaal River Development Association respectively – against Eskom, the two municipalities, energy regulator Nersa, the minister of mineral resources and energy and the premiers and MEC for cooperative governance in Mpumalanga and the Free State.
Eskom was the only respondent to make an appearance.
The court heard that both municipalities had concluded electricity supply agreements with Eskom a decade or more ago. The agreements stipulate the notified maximum demand (NMD) – the 30 minutes of highest use in a period of a month – for each municipality.
The purpose of the NMD is to assist Eskom in planning its electricity supply. Municipalities are not allowed to exceed the NMD without written permission from Eskom, and should they do so frequently a very punitive penalty regime kicks in.
In the past both municipalities have regularly exceeded their NMD and Eskom dealt with this by supplying the increased electricity demand and imposing the penalties.
Recently the utility however informed the municipality that it will now limit the supply to the contracted NMD.
This has left the two municipalities with an ongoing power shortage to the extent that they had to institute local load shedding. The towns of Parys and Vredefort in Ngwathe, for example, exceeded the NMD by 23.5% and 35% respectively before Eskom began to throttle their supply.
Eskom’s demands ‘impossible’ to meet
In terms of the NMD rules a municipality must apply to Eskom to increase the NMD as the demand grows.
The court heard that both municipalities did exactly that, but that Eskom would only agree if the municipalities paid all their arrear debt and even made large prepayments. This, according to the applicants, is impossible.
Acting Judge Anthony Millar was shocked to hear that Eskom charges municipalities interest on arrears at the prime interest rate plus 5%.
Ngwathe, for example, earns R12 million in electricity revenue per month, but its interest payments to Eskom alone amount to R10 million per month.
Millar remarked that Eskom might have an incentive not to approve upward adjustment of the NMD, because doing so would cut off an income stream.
Public function obligations
The applicants argued that a municipality is merely a conduit for electricity supply and that Eskom performs a public function by performing its duties. It knows the electricity it supplies to the municipalities is reticulated to consumers and has an obligation to follow an administratively fair process before limiting the electricity supply to the two municipalities.
However, the utility only engaged with the municipality and not the residents on the matter.
The applicants argued that they are suffering because two organs of state – the municipality and Eskom – failed to use the appropriate mechanisms to resolve their disputes.
In terms of the electricity supply agreement between the parties, disputes should be referred to arbitration. The other option open to them is to involve Nersa, which has the legislative powers to resolve disputes between its licencees.
The applicants asked the court to end the “human catastrophe” that impacts residents by ordering Eskom to restore the status quo.
Infrastructure is available
The infrastructure at the points of service is available and Eskom can do it, the applicants assured the court.
Advocate Makhosi Gwala, acting on behalf of Eskom, informed the court that his client had an apprehension that Millar is biased against Eskom and applied for the acting judge to recuse himself.
Millar refused the application and said that while he made remarks while the applicants presented their case, he was open to hearing Eskom’s arguments.
Eskom argued that the power underlying its decision to limit the electricity supply to the two municipalities is derived from the contract it has with them and that the obligation to provide basic municipal services lies with the municipalities, not with Eskom.
The court may not interfere with the contract and substitute the content, which is what the applicants want, Gwala said.
He denied the existence of any intergovernmental dispute, saying Eskom put its conditions for increasing the NMD for the two municipalities on the table as a first move in a negotiating process and the municipalities did not respond. The process has therefore not been concluded and there is no certainty as to what the final position may be.
Gwala said Nersa’s NMD rules make it clear that exceeding the NMD puts the electricity grid and other users at risk, which is proven by the fact that one of the transformers serving Parys has been damaged.
He said to increase the NMD would require infrastructure upgrades, at a cost of R187 million for Lekwa and R4.5 million for Parys. The municipalities have to pay that as well as their arrear debt before the supply can be increased.
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Gwala further argued that the reason for Ngwathe’s increased electricity use is illegal connections and that by increasing the NMD, Eskom would be accommodating electricity theft.
Millar reserved judgment but said he would try to give his ruling before the end of the week.