A municipality’s failure to pay Eskom and comply with load-shedding demands could have dire consequences for the entire national grid.
This was the finding of the Pretoria high court when it ruled on Emfuleni municipality failing to pay R3.5bn to Eskom, defying a 2018 order to do so.
Altogether 216 businesses argued they should be allowed to pay Eskom directly due to the municipality’s inaction.
The court found the municipality was in contempt of court and also criticised the national energy regulator Nersa for failing to implement measures to fix the nonpayment, leaving customers and businesses to suffer.
Emfuleni municipality was primarily responsible for generating and supplying electricity to its residents and businesses. It purchased bulk electricity from Eskom, then passed that to residents and businesses who paid the municipality. However, in late 2018, Eskom decided to stop supplying electricity to Emfuleni as a result of its nonpayment which, at the time, was about R900m. This decision came after Eskom demanded that Nersa intervene.
As a result of Eskom interrupting electricity supply for certain hours of the day, which is apart from load-shedding, several businesses in Emfuleni approached the court. In 2018, the Johannesburg high court ruled that, pending a final determination later Eskom could not stop its supply and the businesses could pay Eskom directly.
After the 2018 judgment, Emfuleni said Nersa had failed to provide the necessary oversight that would facilitate a direct payment regime.
Though Nersa was approached as the lawful custodian on these issues, still nothing resulted. Nersa’s attempted processes were, according to the court, “frustrated” by Emfuleni, which refused to participate.
Judges Selby Baqwa, Gcina Malindi and acting judge Irene de Vos criticised the regulator., saying: “Nersa has effectively done nothing to address the problem.”
After examining Nersa’s conduct with the municipality and the affected businesses, the court said: “The only logical conclusion to be drawn is that Nersa intentionally refuses and/or fails to act against Emfuleni to address its failures to comply with [the relevant laws].”
The court then examined the duties owed by Eskom and the municipality. “To ensure access to electricity,” the court said, “Eskom and Emfuleni have a reciprocal duty to work together to comply with their contractual and statutory obligations owed towards each other.”
Emfuleni’s nonpayment “impedes Eskom from complying with its ... mandate of generating and supplying electricity to citizenry and businesses.” As a result of the municipality not paying, Eskom experienced a shortfall, resorting to government bailouts and borrowing. This led to “catastrophic consequences” such as people not having power, businesses unable to operate and loss of jobs.
The court noted that “Emfuleni collected R4.5bn from its electricity customers at a collection rate of about 90%.” However, as a result of mismanagement, the money did not go where it was meant to.
Since 2018, Emfuleni’s electricity debt “had escalated from R1bn ... to R3.5bn in 2021 and it continues to grow.” This despite the municipality collecting payment of 90% of the charges it raises.
If the court does not intervene, it said, the debt would “plunge Eskom into a financial crisis too ghastly to contemplate”. The court noted Emfuleni’s failure to co-operate with Eskom, when it does not comply with load-shedding requests, “is a potential collapse of the entire national grid”.
The court also noted the “broader crisis” involving other municipalities, such as Letsemeng, which owed R41m. Eskom said in March that Maluti-a-Phofung local municipality in the Free State owed R7.2bn. Emfuleni’s debt of about R3bn was called “a state of disaster” by the court that “Emfuleni has yet to ... confront”.
As a result, the court ordered that, aside from being in contempt, Emfuleni and Eskom must enter into a new, workable agreement to settle the debt. Businesses could now pay Eskom directly. Nersa must exercise its oversight obligations.
Eskom and Emfuleni have six months to find a solution. Emfuleni and Nersa were ordered to pay costs.
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