Tshwane metro will challenge the National Energy Regulator of SA (Nersa) in the Pretoria high court after the regulator granted Eskom a licence to supply power to a R30bn property development in the east of Pretoria.
Nersa in 2023 approved a power supply licence to Eskom for the Mooikloof Mega City development, under construction by Balwin properties in partnership with government, that is expected to build 50,000 residential units.
The development, announced by President Cyril Ramaphosa in 2020, is expected to cost R30bn and result in a total economic impact of R75bn.
The Tshwane metro accuses Nersa of breaching legal procedures in awarding the power utility the licence.
The case will be heard in the high court on Thursday and Friday.
The case will put a spotlight on whether the constitution gives municipalities the executive power for electricity distribution in their own jurisdictions.
Tshwane city manager Johann Mettler argues in court papers the Nersa decision is unlawful because Mooikloof is within its jurisdiction and Eskom’s takeover will dent its chances to cash in on major revenue collection.
The municipality for years has been struggling to balance its financial books citing poor revenue streams as one of the main reasons.
“The full implementation of 50,000 households is expected to have a significant impact on the city’s revenue,” Mettler argues.
“It is estimated that this development will lead to a monthly revenue loss of about R125m, based on an average household consumption of R2,500 per month.”
The estimates in a year will amount to R1.5bn.
The municipality wants the court to declare Mooikloof Mega City part of areas included in the city’s electricity licence and that the municipality has the legal right to distribute electricity to it.
“The inclusion of Mooikloof Mega City into Eskom’s licensed area of supply will adversely affect the city’s executive authority and its right in respect of electricity reticulation.”
The municipality pins its argument on section 155 of the constitution, which stipulates a municipality has exclusive municipal executive and legislative authority in its area.
Nersa and Eskom oppose the city’s case and rely on provisions of the Electricity Regulation Act (ERA) in their rebuttal.
Mettler argues permission should have been sought from the municipality when Eskom applied for the licence — adding in failing to do so Nersa breached the provisions of the act.
The city manager says the municipality became aware of Eskom’s plans in March 2022, months after the power utility filed its request to Nersa.
“The city confirmed it operates the Mooikloof substation, which is located near the development. The city also informed Nersa of its future plans to establish the Zwavelpoort substation, which will further support the Mooikloof Mega City development and other neighbouring developments.”
There have been several upmarket property developments in the east of Pretoria in recent years that at times suffered long blackouts.
The cause of blackouts includes persistent cable theft and grid constraints.
The municipality concedes it has power supply constraints but says it made plans to cater for the huge development.
“The city informed Nersa the current bulk electricity supply in the eastern suburbs of Tshwane is severely limited. However, the municipality is actively addressing this issue by implementing plans to ensure an adequate supply of bulk electricity,” says Mettler.
One of the plans is the construction of the Wildebees Infeed Station scheduled to be commissioned in 2025.
The municipality argues Eskom took over power supply in municipalities, with Nersa’s approval, but insisted this was done only when municipalities could not fulfil its mandate.
“While the development lies within the municipal boundary of the city, the agricultural holdings in the area have been supplied by Eskom. Any new township developments are then supplied by the city in line with its executive and legislative authority.”
The disputed area is an undeveloped land with scattered farm holdings.
Eskom Gauteng senior manager Mpumelelo Mnyani argues the development area is a “green field”, an area “that is outside an existing licensed area of supply”.
“The assertion that electricity supply is the exclusive preserve of municipalities is at odds with the primary statute, the Electricity Regulation Act that governs the supply, transmission and generation of electricity,” Mnyani says.
“The applicants are not impugning the constitutional validity of the provisions of the ERA which entitle Nersa to grant licences to licensees such as Eskom for supply of electricity.”
Nersa electricity regulation head Nhlanhla Gumede says the metro’s case is based on “erroneous interpretation” of the act.
“It is true that farm 375-JR [Rietfontein farm] appears in the city’s licence. But the licence could not and did not grant the city exclusivity in respect to the whole farm of 375-JR despite that it compromises portions some of which were undeveloped when the city’s licence was granted,” he argues.
“Eskom currently supplies some of the portions of the farm. Only portions of the farm, developed and with identifiable customers, would qualify as an area of supply in terms of ERA.”
Gumede insists the development was built on land comprising three farms and only portions of the Rietfontein farm (under the city licence) will be used.
“The other two farms are not designated as the city’s area of supply. Therefore the declaratory order sought by the city, which carries the consequence of having the entire Mega City as its area of supply, has no factual nor legal basis.
“The provisions of the constitution the city relies on do not preclude Eskom from being licensed to supply electricity.”
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