Tshwane wins court battle over power supply to R30bn megacity

Tshwane metro has succeeded in its legal battle to strip Eskom of the right to supply electricity to a R30bn property development in the east of Pretoria.

High court Pretoria judge Anthony Millar, in a judgment affirming municipalities’ constitutional power to supply electricity in their own jurisdiction, found the National Energy Regulator of SA (Nersa) decision in 2023 to approve a power supply licence to Eskom for the Mooikloof Mega City development was unlawful.

The estimated R30bn infrastructure development under construction by Balwin Properties in partnership with the government is expected to build 50,000 residential units.

The effect of the judgment is that the Mooikloof development will not receive its power supply directly from Eskom but from the municipality. This undermines Eskom’s plan to eliminate the middleman in the lucrative electricity distribution model.

Tshwane city manager Johann Mettler argued in court papers that Eskom’s takeover would significantly dent the municipality’s revenue collection.

The development is expected to generate revenue of R125m monthly for the municipality, based on an average household consumption of R2,500 a month. The estimates in a year will amount to R1.5bn, which will boost the municipality’s finances.

“It is declared that [Nersa’s] decision taken on February 10 2023 to include the Mooikloof Mega City, insofar as it is located upon Farm Rietfontein 375-JR, into [Eskom’s] licensed area of supply is declared unlawful and invalid and is reviewed and set aside,” Millar said.

Mooikloof Mega City is situated in an undeveloped area that was a farm. Eskom supplied power to a few farming holdings near the site currently under development in Pretoria east.

Eskom applied to Nersa to amend its licence to include the land on which the Mooikloof Mega City is currently developed, and the application was approved in 2023.

The amendment to Eskom’s electricity distribution licence affected areas of the farm covered in Tshwane’s electricity distribution licence.

‘Impermissible overlap’

Nersa expanded Eskom’s portion without contracting Tshwane’s portion, and the judge found this was an “impermissible overlap”.

“While the area’s agricultural holdings had historically been supplied by Eskom, any new township developments were to be supplied by Tshwane consistent with its executive and legislative authority,” the judgment reads.

The court found in Tshwane’s favour that Nersa acted unlawfully in the decision. Millar affirmed the municipality’s authority and power to supply electricity.

“Nersa and Eskom argued that electricity supply does not fall within the exclusive jurisdiction of municipalities and that Tshwane’s interpretation of section 156(a) of the constitution is incorrect. This contention is rejected,” Millar ruled.

“The constitution unequivocally confers executive authority and jurisdiction over electricity reticulation on Tshwane. ERA [Electricity Regulation Act] expressly recognises and gives effect to this constitutional position.

“Nersa ought not to have approved Eskom’s licence amendment without either addressing whether or not this was permissible in the absence of an amendment to Tshwane’s licence or also the constitutional position of Tshwane.”

The court set aside Eskom’s takeover of power supply to the development.

Tshwane takes on the major project, having admitted to Nersa that the current bulk electricity supply in the eastern suburbs of Tshwane is severely limited but saying it is implementing plans to ensure an adequate supply of bulk electricity.

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.