Power utility Eskom achieved a significant legal victory against municipalities when the Supreme Court of Appeal (SCA) on March 9 affirmed its right to payment for services rendered to municipalities.

This was the conclusion of a court case between Eskom and the Free State province, in which the SCA ruled that the Letsemeng local municipality in the Free State must pay Eskom all amounts due for electricity it receives from Eskom, when such amounts are due and payable, in terms of the electricity supply agreement concluded between the parties.

The court case follows a long-running legal battle in which Eskom had been trying to recover debt owed by the municipality that had accumulated to more than R41-million by January 2020. 

The outstanding debt owed by the Letsemeng local municipality has since increased to R108.5-million as at the end of February this year.

This is despite several agreements by the municipality to discharge its debt obligations to Eskom. 

The SCA further directed the municipality to pay Eskom its portion of the equitable share that relates to electricity within 24 hours of receipt of the equitable share, as well as awarding legal costs to the municipality.

Included in its judgment, the SCA ordered the municipality to settle all arrear debts due to Eskom in accordance with the terms of the acknowledgement of debt and payment plan concluded between the parties and to pay the R5-million the National Treasury had made available to the municipality for the payment of its electricity debt.

The SCA was also critical of the dishonesty of the municipality in its dealings with Eskom which it described as disgraceful.

The SCA further rejected the Letsemeng municipality’s contention that there was a dispute concerning the municipality’s mode of payment that should be referred to the regulator and other executive authorities in terms of the Intergovernmental Relations Framework Act (IRFA) because it was unable to pay.

Further, the SCA found that the municipality must pay Eskom money owed within 30 days of receiving the relevant invoice or statement.

In its judgment, the SCA said Eskom had made several attempts to assist the municipality with the structuring of its debt and that this was evident in at least two written acknowledgements of debt and repayment plans.

The SCA further noted that such repayment plans were prepared by the municipality, and that it, on its own accord, structured and prepared the terms of repayment and gave written assurances that it could afford to pay the amounts that formed part of those repayment plans.

However, in a statement, Eskom points out that, despite the municipality’s express undertakings to pay its debt to Eskom, including current account payments and the repayment of arrears debt, the municipality reneged on its undertakings.

In total, municipalities throughout South Africa owe Eskom more than R44-billion in unpaid debt for the supply of electricity.

In its effort to recover these debts, Eskom says such attempts have often been frustrated by conflicting high court judgments, some of which have been used by “delinquent” municipalities as justification for their failure to meet their obligations to Eskom.

Meanwhile, Eskom also notes that the SCA judgement makes it clear that if a municipality raises a dispute in terms of the IRFA as a defence or claims it is unable to pay, such an action would not absolve it of its legal obligations to pay Eskom for the bulk electricity it receives.