Large power users obtain interdict in five-year battle.
Despite a court order that declared its electricity tariffs unlawful, the City of Johannesburg’s power utility City Power continued to threaten four large power users with disconnection due to non-payment of these tariffs.
The companies and their industry body – the Casting, Forging and Machining Cluster of South Africa (CFMC) – last week obtained an interdict to stop City Power from cutting their electricity supply.
This comes as City Power owes Eskom almost R5 billion in arrear debt.
It has also not yet paid its October Eskom bill, which was due by 29 November.
Eskom earlier served a disconnection notice on City Power, but City Power disputes Eskom’s right to disconnect its bulk supply, because it disputes the debt. The utility has since withdrawn its notice pending a dispute resolution process.
Despite its objection to Eskom’s disconnection plans, City Power threatened to do exactly the same to its clients.
The companies that obtained the interdict against City Power are:
- Scaw South Africa in relation to the Haggie Steel Rope division;
- Dunrose Trading 57, which manufactures and distributes nails and fasteners;
- International Wire Convertors (IWC), a manufacturer of high and low carbon steel wire; and
- Abracon Property 1, which is IWC’s landlord.
Stephen Jardine, a CFMC director, told the court that the four companies all submitted formal disputes regarding their electricity bills to the City of Joburg (CoJ) in terms of local government legislation between September and November 2019. This should have the effect of suspending credit control measures like disconnecting supply, pending the resolution of the dispute.
ALSO READ: City Power achieves unqualified audit, hits 75% of targets
The disputes were based on a court challenge the companies and the CFMC launched to the method energy regulator Nersa used to determine City Power’s tariffs for 2019/20.
The disputes were later expanded to include the tariffs for the subsequent four years, which were based on the same unlawful methodology.
The users offered to pay the CoJ what they considered to be a lawful amount for the electricity they consumed every month.
In November 2022 the high court declared the tariffs unlawful and set them aside. It referred the matter to Nersa to determine what the lawful tariff should be unless the parties could agree on that within 30 days from the date of the judgment.
Nersa, however, approached the court to change the order to give it the opportunity to develop a new methodology for setting municipal electricity tariffs. It still hasn’t done that, and the application is pending.
The companies and their industry body in turn asked the court to find Nersa guilty of contempt of court for its failure to set the lawful tariffs. This application is also still pending.
ALSO READ: City Power debt: Which SDC’s owe Eskom the most?
Harassment
Jardine describes how the four companies have been harassed by City Power officials in the meantime.
Both Dunrose and IWC/Abracon had their power supply disconnected on occasion, and all four businesses have been repeatedly threatened with disconnection.
This despite an undertaking by the CoJ’s attorneys that the power will stay on.
Jardine says there seems to be a disconnect between the CoJ’s senior management and legal representatives who understand that disconnection will be unlawful until the disputes have been settled, and officials in charge of credit control who “are unaware of the illegality” of disconnections under these circumstances.
“The only reason why this application has become necessary is because of the maverick conduct of the city’s employees who routinely attempt to disconnect the applicants’ power,” Jardine stated.
Jardine says the four businesses will suffer irreparable harm if their power supply is disconnected.
ALSO READ: Lenasia SDC customers owe City Power R851m in unpaid electricity
Impact on Haggie … and the economy
Haggie is the only manufacturer of steel wire rope in the country and supplies about 85% of the productive mines in South Africa.
“If Haggie were to discontinue manufacturing, whether owing to the termination of the electricity supply or because of being unable to remain in business because of being rendered non-competitive, the mining sector in South Africa would be severely disrupted and compromised.”
Haggie also supplies strands for Eskom’s power lines and power supply in the country may be severely disrupted if it is unable to supply the product.
It has 565 employees, a third of whom would face retrenchments if Haggie was required to pay the full electricity bill.
Dunrose is the only manufacturer of nails and fasteners in South Africa with SABS ISO 9001 and SANS 820:2011 accreditation, Jardine told the court.
If its power supply is disconnected it is at risk of losing its contract to supply Cashbuild, the retailer that buys almost a quarter of its production.
ALSO READ: City of Joburg agrees to pay Eskom R1.4bn to avoid power being cut off
Impact on Dunrose … and the economy
“Dunrose is in no position to hold sufficient stock of each product that it manufactures to ameliorate the risk of not being able to supply its major customers in the event of an electricity supply termination,” Jardine stated.
It would also be unable to pass the full cost of CoJ’s electricity bills onto its clients and this would put the jobs of 40 of its 240 employees at risk.
To make matters worse, Dunrose pays 37% more for electricity than its competitors, who buy electricity directly from Eskom at a considerably lower cost.
Impact on International Wire Convertors …
IWC is a manufacturer of high-carbon steel for the bedding and setting industries, and electricity represented 40% of its total cost of production in 2018/19.
Jardine says the company breaks even when it produces 1 913 tonnes of steel per month. It currently produces 2 074 tonnes per month. If required to pay the full electricity bill, it would have to pass the costs on to consumers who may defect to buy internationally.
Even the loss of a few clients could result in the company making a loss and eventually closing.
ALSO READ: Eskom ‘not to blame’ for Joburg’s electricity debt crisis – Outa
Judgment ‘provides certainty’
Because the CoJ continues to bill the companies according to their unlawful tariffs, they are technically in arrears with Haggie “owing” R61 million, Dunrose R4.7 million, IWC R32 million and Abracon R3.4 million.
The attorneys for the applicants, MC Botha Inc, welcomed Judge Bqaqwa’s judgment as providing certainty to industrial consumers about their rights when Nersa or other state actors fail to discharge their duties in a timely or lawful manner.
“It is unfortunate that the court’s time needs to be taken up by matters that are eminently capable of being resolved by administrators,” they stated.
This article was republished from Moneyweb. Read the original here.
