ESKOM has been given court approval to cut power to a defaulting municipality that owes at least R275 million in overdue electricity bills.
In an urgent application the Ngwathe Local Municipality, including the Free State towns of Parys, Edenvale, Heilbron, Koppies and Vredefort, had asked that Eskom be interdicted from disconnecting power, and that it be ordered by the court to resume negotiations over the repayment of its rapidly mounting debt.
Eskom too lenient
Ngwathe argued that Eskom had been the author of its own misfortune by being ‘too lenient’ in its approach to the municipality’s debt.
In his judgment delivered yesterday (Thursday), Judge A F Jordaan refused Ngwathe’s application and granted Eskom’s counter application instead.
Pay entire debt
The municipality now has 14 days to pay the entire outstanding amount. If it fails to do so, Eskom may cut off power without going back to court.
Eskom must however, follow the process outlined by Judge Jordaan. This includes giving notice in newspapers four weeks before it intends to disconnect, stating that public representations may be made about its decision. Eskom must also publish another notice, once any representations have been considered, giving consumers at least two weeks of the disconnection.
The municipality’s Eskom debt problems began in 2009 when it ran up a bill of R6.3million. By September last year this had risen to R275million.
Failed to honour undertakings
The judgment also discloses that the municipality has several times failed to keep its undertakings in negotiations with Eskom. For example, when the urgent application was initially called the two sides reached an agreement that was made an order of court.
In terms of that order, Eskom would not carry out its intended disconnection. Ngwathe, on the other hand, undertook, among others, that it would pay over all the electricity that it had collected from users in the area that month. However, it paid not a single cent to Eskom.
Judge Jordaan noted that the municipality claimed Eskom had not negotiated in good faith. The municipal manager also alleged that the situation was Eskom’s fault: ‘the problem is rather to be laid at the door of Eskom because (it) neglected to enforce its rights and allowed (the municipality) to run into excessive arrears and for years allowed the situation to worsen.’
No municipal debt collection
The municipal manager also claimed that the municipality had not run any formal debt collection programme over the last six years and this had so exaggerated the problem that the monthly shortfall between income and expenditure is now almost R10million every month.
Judge Jordaan said that, contrary to the claims of the municipality, ‘there are no disputes’. Ngwathe did not dispute the amount it owed Eskom, nor its liability and the fact that was obliged to pay the arrears.
Its only real complaint was that Eskom should have been more lenient and accommodating on efforts it made to pay the undisputed debts.
By its own admission Ngwathe had failed to take steps to collect the debts owed by its consumers, despite the payment plan the municipality had proposed to Eskom in November 2013 under which it had undertaken to settle the full account by November 2014.
‘It is only now when Eskom threatens drastic action to enforce their rights that the (municipality) starts implementing a proper debt collection system.
‘In view of the (municipality’s) history as far as effective administration and control is concerned, it is questionable whether it is able to effectively implement a proper collection system.’
The judge said that when municipalities such as Ngwathe failed to pay what they owed to Eskom it threatened Eskom’s ability to carry out its duty: ‘to secure the wellbeing of the people of South Africa as a whole’.
Just as Ngwathe should be able to rely on Eskom’s co-operation in supplying power, so Eskom should be able to rely on Ngwathe’s ‘co-operation in good faith, assistance and support’.
‘I am not convinced that Eskom failed its statutory duties. It is indeed the (municipality) that has failed its statutory duties and has done so for a number of years.’
Commenting on Eskom’s counter application, the judge said that it seemed the municipality had not paid because of a financial crisis, rather than because of ‘wilful contempt’.
He accepted that if Eskom discontinued power to the municipality it would lead to serious hardships and Ngwathe had submitted that the inhabitants of the towns in the municipality would engage in ‘riotous uproar’.
‘I am acutely aware of those facts and the possible consequences of such an order, but, as a court of law, I have to apply the law and cannot be held (to) ransom by threats of violence and unruly criminal activity ….’
‘It is the duty of the (municipality), the provincial and national executive to take the necessary steps to prevent such situations from arising.
In the meantime he could not compel Eskom to continue supplying electricity without being paid. This would compromise its ability to continue supplying power to the rest of the country.
Judge Jordaan then set out the steps that Eskom would have to follow if the municipality had not paid its whole bill without a fortnight, and ordered that Ngwathe pay the legal costs of the case.