Eskom Holdings SOC Limited v Lekwa Ratepayers Association NPC and Others; Eskom Holdings SOC Limited v Vaal River Development Association (Pty) Ltd and Others

Eskom unilaterally decided to reduce bulk electricity supply to Ngwathe Local Municipality and Lekwa Local Municipality to historic, outdated and inadequate Notified Maximum Demand (NMD) supply levels that had been contractually agreed decades ago. The municipalities had for years exceeded their NMD levels with Eskom's acquiescence, as the agreed levels (55 MVA for Lekwa from 1981; 21 MVA for Parys and 4.3 MVA for Vredefort from 2008) were hopelessly inadequate for current demand. Both municipalities owed substantial debts to Eskom (R1.26 billion for Ngwathe; R1.13 billion for Lekwa) and had failed to honor payment obligations for years. However, the residents in the affected areas were paying consumers using pre-paid electricity. When Eskom implemented its decisions in July 2020, it caused severe rotational load shedding (up to 11 hours per day in some instances) in addition to national load shedding. This resulted in catastrophic consequences: hospitals could not function adequately, water treatment plants ceased operating, taps ran dry, sewage spilled into streets and the Vaal River causing environmental disaster, and essential services were paralyzed. Residents' associations brought urgent applications for interim interdicts to restore electricity supply pending review proceedings.

• Whether residents have established a prima facie right to interim interdictory relief to restrain Eskom from implementing unilateral decisions to reduce bulk electricity supply to municipalities to contractually agreed NMD levels
• Whether Eskom's decisions constitute administrative action subject to PAJA and constitutional review
• Whether Eskom, as an organ of state, was required to comply with constitutional and statutory intergovernmental dispute resolution mechanisms before taking unilateral action
• Whether an appeal against an interim interdict is appealable in the interests of justice
• Whether Eskom's decisions were irrational and failed to take into account relevant considerations
• Whether the relationship between Eskom and municipalities is purely contractual or subject to constitutional obligations regarding cooperative governance

Both appeals dismissed with costs, including costs of two counsel. The interim interdicts granted by the High Court (Millar AJ) remained in place, requiring Eskom to restore electricity supply to levels supplied before the implementation of the NMD limitations, pending finalization of review applications.

Organs of State, including state-owned enterprises like Eskom, are constitutionally and statutorily required under section 41 of the Constitution and sections 40-41 of the Intergovernmental Relations Framework Act to make every reasonable effort in good faith to settle intergovernmental disputes through prescribed dispute resolution mechanisms before taking unilateral action that undermines another organ of state's ability to fulfill its constitutional obligations. The relationship between Eskom and municipalities regarding electricity supply is not purely contractual but falls within the constitutional framework of cooperative governance because Eskom, as an organ of state, supplies bulk electricity to local government spheres to secure the economic and social well-being of people. Eskom cannot exercise its statutory powers under section 21(5) of the Electricity Regulation Act to reduce or interrupt electricity supply in a manner that renders municipalities unable to discharge their constitutional obligations to provide basic services to citizens without first exhausting intergovernmental dispute resolution processes. Such decisions, when taken without compliance with constitutional and statutory imperatives for cooperative governance, are prima facie irrational and reviewable as administrative action under PAJA for failure to take into account relevant considerations. A prima facie right for interim interdictory relief can be established by demonstrating prospects of success in review proceedings to set aside decisions on grounds of irrationality and non-compliance with constitutional obligations.

The court noted that electricity is "the cornerstone upon which all the realization of other rights is based" - homes cannot be built, water cannot be pumped, sewerage cannot operate, and healthcare facilities cannot function without electricity supply. The "inherent dignity" and "right to life" of residents are directly affected by electricity supply. The court observed that although the interim interdict appeals were exceptional, it remains generally true that it is not in the interests of justice to permit appeals against interim interdicts as this defeats their interim nature and undermines a necessarily imperfect but usually best-designed procedure to achieve justice. The court characterized the Ngwathe and Lekwa municipalities as "dysfunctional" and "delinquent" but noted this did not absolve Eskom of its constitutional obligations. The court noted with apparent criticism that Eskom had "inexplicably failed to make any serious attempt for more than ten years" to act in terms of legislative prescripts and had "indulged" the municipalities for far too long before suddenly taking drastic action. The court observed that Eskom's decisions were used "as leverage to extract payment" - a coercive measure taken when Eskom knew full well the financially strapped municipalities could not settle debts within the short timeframe allowed, having struggled for years to do so.

This case reinforces fundamental principles of cooperative governance in South Africa's constitutional framework. It establishes that organs of state, including state-owned enterprises like Eskom, cannot unilaterally exercise contractual rights when doing so undermines other organs of state's ability to fulfill constitutional obligations. The judgment emphasizes that intergovernmental disputes must be resolved through prescribed constitutional and statutory mechanisms before resorting to unilateral action or litigation. It clarifies that the relationship between Eskom and municipalities transcends mere contract and is subject to constitutional principles in section 41 of the Constitution and the IRFA. The case affirms that electricity supply is a cornerstone basic service essential for realization of other constitutional rights including dignity, life, housing, water, and health care. It demonstrates that even where municipalities are financially delinquent, constitutional processes must be followed, and provincial/national government intervention mechanisms must be explored. The judgment also confirms that prima facie rights for interim interdicts can be established by demonstrating prospects of success in review proceedings based on irrationality and failure to consider relevant considerations under PAJA. The case represents important jurisprudence on the balance between contractual enforcement rights and constitutional obligations in the context of essential service delivery.