Coal Transporters Forum v Eskom Holdings Limited and Others

The Coal Transporters Forum (CTF), a voluntary association whose approximately fifty members are companies transporting coal for Eskom and providing logistical support, brought an application challenging power purchase agreements (PPAs) between Eskom and independent power producers (IPPs). The Minister of Energy published Determinations on 1 August 2011 and 19 December 2012 under s 34(1) of the Electricity Regulation Act 4 of 2006, determining that 3,725 MW and a further 3,200 MW of new renewable energy capacity should be procured from IPPs. This was pursuant to government's policy decision to move towards a low-carbon economy and diversify energy sources, following the Integrated Resource Plan 2010 (IRP 2010) adopted by Cabinet. The IRP 2010 was informed by the peak, plateau and decline (PPD) trajectory for greenhouse gas emissions. A Renewable Energy Independent Power Producer Procurement Programme (REIPPPP) followed through bidding windows, with successful IPP bidders announced. Eskom concluded PPAs with all successful IPP bidders except three (Adams, Bellatrix and Du Plessis). The National Energy Regulator of South Africa (NERSA/the Regulator) issued electricity generation licences to each successful IPP after public participation processes. CTF sought to interdict Eskom from concluding PPAs with the three remaining IPPs until the Regulator had taken certain decisions, and to declare invalid all PPAs already concluded.

• Whether the National Energy Regulator was required to make determinations on tariffs, prices, and terms of PPAs before Eskom could conclude PPAs with IPPs
• Whether CTF had standing to challenge the PPAs
• Whether the PPAs constituted administrative action subject to the Oudekraal principle
• Who bore the onus of proving that the Regulator had or had not taken the required decisions
• Whether the Plascon-Evans rule applied to resolve factual disputes on motion proceedings

The application was dismissed. The applicant (CTF) was ordered to pay the costs of opposition of the first respondent (Eskom), second respondent (NERSA), third respondent (Minister of Energy), and various IPP respondents, including costs of two counsel for the first three respondents.

The binding legal principles established are: (1) Administrative action and its consequences exist in fact and have legal consequences that cannot be overlooked until set aside by a court in judicial review proceedings (Oudekraal principle); (2) Power purchase agreements concluded pursuant to ministerial determinations under the Electricity Regulation Act constitute administrative action subject to the Oudekraal principle; (3) In motion proceedings where final relief is sought, an applicant bears the onus of proving all elements of its case, including that a required decision has not been taken; (4) Under the Plascon-Evans rule, where factual disputes arise in motion proceedings, the court must accept the respondent's version unless it constitutes bald or uncreditworthy denials or is palpably implausible; (5) Ministerial Determinations made under s 34(1) of the Electricity Regulation Act, in consultation with NERSA, are binding on the procurer (Department of Energy) and buyer (Eskom) and leave no room for further discretionary determination by NERSA on matters already determined; (6) The proper procedure to challenge administrative action is through legality review proceedings or review under PAJA, not through applications merely seeking declarations of invalidity of contracts; (7) When NERSA issues electricity generation licences that endorse and incorporate the terms of power purchase agreements, it has implicitly made the necessary determinations regarding those agreements.

The court made several obiter observations: (1) It noted that South Africa's energy policy, developed over two decades with extensive public participation, recognizes the country's heavy dependence on coal but acknowledges coal's detrimental environmental impacts including greenhouse gas emissions contributing to climate change; (2) The court observed that government policy accepts coal will remain the primary energy source for the foreseeable future but supports renewable energy development for a more sustainable energy mix; (3) The court described the Integrated Resource Planning (IRP) approach and the peak, plateau and decline (PPD) trajectory adopted by Cabinet for greenhouse gas emissions; (4) The court noted that the IRP's primary objective is to forecast long-term electricity demand and determine what energy sources should be used to meet that demand; (5) The court commented on CTF's criticism of the respondents' evidence regarding licences not being annexed to affidavits, stating that CTF could have required production under Rule 35(12) but failed to do so; (6) The court observed that findings that a respondent's version in motion proceedings is so untenable it can be rejected occur infrequently because courts are alive to how evidence and cross-examination might alter views of facts; (7) The court noted that s 172(1) of the Constitution mandates courts to declare unconstitutional conduct invalid and s 8 of PAJA empowers courts to grant just and equitable orders in judicial review proceedings.

This case is significant in South African energy law and administrative law for several reasons: (1) It affirms the validity of South Africa's renewable energy procurement programme (REIPPPP) as part of government's policy to transition to a low-carbon economy and diversify energy sources beyond coal; (2) It clarifies the respective roles of the Minister of Energy, the National Energy Regulator (NERSA), and Eskom in the procurement of new generation capacity under the Electricity Regulation Act; (3) It confirms the application of the Oudekraal principle to power purchase agreements, holding that such contracts constitute administrative action that stands until set aside through proper review proceedings; (4) It reinforces that parties seeking to challenge administrative action must follow prescribed review procedures under PAJA or legality review, rather than seeking declaratory orders of invalidity; (5) It clarifies that once the Minister makes binding Determinations under s 34 of ERA (with NERSA's concurrence), there is limited scope for further regulatory discretion on matters already determined; (6) It demonstrates the courts' application of the Plascon-Evans rule in motion proceedings involving factual disputes; and (7) It provides judicial endorsement of South Africa's Integrated Resource Plan and the policy framework for introducing renewable energy into the national energy mix.