Eskom Holdings SOC Limited v Letsemeng Local Municipality and Others

Eskom, the national electricity supplier, supplied bulk electricity to Letsemeng Local Municipality in terms of an electricity supply agreement concluded in 2006. From 2017 onwards, Letsemeng persistently failed to pay its electricity accounts, despite repeated acknowledgements of debt and payment plans. By January 2020, the arrears exceeded R41 million. Eskom issued a final notice to interrupt supply under s 21(5) of the Electricity Regulation Act 4 of 2006. Letsemeng launched urgent proceedings in the High Court to interdict the interruption pending a review and referral of a dispute to NERSA. Eskom opposed the application and brought a counter-application seeking orders compelling payment in terms of the agreement, acknowledgements of debt, statutory obligations under the MFMA, payment of a R5 million Treasury advance, and payment of the electricity-related portion of the municipality’s equitable share. The High Court granted the interim interdict but dismissed Eskom’s counter-application. Eskom appealed only against the dismissal of its counter-application.

The appeal was upheld with costs. The High Court’s order dismissing Eskom’s counter-application was set aside and replaced with an order directing Letsemeng Local Municipality to pay Eskom all current amounts due under the electricity supply agreement, all arrear debts in terms of the acknowledgements of debt, the electricity-related portion of its equitable share within 24 hours of receipt, the R5 million advanced by Treasury, and Eskom’s costs, including the costs of two counsel.

The case affirms Eskom’s right to enforce payment obligations against municipalities notwithstanding their financial distress and clarifies that inability to pay is not a defence to contractual and statutory debt. It reinforces the enforceability of acknowledgements of debt and payment clauses in electricity supply agreements and delineates the limited relevance of the Intergovernmental Relations Framework Act to claims for payment as opposed to supply interruptions. The judgment is significant for public finance discipline and the sustainability of electricity supply in South Africa.