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[2016] ZAGPPHC 996
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Heidelberg Kloof Land-Owners Association v Lesedi Local Municipality and Others (95656/2015) [2016] ZAGPPHC 996 (2 November 2016)
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
DIVISION, PRETORIA
2/11/16
CASE
NO: 95656/2015
REPORTABLE:
NO
OF
INTEREST TO OTHER JUDGES: NO
In
the matter between:
HEIDELBERG
KLOOF LAND-OWNERS
ASSOCIATION
Applicant
and
LESEDI
LOCAL
MUNICIPALITY
First Respondent
MAYOR:
LESEDI LOCAL
MUNICIPALITY
Second Respondent
MUNICIPAL
MANAGER:
LESEDI
LOCAL
MUNICIPALITY
Third Respondent
NATIONAL
ENERGY REGULATOR
OF
SOUTH
AFRICA
Fourth Respondent
JUDGMENT
Tuchten
J
:
1
This is a dispute between the applicant and the first respondent
(the
municipality) which the has jurisdiction over the properties of the
applicant's members. The applicant is a bulk buyer of
municipal
services. It buys electricity and water from the municipality which
it resells to its members. The applicant claims that
the municipality
has overcharged it for electricity and water. The municipality
concedes that it has charged too much for water
because, it says, of
a clerical error. The municipality conceded the relief sought by the
applicant in the answering affidavit
in relation to the provision of
water so nothing further need be said on this score. The real dispute
is about electricity.
2
There is elaborate statutory provision for how the
amounts
municipalities charge for electricity may lawfully be determined.
This is important because the lawful imposition of an
electricity
tariff depends on compliance with these statutory provisions. Because
of the way the case developed and the conclusions
to which I have
come, I need sketch these provisions only broadly.
3
Under s 74 of the Local Government Municipal Systems
Act, 32 of 2000
(the Systems Act), a municipality is obliged to adopt and implement a
tariff policy on the levying of fees for
municipal services. These
services include in the present case the provision of electricity
which the municipality buys from Eskom.
4
As I shall show, this new tariff policy might have
been misleading in
relation to the tariff applicable to the applicant but no direct
point was made of this in the papers. I shall
explain how this
potential confusion arose.
5
A municipality may be
licensed to sell electricity under the Electricity Regulation Act, 4
of 2006 (the Regulation Act). The municipality
was so
licensed
by
the
fourth
respondent (Nersa).
Section
15
of
the Regulation Act is
important in
this
case. It provides:
[1]
(1)
A licence condition determined under
section 14 relating to the
setting or approval of prices, charges and tariffs and the regulation
of revenues-
(a)
must enable an efficient licensee to recover
the full cost of its
licensed activities, including a reasonable margin or return;
(b)
must provide for or prescribe
incentives for continued improvement of
the technical and economic efficiency with which services are to be
provided;
(c)
must give end users proper information
regarding the costs that their
consumption imposes on the licensee's business;
(d)
must avoid undue discrimination
between customer categories; and
(e)
may permit the cross-subsidy
of tariffs to certain classes of
customers.
(2)
A licensee may not charge a customer
any other tariff and make use of
provisions in agreements other than that determined or approved by
the Regulator as part of its
licensing conditions.
(3)
Notwithstanding subsection (2), the
Regulator may, in prescribed
circumstances, approve a deviation from set or approved tariffs.
6
So, under s 15(2) of the Regulation Act, a decision
by a municipality
to charge consumers for electricity in accordance with a particular
tariff is not enough to create a legal power
to charge; the approval
of the Regulator, ie Nersa, must be obtained.
7
By letter dated 29 January 2015, Nersa wrote to municipal
managers to
tell them that it had approved a guideline increase in electricity
prices for 2015/16, based on certain stated assumptions.
Nersa wrote:
It
is important to note that this guideline is not an automatic increase
in tariffs and that licensees are still required to apply
to [Nersa]
for approval of their tariffs in accordance with the provisions of
Section 15(1) of the [Regulation Act] before implementation.
8
The applicant was previously the beneficiary of a
special
dispensation in relation to the provision to it by the municipality
of electricity. This dispensation was given the force
of law under a
tariff policy called colloquially the Kloof policy. The Kloof policy
was abolished by a resolution of the council
of the municipality (the
council) taken on 31 March 2015. Then the municipality proceeded to
develop and advertise a new tariff
policy which was approved at a
meeting of the council on 27 May 2015.
9
In a submission to the council for consideration
at its meeting on 31
March 2015, officials stated:
It
is well understandable that the municipality's ability to fund its
operations is also based on its own generated revenue. ...
The
following tariff increases are proposed to be effected in the 2015/16
financial year.
One
of the increases proposed in the submission was, in line with Nersa's
guideline, 12,2% for electricity. But this broad proposal
was given
greater detail in the body of the proposal. In relation to the
category of consumers into which the applicant falls,
the proposed
increase was much greater than 12,2%.
10
The municipality's proposed budget was also tabled at the meeting
of
31 March 2015, for information. Included in the proposed budget was a
category directly relevant to the applicant. This category
provided
under item RR 1 for a fixed charge and an energy charge for the
supply of voltages between 230 and 400 volts and for the
supply of
voltages greater than 400 volts for consumers such as the applicant.
11
The applicant's case is that the charges proposed for the applicant
for
the 2015/2016 financial year was merely a repackaging of the
charges for the previous two financial years applicable to the
applicant.
If this is so, I cannot see that it makes any difference
to the overall result of this application.
12
The council met on 27 May 2015 to consider the budget, which included
a
consideration of the electricity tariff for the 2015/2016 financial
year. The budget was approved by majority vote. Accordingly,
the
council resolved that the budget as tabled would be implemented by
the municipality (the budget resolution). The content of
the budget
resolution appears from a minute of the proceedings which must be
read together with certain annexures.
13
The charges for electricity were set out in one of these annexures
and
provided separately for "bulk residential resellers", a
category into which the applicant falls. There, explicitly, the
charges as set out in the proposal tabled on 31 March 2015 were again
set out.
14
The municipality published a notice to ratepayers and consumers
setting
out what was said to be the essence of the decision of 27 May
2015 relating to, among other things, the electricity tariff. The
notice recorded that the electricity tariff was subject to the
approval of Nersa and that the full text of the council resolution
was available on the municipality's website and in hardcopy. The
notice stated (by inference) that the increase in electricity
tariff
over the previous tariff applicable was 12,2%.
15
The statement that the increase in the electricity tariffs was 12,2%
was
potentially misleading. This is because only
some
electricity
tariff items increased by 12,2%. The electricity tariff items
applicable to the applicant increased by 70,32%.
16
The municipality also published a notice in a local newspaper,
Mapeza,
in the first week of June 2015. That notice is in dense,
small print and refers to the various tariff items. In the first
block
of the notice, the statement is made that the increase in the
tariffs relating to electricity would be 12,2%. But in the body of
the notice, the tariff directly applicable to the applicant was set
out in the same terms as those I have previously described.
17
The proposed electricity
increases were then submitted to Nersa for approval. Nersa
wrote to
the municipality making
an
enquiry
in
regard
to
the
"adjustment and
revision
of
electricity tariffs
for
the
municipality
...".
Nersa's letter of enquiry could not be traced but the municipality's
reply,
dated
9
June
2015,
is
before
me.
[2]
The
letter
dated 9 June 2015 makes
reference to tariff B (residential resellers), a
category into
which
the
applicant
would
fall.
It
seems
likely
that
"tariff B"
is
a reference
to item RR1
in
the
proposed budget but because
the
page of this letter was
not available when the affidavits were drawn, this was not dealt with
on the papers.
[3]
18
In the first paragraph of the heretofore missing page, however, the
statement
was made that "... only the approved increase of 12,2%
was added." Whether this statement was factually incorrect
cannot
be determined because nothing in regard to the second page of
the letter appears in the papers and I therefore cannot determine
the
context in which the statement was made.
19
On 1 July 2015, in a letter to the municipality, Nersa approved the
electricity
tariff of the municipality. Although Nersa made reference
to its guideline increase of 12,2%, Nersa in its letter of approval
expressly
approves in terms the charges applicable to residential
resellers such as the applicant. The charges applicable to the
applicant
and approved by Nersa amounted to an increase over the
tariff items of the previous year of 70,32%.
20
The municipality then proceeded to implement the tariff as approved
by Nersa. Correspondence was directed by the applicant to the
municipality on this issue. In a letter dated 25 June 2015, the
applicant asserted that the notice which appeared in Mapeza could not
be correct because the summary differs from the contents.
I have
dealt with this in paragraph 16 above. It is in the context of the
relief sought by the applicant significant that the applicant
was in
fact not misled by the notice. The applicant appreciated the
discrepancy. The applicant was not led by the notice to believe
that
the increase was only 12,2%.
21
In response to the applicant's letter dated 25 June 2015, the
municipality
replied in a letter dated 5 July 2015. In its letter the
municipality admitted that the increase was greater than 12,2% and
defended
its decision. This led to further correspondence in which
the applicant said that it could not accept that Nersa had approved
an
increase greater than 12,2%.
22
In a letter dated 21 July 2015 written by its attorney, the applicant
again made the assertion that Nersa had approved no more than a 12,2%
increase and that the increase of over 70% had been implemented
"without conveying the increase" to Nersa. The municipality
however steadfastly refused to reduce the amounts charged
to the
applicant. The applicant paid what was charged under protest and
launched the present application for the relief which I
shall now
describe.
23
In its notice of motion, the applicant sought relief as follows:
1
Ordering and declaring that the Council of Lesedi Local Municipality
resolved at a meeting held on 27 May 2015 that the percentage
increase in the electricity tariff charged for bulk residential
resellers will increase with 12,2% for the 2015/2016 financial
year;
2
2.1
Alternatively
and insofar as the Council or Lesedi Local
Municipality did in fact resolve at the meeting held on 27 May 2015
that the percentage
increase to the electricity tariff for bulk
residential resellers for the 2015/2016 financial year exceeded
12,2%, that such resolution
is invalid, unlawful and set aside;
2.2
Ordering and directing the First Respondent to apply an increase not
exceeding
12,2% to the electricity tariff charged for bulk
residential resellers for the 2015/2016 financial year;
3
Ordering and
directing the First Respondent to reimburse the Applicant the amount
of R131 135,90 plus VAT together with interest a
tempore morae;
6
Costs of the application against the First
Respondent. The Second, Third and Fourth Respondents are joined
in
this application as interested parties only and no costs order
is sought against any of these Respondents insofar that
the matter is
not opposed. In the event of the matter being opposed, then a costs
order will be sought against such Respondents;
24
The second, third and fourth respondents did not oppose the
application.
As is evident, no relief was sought against any of them.
Only the applicant and the municipality filed papers and were
represented
at the hearing before me.
25
The first issue raised by the notice of motion is whether the
municipality
as a fact resolved that the percentage increase in the
electricity tariff charged to bulk residential resellers would
increase
by no more than 12,2% for the 2015/2016 financial year.
26
In my view, the municipality did not so resolve. To determine this
issue, the terms of the resolution must be examined. Of course the
resolution like any document must be read in its context, in
the
light of the purpose for which it was framed and passed and in the
light of what was known to councillors at the time. See
eg
Natal
Joint
Municipal Pension
Fund
v
Endumeni
Municipality
2012 4 SA 593
SCA paras 18 and 25-26.
27
But before embarking on the interpretative exercise, the terms of
the
resolution must be examined. It is clear in my view that a specific
provision was included in the resolution which unambiguously
provided
for the charges that would be levied against bulk residential
resellers such as the applicant.
28
It may be, as I have said, that an incautious reader might have been
misled by the municipality's general statements that the increases
would not exceed 12.2%, so that the specific provisions relating
to
bulk residential resellers were overlooked. But that was never the
case in relation to the applicant, which appreciated the
discrepancy.
29
It was equally not the applicant's case that references to the
increase
of 12.2% in the resolution constituted a promise or
representation made to ratepayers and consumers which created a
legitimate
expectation to which the municipality should be held,
notwithstanding the later provisions in the resolution which imposed
greater
increases. Nor was it the applicant's case that the possibly
misleading presentation of the basis on
which
the municipality intended to
achieve its desired increase in the electricity tariff resulted in a
failure
by the municipality to give proper content to a duty to
facilitate public participation in the legislative process. Indeed,
there
is nothing in the founding or replying affidavit which suggests
that relief was sought on any of these grounds or that anyone other
than Cir Mulder, who was present in the council chamber when the
resolution was debated, was misled by its terms or the documents
which preceded it. Nor was there any other basis suggested in the
papers or during argument on the strength of which the resolution
might have been unlawfully taken.
30
So on the facts, the relief in prayers 1 and 2 cannot be granted.
But
there is a more fundamental reason why the application cannot
succeed. I have found that the approval granted by Nersa authorised
the municipality in its terms to impose the 70,32%. I cannot agree
with the submission of counsel for the applicant to the contrary.
My
reason for this conclusion is that the Nersa approval is clear in its
terms. Under s 15(2) of the Regulation Act, the municipality
is
obliged to charge the applicant (and all other electricity consumers
within its area of jurisdiction) the tariff approved by
Nersa. That,
in my judgment, is exactly what the municipality is doing. And it is
the decision by Nersa to approve the tariffs
proposed by the
municipality in the terms in which Nersa did so that forms the legal
foundation of the power of the municipality
to levy the charges to
bulk residential resellers (and others) and the concomitant
obligation of the applicant to pay them.
31
There is no challenge to the decision of Nersa. So, while it stands,
the decision of Nersa constitutes existing law which must be obeyed
unless and until that decision is set aside by a court. See
eg
Oudekraal Estates (Pty) Ltd v City of Cape Town
and Others
2004 6 SA 222
SCA para 14.
32
In the result, except for the relief relating to the provision of
water, the application cannot succeed. The result on the water issue
does not translate to substantial success and I do not think
the
applicant is entitled to costs. I have considered whether I should
order costs against the applicant as argued on behalf of
the
municipality. I have decided not to do so, in accordance with the
Biowatch
principle. The issues raised relate to the public
powers of the municipality and resolved an issue which concerned bulk
retail
resellers of electricity within the municipality generally.
33
I make the following order:
1
The first respondent is directed to apply an increase not
exceeding
14,5% in respect of the water consumption tariff for the financial
year 2015/2016.
2
The first respondent is directed to reimburse the
applicant the sum
of R13 271,99 plus VAT together with interest a
tempore morae.
3
For the rest, the application is dismissed.
4
There will be no order as to costs.
_______________________
NB
Tuchten
Judge
of the High Court
31
October 2016
For
the applicant: Adv C Acker
Instructed
by Liebenberg Malan Liezel Horn Inc Heidelberg
For
the first respondent: Adv M Majozi
instructed
by Ngeno & Mteto Pretoria
Heidelberglesed195656
15
[1]
Section 15 was previously s 16 but was renumbered by Act 28 of 2007
with effect from 1 May 2008
[2]
In
fact,
the record
as
initially
constituted only
contained
the
first
page
of
the municipality's
letter dated 9 June 2015. The second page of
this
two page letter
was
discovered shortly before the hearing and put into the record by
consent. Counsel for the applicant declined the invitation
from the
bench to adjourn the matter
sine
die
to
consider whether the applicant needed to deliver further affidavits
or amplify the relief it sought.
[3]
I say that this seems likely because in the proposed budget item
"RR" falls between items AA and CC.