Brief Summary

Electricity — Licensing — Review of Nersa decision to amend Eskom's electricity distribution licence — City of Tshwane sought to review and set aside Nersa's decision to include Mooikloof Mega City in Eskom's licensed area, asserting it fell within its own licensed area — Nersa's approval of the amendment challenged on grounds of legality and procedural fairness — Court held that Nersa's decision was unlawful and invalid as it failed to consider Tshwane's constitutional rights and obligations regarding electricity distribution within its jurisdiction.

Comprehensive Summary

Summary of Judgment

1. Introduction

The matter concerned an application in the High Court (Gauteng Division, Pretoria) to judicially review and set aside an administrative decision taken by the National Energy Regulator of South Africa (NERSA). The impugned decision, taken on 10 February 2023, amended Eskom Holdings SOC Limited’s electricity distribution licence to include within Eskom’s licensed area of supply the Mooikloof Mega City Development, to the extent that the development is situated on Farm Rietfontein 375-JR.

The applicants were the City of Tshwane Metropolitan Municipality and the City Manager of the City of Tshwane. The first respondent was NERSA, as the licensing authority under the electricity regulatory framework. The second respondent was Eskom Holdings SOC Limited, the beneficiary of the licence amendment. Additional respondents (the South African Local Government Association, the Minister of Electricity, the Minister of Mineral Resources and Energy, the Minister of Co-operative Governance and Traditional Affairs, and National Treasury) did not participate in the proceedings and did not appear at the hearing.

Procedurally, Eskom lodged its application to NERSA for a licence amendment on 25 March 2021. Tshwane became aware of the application only in March 2022, after NERSA invited public participation, and then participated in the public hearing process. NERSA nevertheless approved Eskom’s amendment on 10 February 2023. Tshwane brought review proceedings under section 10(3) of the National Energy Regulator Act 40 of 2004, read with section 31 of the Electricity Regulation Act 4 of 2006, and also invoked the principle of legality. The matter was heard on 16 April 2026 and judgment was delivered electronically on 8 June 2026.

The general subject-matter of the dispute was whether NERSA could lawfully extend Eskom’s licensed area to cover parts of Farm Rietfontein 375-JR forming part of the Mooikloof Mega City development, given that the Farm was already reflected in Schedule 1 of Tshwane’s distribution licence (subject only to an express exclusion for existing “legacy” Eskom customers at the time Tshwane’s licence commenced).

2. Material Facts

Historically, Farm Rietfontein 375-JR fell under the jurisdiction of the former Kungwini Local Municipality, which was later dis-established. In 2008, the area was transferred to the municipal authority of the City of Tshwane Metropolitan Municipality. These background jurisdictional facts were treated as common cause.

On 22 September 2011, NERSA granted Tshwane an electricity distribution licence. The Farm appeared in Schedule 1 to Tshwane’s licence as “1926 Rietfontein 375-JR”, which the judgment treated as encompassing the Farm, including subdivided portions. At the time of the granting of Tshwane’s licence, certain existing customers in the generally undeveloped area had historically been supplied by Eskom. Tshwane’s licence expressly excluded those existing Eskom-supplied customers by providing that customers supplied by Eskom (or another licensed distributor) at the commencement date were excluded from Tshwane’s licence. The judgment treated it as material that this arrangement resulted in a division: Eskom remained licensed for those legacy customers, while the balance of the Farm—predominantly undeveloped land—fell within Tshwane’s licensed area.

On 25 March 2021, Eskom applied to NERSA to amend Eskom’s distribution licence to include the Mooikloof Mega City development insofar as it related to portions of the Farm for which Eskom held no licence at that time. Tshwane only learned of Eskom’s application in mid-March 2022 through media reports and public consultation notices, and NERSA only officially informed Tshwane on 25 March 2022. Tshwane thereafter objected and participated in the process, including attending and presenting at the public hearing on 11 April 2022.

In its engagement with NERSA, Tshwane asserted that the Farm formed part of its licensed area; that it had existing infrastructure in the area (including the Mooikloof 132 kV/11 kV sub-station); that it intended further infrastructure development; and that an Eskom licence expansion would have significant revenue implications. The court treated these contentions as part of the context presented to NERSA, while the dispositive factual consideration for the outcome was the licensing position: the Farm was listed in Tshwane’s Schedule 1, and Eskom’s licensed position was limited to legacy customers.

Internally within NERSA, the judgment recorded that, at NERSA’s Electricity Subcommittee Meeting on 10 February 2023, members repeatedly raised concerns that the same area remained listed in Tshwane’s licence and indicated a view that Tshwane’s licence should first be amended to remove the area before it could be included in Eskom’s licence. It was common cause that no amendment to Tshwane’s licence was ever made or applied for. Despite the stated procedural concern, NERSA approved Eskom’s licence amendment on 10 February 2023.

A factual dispute arose in relation to a supplementary affidavit filed by Eskom in the review proceedings, which relied on a township establishment condition allegedly directing the developer to plan with Eskom as the licensed supplier. Tshwane opposed the admission of this affidavit on the basis that the information was not before NERSA when it made the decision. The court agreed with Tshwane and did not admit the supplementary affidavit, holding that the review had to be assessed on the record before NERSA at the time of the decision.

3. Legal Issues

The central legal questions were whether NERSA’s decision to amend Eskom’s distribution licence to include the Mooikloof Mega City development on Farm Rietfontein 375-JR was lawful and authorised, given that the Farm was already included in Schedule 1 to Tshwane’s distribution licence, and given the statutory framework governing licence amendments.

A connected legal question was whether the Farm (or undeveloped parts of it) could properly be treated as a “greenfield” area under NERSA’s Internal Electricity Licence Procedure, in a way that would take it outside Tshwane’s existing licensed area of supply for licensing purposes.

The dispute was primarily one of application of law to fact within the administrative-law framework: the material facts concerned the content and effect of the respective licences, the absence of any amendment to Tshwane’s licence, and the regulator’s power under the Electricity Regulation Act to amend licences. It also entailed a legal characterisation issue (whether the Farm could be characterised as greenfield) and a lawfulness inquiry under PAJA into whether the decision was authorised by the empowering provisions, and whether it was otherwise unlawful or unconstitutional.

A further legal issue arose as to the proper framework for review. Tshwane invoked PAJA and also the principle of legality, but the court had to determine whether PAJA provided the applicable basis without the need for an additional legality review. Ancillary issues included whether alleged procedural unfairness and delay in notification rendered the decision reviewable, and whether the developer (Balwin Properties) had to be joined due to a direct and substantial interest in the relief sought.

4. Court’s Reasoning

The court approached the matter as a review of administrative action. It held that, by operation of section 10(3) of the National Energy Regulator Act 40 of 2004 and section 31 of the Electricity Regulation Act 4 of 2006, NERSA’s decision was reviewable in accordance with the Promotion of Administrative Justice Act 3 of 2000 (PAJA). Relying on the Constitutional Court’s confirmation in Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and Tourism and Others [2004] ZACC 15; 2004 (4) SA 490 (CC), the court treated PAJA (and specifically PAJA review grounds) as the appropriate framework and held that a separate legality review was not required.

The court identified the “nub” of the dispute as whether Tshwane’s licence conferred, for the non-legacy parts of the Farm, an exclusive right to supply electricity, such that any attempt to license Eskom for additional parts necessarily required a corresponding contraction of Tshwane’s licensed area. The court reasoned that the original licensing arrangement was designed so that the two licences together covered 100% of the Farm: Eskom’s licence covered only the specified legacy customers, and Tshwane’s licence covered the remaining area (with an express exclusion for those existing Eskom customers). On that footing, extending Eskom’s licensed area into the remaining parts of the Farm without simultaneously amending Tshwane’s licence created an impermissible overlap. The court considered this logical consequence decisive: an amendment expanding Eskom’s portion necessarily required an amendment removing that portion from Tshwane’s Schedule 1 area.

The court then measured NERSA’s conduct against the empowering provisions of the Electricity Regulation Act, focusing on section 16, which governs licence amendments. While Eskom applied to amend its own licence under section 16(1)(a), the court regarded it as fundamental that no application was made to amend Tshwane’s licence, nor was Tshwane’s permission obtained in relation to any change affecting its licenced area. The court also referred to section 17, governing revocation on application by a licensee, noting that no such application had been made by Tshwane. The court treated NERSA’s own subcommittee concerns recorded on 10 February 2023 as reinforcing that NERSA appreciated the problem of licensing the same area to two distributors, yet proceeded regardless.

NERSA attempted to justify its approach by characterising the Farm (insofar as it was undeveloped) as a “greenfield” area under its Internal Electricity Licence Procedure rules. The court rejected that contention as inconsistent with the rule definition. The rules defined greenfield as an area outside an existing licensed area of supply and that has never had an electrical connection. The court held that Farm Rietfontein 375-JR had been within Tshwane’s licensed area since 2011, and therefore could not be “outside” an existing licensed area of supply. The greenfield characterisation could not, on the court’s reasoning, be used to take the area outside the ambit of Tshwane’s existing licence.

On Tshwane’s argument that Eskom’s application failed to comply with section 10 of the Electricity Regulation Act (which sets out requirements for a licence application), the court held that section 10 applied to initial licence applications rather than an amendment application brought by an existing licensee. The court reasoned that requiring Eskom, in seeking a licence amendment, to comply as if it were making a first licence application would be impractical and unreasonable, and that it was for NERSA to call for information it needed to decide the amendment. This ground of review was therefore rejected.

The court also relied on the principle that administrative decisions must be made on the basis of material facts properly before the decision-maker, citing Pepcor Retirement Fund and Another v Financial Services Board and Another 2003 (6) SA 38 (SCA) on material mistake of fact as a basis for review. However, the court treated the core defect as not remedied by later information. In this context, Eskom’s supplementary affidavit was excluded because the review had to be assessed through the lens of the record before NERSA when the decision was taken.

The court rejected NERSA’s and Eskom’s argument that electricity supply (and specifically reticulation) does not fall within the exclusive jurisdiction of municipalities and that Tshwane’s reliance on section 156(1)(a) of the Constitution was incorrect. The court stated that the Constitution confers executive authority over electricity reticulation on municipalities, and that the Electricity Regulation Act recognises and gives effect to this constitutional position. The court held that NERSA ought not to have approved Eskom’s licence amendment without addressing whether the amendment was permissible in the absence of an amendment to Tshwane’s licence, and without addressing Tshwane’s constitutional position. This failure was treated as fundamental to the decision’s lawfulness.

Several additional grounds were advanced but not upheld as necessary to determine the review. On procedural unfairness due to delayed notification, the court accepted that Tshwane was not timeously informed in accordance with the distribution licence procedure, but held that Tshwane participated meaningfully once aware and that the process was procedurally compliant thereafter; the court noted Tshwane’s concession which disposed of the ground. On the statutory 120-day timeframe issue, the court held that the delay did not establish prejudice and would not, by itself, justify review in the circumstances.

On joinder, the court rejected the contention that the developer (Balwin Properties) should have been joined. Applying the principle stated in Lebea v Menye and Another 2023 (3) BCLR 257 (CC), the court held that a party must have a direct and substantial interest in the order sought, not merely an interest in the court’s reasoning or findings. The court held that Balwin’s interest was limited to the supply of electricity, not who supplied it, and therefore did not warrant joinder.

5. Outcome and Relief

The court granted the relief sought by Tshwane. It issued a declarator that the Mooikloof Mega City, insofar as it is located on Farm Rietfontein 375-JR, is included in Schedule 1 to Tshwane’s electricity distribution licence NER/D/TSHWANE granted on 13 October 2011.

It further declared that NERSA’s decision of 10 February 2023 to include the Mooikloof Mega City (on Farm Rietfontein 375-JR) in Eskom’s licensed area of supply was unlawful and invalid, and the decision was reviewed and set aside.

On costs, the court ordered that NERSA and Eskom pay Tshwane’s costs jointly and severally, on the party-and-party scale, including the costs of two counsel, with such costs to be taxed on Scale C.

Cases Cited

The judgment referred to Bato Star Fishing (Pty) Ltd v Minister of Environmental Affairs and Tourism and Others [2004] ZACC 15; 2004 (4) SA 490 (CC). It also referred to Glencore Operations South Africa (Pty) Ltd v NERSA 2023 JDR 4386 (GJ), Joseph v City of Johannesburg 2010 (4) SA 55 (CC), and Eskom Holdings SOC Ltd v Vaal River Development Association (Pty) Ltd 2023 (4) SA 325 (CC).

In addition, the judgment cited MEC for Environmental Affairs and Development Planning v Clairison’s CC 2013 (6) SA 235 (SCA), Pepcor Retirement Fund and Another v Financial Services Board and Another 2003 (6) SA 38 (SCA), Johannesburg Metropolitan Municipality v Gauteng Development Tribunal 2010 (6) SA 182 (CC), and Lebea v Menye and Another 2023 (3) BCLR 257 (CC).

Legislation Cited

The judgment referenced the Constitution of the Republic of South Africa, 1996, particularly section 155(2)(a), section 156(1)(a), and Part B of Schedule 4 (electricity and gas reticulation). It cited the National Energy Regulator Act 40 of 2004, including section 10(3) and section 10(1)(a), (b), (d), (e), and (f). It cited the Electricity Regulation Act 4 of 2006, including sections 10, 11, 12, 13(1), 16(1), 17, 27, 31, and 35.

It also referred to the Promotion of Administrative Justice Act 3 of 2000, and to the Local Government: Municipal Structures Act 117 of 1998. The judgment further referenced the Intergovernmental Relations Framework Act 13 of 2005, including the mechanism contemplated by section 42(1)(d).

Rules of Court Cited

The judgment referred to Rule 28(1) in the context of the joinder principle discussed in Lebea v Menye and Another 2023 (3) BCLR 257 (CC).

Held

The court held that Farm Rietfontein 375-JR, including the Mooikloof Mega City insofar as it is situated on that Farm, was included in Schedule 1 of Tshwane’s existing electricity distribution licence, subject only to the express exclusion of existing Eskom-supplied customers at the commencement of Tshwane’s licence. On the court’s reasoning, NERSA could not lawfully approve an amendment expanding Eskom’s licensed area into that Farm without a corresponding lawful change to Tshwane’s licence (or Tshwane’s permission, or a statutory revocation mechanism being invoked), because doing so created an impermissible overlap of licensed areas.

The court held that NERSA’s attempt to treat the undeveloped portions of the Farm as a “greenfield” area under NERSA’s internal licensing procedures was inconsistent with the definition of greenfield, because the area was not outside an existing licensed area of supply and had been included in Tshwane’s licensed area since 2011.

The court held further that the review fell to be determined under PAJA as the applicable review framework by operation of the National Energy Regulator Act and the Electricity Regulation Act. It set aside the decision taken on 10 February 2023 as unlawful and invalid. It also held that additional grounds advanced (including delayed notification and the 120-day period point) did not provide a basis for relief on the facts, and that the developer did not have to be joined because it lacked a direct and substantial interest in the order sought.

LEGAL PRINCIPLES

The judgment applied the principle that, where legislation provides that decisions of a regulator constitute administrative action reviewable under PAJA, the review should proceed within PAJA’s framework rather than through a separate legality enquiry, particularly where the grounds of review are addressed by PAJA.

It applied the principle that an administrative decision must be taken consistently with the empowering statute and must be authorised by law, and that a licensing authority may not approve regulatory outcomes that result in an impermissible overlap of licensed areas where the statutory scheme requires proper amendment or revocation processes to adjust existing rights and obligations.

The judgment applied the principle that a regulator’s decision must be made on the basis of the material information properly before it at the time the decision was taken, and that a review is assessed by reference to the contemporaneous record. On this approach, post-decision information introduced in review proceedings (and not before the decision-maker) does not provide a basis to validate an otherwise defective administrative decision, and may be excluded when it is inconsistent with the record-based nature of review.

It applied the principle (in the joinder context) that joinder depends on a party having a direct and substantial interest in the order sought, and that an interest in the reasoning or in collateral consequences, without an interest in the order itself, is insufficient.

Finally, the judgment reflected the constitutional and statutory principle that municipalities have executive authority over electricity reticulation within their jurisdictions (as recognised by the Constitution and the Electricity Regulation Act), and that regulatory decision-making affecting municipal reticulation competence must properly account for that constitutional position within the licensing framework.

City of Tshwane Metropolitan Municipality and Another v National Energy Regulator of South Africa and Others (2023-072548) [2026] ZAGPPHC 530 (8 June 2026)