Court overturns no load-shedding arrangement that risked ‘national blackout’

A full bench of the Mpumalanga High Court has put the brakes on a decision that interdicted Eskom from load-shedding multinational firm Sonae Arauco, which the state-owned utility argued put the national grid at risk of collapse.

Sonae Arauco, which produces wood-based products and is the single largest contributor to electricity revenue for the Mbombela municipality, had a verbal agreement with the municipality that it wouldn’t be subjected to rotational power cuts.

The court said it was convinced Eskom had made its case on why the order granted by the court in September cannot be enforced. 

“The appellant [Eskom] thus produced substantial evidence that execution of the order would increase the risk of a national blackout. The court a quo’s conclusion that the appellant had produced no evidence demonstrates that it overlooked this evidence and thus constituted a further misdirection that is material,” the judgment reads.

“But the simple and short answer to all of the analysis above regarding the harm that the appellant will or not suffer is that, despite the observation I made above, in any event, the appellant bore no onus to prove that execution of the order would imperil the grid.”

The interdict appeal judgment did not go into the merits of whether an agreement between the municipality and the company existed and its likely implication. That is still to be decided by the courts as Sonae Arauco has taken the local authority and Eskom to court, seeking enforcement of the agreement.

An affidavit from Nkosinathi Dlamini, technical manager responsible for network optimisation at Eskom, explaining the gravity of Sonae Arauco being exempt from load-shedding seems to have swayed the full bench.

Dlamini, whom the court accepted “had specific expertise in load-shedding”, said the exemption posed “a severe risk to the national power system” adding that Sonae Arauco was “compromising the network performance or putting the grid at risk”.

In September, Judge Johannes Roelofse interdicted the Mbombela municipality and Eskom from load-shedding Sonae Arauco’s plant, in line with the 2020 verbal agreement the company claimed it had with the municipality.

Under the purported agreement, the municipality agreed that load-shedding would not be implemented at Sonae Arauco’s factory, while the plant undertook in return to limiting its power use to 70% of capacity or less during rotational power cuts.

The municipality denies the existence of such an agreement. Eskom argued before Roelofse that the existence or lack of the purported agreement is irrelevant as such an agreement precludes it from implementing load-shedding in the municipality, whatever the state of the grid regardless of whether the municipality has reduced its load by the required amount.

In its rebuttal, the municipality, emphasised that no written agreement exists between it and Sonae Arauco.

Sonae Arauco produced graphs to prove it had for the past two years limited its electricity usage to 70% during load-shedding as part of the exemption agreement.

Roelofse was satisfied an agreement between the parties existed, pointing out the company was not load-shed for the past two years without any explanation from the municipality.

“I find in favour of Sonae Arauco. First, it and the municipality had indeed entered into the agreement and, second, nothing prevented the municipality from entering into the agreement. The NRS Code specifically provides for such an agreement to be entered into between a licensee and a large consumer,” Roelofse’s judgment reads.

“My second finding is premised on the fact that the municipality cannot say that only the municipal manager would have been authorised to enter into the agreement in line with the Municipal Systems Act and that the municipality, as an organ of state, cannot enter into oral agreements. The NRS Code specifically provides for load curtailment agreements and no formal requirements are set for its validity.”

Sonae Arauco made its foray in SA in 2001 when it bought Sappi Novobord. The group, which supplies its goods in more than 70 countries, told the court it has no other energy source and that an alternative plant would require capital expenditure of about R600m and take at least 12 to 18 months to commission, placing jobs at risk.

khumalok@businesslive.co.za