- The High Court has ruled that Farm Rietfontein 375 JR is part of Tshwane’s licensed electricity supply area.
- Nersa’s decision to give Eskom electricity supply rights in part of the Mooikloof Mega City development was declared unlawful and set aside.
- The court found that Nersa failed to properly consider Tshwane’s constitutional authority over electricity reticulation before approving Eskom’s licence amendment.
The City of Tshwane has won a High Court challenge that overturns the National Energy Regulator of South Africa's (Nersa) decision to allow Eskom to supply electricity to part of the Mooikloof Mega City development.
The case arose from a decision taken by the Nersa on 10 February 2023 to amend Eskom’s electricity distribution licence to include part of the Mooikloof Mega City development situated on Farm Rietfontein 375 JR in Tshwane.
The municipality challenged the decision, arguing that the farm already formed part of its licensed electricity supply area. It pointed out that Nersa had granted it an electricity distribution licence in September 2011 that included the farm. Although certain existing customers on the property continued to receive electricity from Eskom, the remainder of the land fell within Tshwane’s licensed area.
The municipality told Nersa that it already had electricity infrastructure serving the area and intended to expand its capacity through additional infrastructure projects. Tshwane also warned that losing the development would have a substantial financial impact. Evidence before Nersa indicated that the completed development could generate approximately R125 million per month in electricity revenue.
Tshwane further argued that municipalities hold constitutional authority over electricity reticulation within their areas of jurisdiction and that Nersa could not simply transfer part of its licensed area to Eskom without following the proper legal process.
Court Finds Nersa Ignored a Fundamental Problem
Acting Judge A Millar found that the central issue was whether Eskom could be granted rights over an area that was already included in Tshwane’s licence.
The court found that Tshwane’s licence covered all portions of the farm that were not already being supplied by Eskom’s historical customers.
Judge Millar wrote, “Tshwane’s licence covered all portions of the Farm where there were no historical Eskom customers, while Eskom’s licence was limited exclusively to those specific legacy customers.
“It follows, as a matter of logic, that any extension of Eskom’s licence to additional areas of the Farm necessarily required a corresponding amendment to Tshwane’s licence to remove those areas from its scope.”
According to the court, that never happened. The judgment noted that members of Nersa’s own Electricity Subcommittee had questioned whether Eskom could be granted rights over an area that still formed part of Tshwane’s licence.
The subcommittee expressed the view that Tshwane’s licence should first be amended before Eskom’s licence is expanded. Despite those concerns, Nersa approved Eskom’s application.
Judge Millar found that the regulator approved Eskom’s licence amendment without simultaneously amending Tshwane’s licence, obtaining Tshwane’s consent or requiring Tshwane to apply for revocation of its licence.
Constitutional Authority Overlooked
A significant aspect of the case concerned Tshwane’s constitutional powers. The municipality argued that the Constitution grants local government executive authority over electricity reticulation and that this authority was recognised in the Electricity Regulation Act. The court agreed.
Judge Millar wrote, “The Constitution unequivocally confers executive authority and jurisdiction over electricity reticulation on Tshwane. ERA expressly recognises and gives effect to this constitutional position.”
The judge found that Nersa should have considered whether Eskom’s licence amendment was permissible in light of Tshwane’s constitutional role before granting the application.
In one of the judgment’s key findings, Judge Millar said, “This was fundamental to the consideration of whether to approve Eskom’s application. This is the nub of the review and why it must succeed.”
The court also rejected Nersa’s argument that the undeveloped portions of the farm constituted a greenfield area that could be separately licensed. Judge Millar found that the farm had already been included within Tshwane’s licensed area since 2011 and therefore did not qualify as a greenfield area.
Final order
The court declared that the Mooikloof Mega City development, insofar as it is located on Farm Rietfontein 375 JR, forms part of Schedule 1 of Tshwane’s electricity distribution licence.
Nersa’s decision to include the area in Eskom’s licensed area of supply was declared unlawful, invalid and reviewed and set aside. Nersa and Eskom were also ordered to pay Tshwane’s legal costs, including the costs of two counsel.
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