Eskom has shrugged off reports of a planned class action lawsuit against its recent bout of load shedding, to the detriment of many a small business in the country who may now seek compensation.
In a statement, the power utility said that it cannot be forced to guarantee an uninterrupted supply of power.
Legal firm, De Beer Attorneys announced earlier this week that it is preparing to take legal action against Eskom in respect of the preventable losses suffered by businesses and individuals as a result of load shedding.
The firm said that Eskom as a State Owned Entity (SOE) has a legal obligation to provide electricity to the people of South Africa.
“Legally, if the business in question had a specific contract with Eskom regarding the provision of electricity, then Eskom’s negligent conduct which resulted in the causing of the power supply failure, will form the basis of our claim,” it said.
“If the claim based on delict, then we will again need to prove that Eskom’s conduct was wrongful and/or negligent.
“Here, we can expect that Eskom’s position would no doubt be that load shedding, per se, is neither wrongful for negligent – in so far as it is a rational, responsible response to the electricity crisis, ensuring that SA’s electricity grid will not collapse, which would be an unmitigated disaster.”
However, it could be argued that the electricity crisis itself is something which is of Eskom’s own making – due to its negligence in maintaining the electricity infrastructure, the firm said.
“As such, they should still be held accountable for the losses suffered. Each case would no doubt have to be evaluated on its own merits.”
Can’t sue Eskom
Eskom said in a statement that it can legally interrupt the supply of power to prevent a blackout.
“Load shedding is done countrywide as a controlled measure when the national grid is constrained to protect the power system from a total collapse,” it said.
It added that “the financial implications associated with a national blackout far outweigh the economic cost of manual load curtailment or shedding”.
And citing the Electricity Regulations Act, Eskom said “the financial impact to a specific customer alone is therefore not sufficient to justify exclusion of individual customer installations from the emergency load reduction”.
Speaking to CNBC on Thursday, Elaine Bergenthuin, a partner at De Beer Attorneys, said that the firm wasn’t necessarily fighting for money, but wanted action.
“The last thing that we would want is to have an impact on the South African tax payer in terms of this litigation, but ultimately, even if monetary compensation is not the end result that is obtained in this action, ultimately if we are to obtain a better governance and accountability… that would be fantastic.”
She said that the legal firm was however exploring avenues around obtaining monetary compensation. It was also looking at the liability from the power firm’s board.
Bergenthuin said that 300 SMEs had come forward, along with some larger firms – who have suffered damages during load-shedding. She said the firm understands the frustration felt by business, and the impact that load shedding has on the economy as a whole.
“There’s definitely avenues that are worth pursuing in this regard,” she said.
Worse than before
Eskom has previously faced legal claims for damages when it instituted load shedding in 2008 and 2015.
However, the majority of these claims were unsuccessful due to a number of factors – including a reluctance by the courts to hold Eskom liable for damages.
Eskom suspended load shedding on Sunday 24 March following a period of more than 10 days of continuous outages – the worst in history as the power utility introduce stage 4 load shedding for the first time.
Eskom attributed the return of power to a recovery in plant performance and an increase in diesel and water reserves.
Imports from Mozambique’s Cahora Bassa plant also increased to 850MW, with the restoration of feed from one of the two lines after the area was hit by a cyclone.
However, experts have warned that load shedding could last for at least several months as the power provider deals with ageing infrastructure and winter.
You can read the full statement from Eskom below:
Eskom supply agreement with either the municipality or with an individual customer makes provision that Eskom does not guarantee uninterrupted supply of electricity. In terms of the Electricity supply agreement, Eskom reserves the right interrupt supply of electricity either through load shedding, unplanned outages and planned outages.
Loadshedding is done countrywide as a controlled measure when the national grid is constrained to protect the power system from a total collapse.
In terms of the Electricity Regulations Act, NERSA issues licenses to Eskom and municipalities for supply of electricity.
In terms of these licenses, licensees are required to implement, inter-alia, the relevant requirements of the South African Grid Code and NRS048-9:2010 Edition 1 (referred to herein as NRS048-9:2010) which form part of the license conditions.
In terms of this license and the South African Grid Code (System Operations Code), the System Operator is responsible for the security of the national power system. Should the System Operator fail to discharge this duty, the national power system could collapse, causing a national blackout.
For purposes of clarity, a blackout is defined in section 3.1 of NRS048-9 as an “unplanned loss of supply over a wide geographic area”. A national blackout is further defined as “a loss of supply to the country”.
A national blackout is an uncontrolled incident on the power system that could take days to weeks to recover from. This has severe consequences for the country, as it will lead to a cascading failure of infrastructure. For example: water systems require pumping with electricity; sewage systems require water; transport systems and emergency generators require fuel which is refined and pumped by electricity; hospitals, telecommunication systems, data centers, air traffic control systems require electricity or diesel to provide backup supplies.
Whilst these infrastructure systems are generally able to deal with interruptions in electricity from time to time, their interdependence and vulnerability to a national blackout is significant.
Electricity must be generated and consumed in real time. Should the available generation not be able to meet demand, the System Operator is required to reduce load through manual interventions as an emergency response measure to prevent a national blackout. Section 4.3.8. (NOTE 2) of NRS048-9:2010 clarifies that “manual load reduction in the event of a system emergency is required in order to prevent the power system from sliding into an unstable state”.
This note goes on to clarify that “the financial implications associated with a national blackout far outweigh the economic cost of manual load curtailment or shedding.”
In order to give effect to its mandate for the security of the national power system, the System Operator will determine the amount of load reduction required, and instruct Eskom’s distribution control rooms and municipal electricity suppliers to implement emergency load reduction.
NERSA has promulgated NRS 048-9:2010 Edition 1, which specifies how this reduction in load is to be undertaken by Eskom’s distribution control rooms and municipal electricity suppliers during a system emergency. This in terms of Eskom’s Distribution License and its obligations under NRS 048-9:2010.
NRS048-9:2010 is Part 9 of a set of NRS048 specifications. It includes the requirements for “load reduction practices, system restoration practices, and critical load and essential load requirements under system emergencies”.
In terms of Eskom’s Transmission License and section 4.1 of NRS048-9:2010, the System Operator will determine when and what amount of load that is to be reduced through load shedding or curtailment in an emergency. Distribution licensees (Eskom and municipalities) are required to comply with these requirements.
In order to reduce the load by the amount required by the System Operator, NRS048-9:2010 paragraph 4.3.3 specifies that “all customer installations shall be considered for load reduction under a system emergency”. It is specifically noted in paragraph 4.3.3 (NOTE 2) that “the financial impact to a specific customer alone is therefore not sufficient to justify exclusion of individual customer installations from the emergency load reduction”.
Paragraph 126.96.36.199 of NRS048-9:2010 requires that: “All customers shall be on the load shedding schedules, with the exception of: (a) critical loads and loads with essential load requirements, where such exceptions are provided for under conditions set out in this part of NRS 048; (b) loads that comply with the requirements for immediate or notified curtailment; and (c) some loads that participate in the merit order.”