Disconnecting electricity over unpaid rates illegal, says Nersa
Municipalities face fines of R2 million a day or revocation of licence
MUNICIPALITIES that “blackmail” ratepayers into paying arrears rates and other accounts by threatening to disconnect their electricity are breaking the law and face massive penalties.
They face a fine of R2 million a day or 10 percent of their annual turnover or worse, revocation of their electricity distribution licence for their actions.
This is the strong warning from the National Energy Regulator of South Africa (Nersa) following complaints from across the country that municipalities are holding guns to their customers’ heads over arrears in rates and water bills. Even pre-paid customers have been disconnected.
“It is illegal for municipalities to disconnect electricity to recoup rate arrears,” said Nersa spokesman Charles Hlebela.
The practice is widespread, and includes the metros of Cape Town, Durban, Johannesburg and Pretoria.
At issue is the fact that while the national Electricity Regulation Act forbids the practice, municipal bylaws around the county permit it. Nersa argues that in terms of the Consitution national laws take precedence over municipal bylaws in a conflict.
The City of Cape Town’s director of revenue, Trevor Blake, acknowledged that the city did cut off or restrict ratepayers’ services such as electricity and water if their other accounts were in arrears, but maintained it was completely legal.
This occurred in cases where ratepayers had a consolidated bill – a billing system that combined all the ratepayer’s accounts.
“The success of the City of Cape Town’s debt management initiatives and the fact that it has one of the highest collection ratios for any municipality in the country is premised on the fact that the city views a ratepayer’s debt holistically,” said Blake.
“If, for example, ratepayers have outstanding rates but all their services accounts are up to date, the city can disconnect their utility services as per the Municipal Systems Act and the City of Cape Town’s Credit Control and Debt Collection Policy.”
Nersa, however, says the Electricity Regulation Act, 2006 provides for circumstances under which electricity can be reduced or discontinued but these do not include defaulting on other municipal accounts.
If Nersa’s interpretation of the law is correct then many electricity customers, in municipalities across the country, including Cape Town, have been illegally disconnected.
Nersa has asked that customers who have had had their electricity disconnected for other outstanding accounts lodge a complaint with Nersa’s customer services.
In a test case in Colesberg in the Northern Cape, the Colesberg Action Group has taken the local municipality to court after five people had their prepaid electricity disconnected because they had water and rates arrears.
The action group’s Johan Matthee said: “This matter is still under debate in our court.
“The metros/municipalities promulgate by-laws allowing them to act in this manner. However, if one studies the Electricity Regulation Act it clearly state that the local authorities are acting illegally.”
In this case, warrants of arrest have been issued for the municipal manager, mayor and the treasurer of the Umsobomvu Municipality because they allegedly ignored a court order stopping them from disconnecting customers.
Like Umsobomvu, the eThekwini Municipality in Durban is relying on Section 102 (1) of the Municipal Systems Act and the Durban Extended Powers Consolidated ordinance, No 18 of 1976 for its “authority to cut off the supply of electricity to water service or both if the amount reflected in the consolidated account is not paid”.
The municipality’s debt collection policies allocate priorities in the payment of bills. Moneys paid go to arrear accounts first and then to current accounts.
Electricity is always paid last. Should a customer fail to pay the full amount due for the consolidated bill, the electricity account is deemed unpaid and disconnected.
Blake said the City of Cape Town also had the right to take such action against ratepayers; however, it offered a number of options to people who could not afford to pay their debts.
“If anyone gets disconnected, that means they never came to access the benefits offered by the city. If they don’t qualify for those benefits, we can still give them an affordable arrangement to pay off their arrears.”
But a leader of the Greater Cape Town Civic Alliance, Philip Bam, said disconnection was a problem, especially in the case where ratepayers had a dispute with the city over their accounts.
“It’s a problem, and one that the alliance plans to discuss. It makes you wonder whether what the city is doing is legal.”
Like Cape Town, the eThekwini Municipality also believes its action is legal.
The city’s head of income Louis Kruger says: “Ethekwini’s payment conditions are set out in our Credit Control and Debt Collection Policy document and in our bylaws.
“These are very clear – if any portion of the account, including rates, remains unpaid, we may disconnect the electricity service.”
He said section 102 of the Municipal Systems Act was also clear.
“In terms of this Act a municipality may credit any payment by a debtor against any account of that debtor, and a municipality may implement any of the debt collection and credit control measures provided for in the Act, which includes the disconnection of services.”
Nersa replied: “Such a bylaw or provincial legislation is invalid as long as the national legislation is operational.”
Now a KwaZulu-Natal woman, Lilian Develing, chair of the Confederation of Mistbelt Ratepayers and Residents Associations, has lodged a formal complaint with Nersa against the eThekwini Municipality for cutting off electricity services.
Develing said the eThekwini Municipality was disconnecting between 14 000 and 16 000 customers a month.
In many cases disputes had arisen between the municipality and customers after their properties had been revalued and their rates increased.
But Kruger said they did not disconnect customers where there is a legitimate dispute.
“If a legitimate dispute is declared in respect of their accounts, then we must resolve that first before disconnecting.”
Mathee said Nersa had already warned a number of municipal managers (including Colesberg) that their actions were illegal “but it seems they regards themselves as above the law”.
Kruger said they had not been contacted by Nersa about the disconnections, but “Nersa would have to go to court” to challenge their actions.