Water tariffs must be equally applied
Umgeni Water cannot overcharge private firm
A WATER service company, which provides supply within a municipality, should not be charged higher tariffs purely because it’s a private entity.
This was the upshot of a recent judgment by the Supreme Court of Appeal (SCA), which found that private water services provider Sembcorp Siza Water, which operates in the iLembe district municipality, in northern KwaZulu-Natal, should pay Umgeni Water the same tariffs that the entity charges other municipalities.
The court was dealing with an appeal brought by Umgeni Water after the high court had ruled in favour of Siza in a matter where it had objected to the 37.9% tariff increase that had been imposed on it three years ago. In the 2015/16 financial year, Umgeni Water, after obtaining approval from the minister of Water and Sanitation, imposed a tariff increase on the bulk water supply of 37.9% for Siza, a private entity, as opposed to an increase of 7.8% which it imposed on its other customers, all of which were municipalities.
Ruling on the matter, the Pietermaritzburg High Court found there was no lawful basis for differentiating Siza from Umgeni Water’s municipal customers and, accordingly, upheld the review and set aside the tariff increase imposed on the company.
The SCA upheld the ruling and found no provision in the empowering legislation justified this type of discrimination between municipal and non-municipal water services providers, “more particularly when they are both performing a municipal function”.
“Penalising Siza for its ability to generate a profit through its efficiency would be irrational… it seems reasonably clear that Siza was targeted because it is a private entity,” the SCA judgment read.
Siza was appointed by the Dolphin Coast Transitional Local Municipality (DCLM), the predecessor to the iLembe municipality.
In terms of its appointment, Siza concluded an agreement with the municipality to supply potable water and sanitation services to a portion of the DCLM’s region for a period of 30 years.
The area Siza supplies lies between the Tongaat River and the Umvoti River and incorporates the urban areas of Zimbali, Ballito, Umhlali, Shakaskraal, Chaka’s Rock, Salt Rock, Sheffield Beach and Tinley Manor. It also incorporates certain inland areas and informal settlement areas.
Outside the concession area, iLembe performs the function of a water services provider.
“Siza is thus performing the identical functions to those that iLembe would otherwise have to perform. If Siza stops supplying those water services, or the concession agreement is terminated, iLembe (which is also the guarantor) must supply the end-users with water it has obtained from Umgeni Water.
“Its (Siza) obligations are no different from those of the municipalities to which Umgeni Water supplies bulk water. It is against this background that the lawfulness of the differential tariff imposed on Siza must be considered,” the SCA said.
The court also ruled that pending any further determination of tariffs for the supply of bulk water, Siza was ordered to pay for bulk water supplied to it by Umgeni Water at the same tariff as that at which Umgeni Water supplies bulk water to all other water services providers.
The court further ordered Umgeni Water and the minister of Water and Sanitation to pay the costs of the application.
Spokesperson for Umgeni Water Shami Harichunder said the water board received the judgment and its legal representatives were studying it. “The legal representatives will communicate with the leadership of Umgeni Water once this process has been completed. Based on the opinion expressed by the legal representatives, a decision will be taken on the next steps,” Harichunder said yesterday.