Recent competition law developments in the energy sector
South Africa’s crippling electricity crisis was recently described by President Ramaphosa as an existential threat to the economy and social fabric. The country has experienced about 200 days of load shedding so far this year, which is approaching the 206 days recorded for the whole of last year. As the energy availability factor remains low, there has been a rush to different judicial forums in search of varying forms of relief.
One of the unfortunate spin-offs of significantly-reduced capacity and ever-increasing municipal debt is that tariffs have risen sharply. The Competition Tribunal's recent Cape Gate judgment addressed some of these issues.
Cape Gate (a major producer of wire and steel products) referred a complaint to the Tribunal alleging that the Emfuleni Municipality had been charging it excessive prices for electricity. The Tribunal had to determine whether it had jurisdiction to adjudicate the matter, since the law provides for the National Energy Regulator of South Africa (NERSA) to investigate complaints of price discrimination regarding electricity tariffs.
The Tribunal began by drawing an important distinction between price discrimination and excessive pricing. Whereas the former seeks to equalise the prices charged by the supplier, the latter is a complaint of overcharging by a dominant firm. The Tribunal said that once a complainant alleges conduct that contravenes the Competition Act, it is required to hear the matter, particularly because the Tribunal is a specialist forum which is best equipped to engage with these types of excessive pricing complaints. More importantly, the Tribunal is empowered to make an order prescribed by the Competition Act which is best suited to remedy the market failure. For these reasons, the Tribunal found that it had the requisite jurisdiction over the complaint of excessive pricing. However, this is merely a preliminary finding on the part of the Tribunal. A full-blown inquiry into the merits as to whether the municipality has actually contravened the Competition Act by charging excessive tariffs still needs to unfold.
The recent Sasol judgment also considered the issue of concurrent jurisdiction between the Tribunal and NERSA. In this case, the Gas Users Association lodged a complaint with the competition authorities alleging that Sasol was charging an excessive price for gas. Again, the Tribunal found that it has jurisdiction to determine whether Sasol is abusing its dominant position by charging an excessive price, simply on the basis that the complaint was framed in terms of the Competition Act. Interestingly, the Gas Users Association was able to obtain interim relief in the form of a six-month interdict preventing Sasol from increasing its gas prices beyond a certain cap. The Competition Commission also recently referred a complaint against Sasol for the excessive pricing of gas. Again, as these are only preliminary findings, an inquiry into the merits of whether the Competition Act has actually been contravened still needs to take place.
The Department of Trade, Industry and Competition has introduced two block exemptions: one for energy users and another for energy suppliers. The exemptions, which were first published during the now-withdrawn national state of disaster, permit some collaboration between industry players to respond to issues of electricity supply. Ordinarily, this type of conduct would fall squarely within the crosshairs of the competition authorities, but circumstances warrant a departure from the Competition Act. For example, telecommunications operators will now be able to collaborate to ensure that their cellular towers and related infrastructure remain operational during intermittent electricity supply.
Finally, the Pretoria High Court recently ordered that the Minister of Public Enterprises take all reasonable steps to ensure that there is a sufficient supply of electricity to prevent any interruption to hospitals, schools and police stations. In making this finding, the Court found that load shedding unjustifiably infringes on the constitutional rights to education, health care, freedom and security.
This judgment has been criticised for a host of reasons. The relevant government departments have since responded, saying that in many respects it is simply not possible to implement an order of this nature which, in turn, undermines the rule of law and the separation of powers.
These recent electricity-related developments are in their infant stages but are an indication of interesting and creative modes of relief being sought by litigants. What remains to be seen is whether these matters will prompt others to approach forums for relief of their own, thereby opening the floodgates to litigation. If so, potential litigants should be aware that the effectiveness of legal relief is only as good as the existence of effective remedies.
These matters raise another common problem: concurrent jurisdiction and regulatory overlap. The jurisdictional boundaries between regulators and competition authorities are becoming increasingly blurred. This blurring has the unfortunate effect of creating legal uncertainty and confusing the rights, duties and obligations of stakeholders.