Port Elizabeth Municipality v Uitenhage Municipality

• Jurisdiction: South Africa
• Judge: Ogilvie Thompson JA, Potgieter JA, De Villiers AJA, Corbett AJA and Muller AJA
• Judgment Date: 14 December 1970
• Citation: 1971 (1) SA 724 (A)
• Hearing Date: 05 November 1970
• Court: Appellate Division

Muller, A.J.A.:

This appeal is concerned with the validity of D certain charges levied by the appellant, the Municipality of Port Elizabeth, in respect of electricity supplied by it to the respondent, the Municipality of Uitenhage. I shall refer to the parties as the Municipality of Port Elizabeth and the Municipality of Uitenhage respectively.

It appears that the Municipality of Uitenhage does not itself E operate works for generating electricity either for its own use or for supplying private consumers in Uitenhage, but obtains a bulk supply of electricity for the said purposes from the Municipality of Port Elizabeth. This has been the position for many years, and the terms and conditions of supply, including the charges leviable, have over the years been laid down in successive agreements entered into between the parties F from time to time, the last of which was concluded in writing during 1953, and which, subject to amendments agreed upon thereafter, is still in force. This agreement, as amended, is the subject of dispute in the present case; and, for a proper understanding of its terms, reference must be made to G legislative provisions regulating the supply of electricity by the Municipality of Port Elizabeth to other consumers.

Until the year 1905 the Municipality of Port Elizabeth, though authorised to employ electricity for certain municipal purposes, was not entitled to sell and supply electricity to other consumers either within or outside the municipal area. By Act 11 of 1905 power was, however, conferred on the H municipality to enter into agreements for the sale and supply of electricity to other consumers

"in accordance with the tariff to be framed by the said Council with the approval of the Governor".

(Preamble and sec. 4 of the Act).

The said Act was repealed by the Electric Power Ordinance, 6 of 1911, which thenceforth regulated, and still regulates, the supply and distribution of electricity for "public purposes" by any "undertaker"

Muller AJA

within the Cape Province. The expression "undertaker" is defined in sec. 1 of the Ordinance as

A "any local authority, company, body, or person supplying, employing or distributing electricity for public purposes within the area of a local authority".

And "public purposes" are defined in the said section as meaning

"any public scheme or system providing for:

(a)

The application of electrical energy for lighting or other purposes to or in connection with any street, place, hall, building, or structure belonging to or subject to the control of a local authority.

(b)

The supply of electric light or electrical energy for private purposes to consumers generally within the area controlled by any local authority.

(c)

B The application of electricity or electric current as a motive power for tramways, lifts, cranes and other like purposes within the area controlled by any local authority."

Sec. 5 of the Ordinance reads as follows:

"Tariffs and conditions of supply to be approved by the Administrator

5. (1)

All charges hereafter levied by any undertaker within the area of any local authority other than the Town Council of C Cape Town for the supply of electric light or electrical energy for private consumers shall be in accordance with such tariffs and conditions of supply as may be approved of by the Administrator, and no charges levied under any tariff or conditions not so approved shall be recoverable.

(2)

Such tariffs and conditions of supply shall be submitted for re-approval by the Administrator at intervals of not more than seven years.

(3)

In respect of any building or premises owned or occupied by the Government within any D area supplied by any such undertaker, the price and extent of the supply shall be subject to mutual agreement, but the rate shall not except with the consent of the Administrator exceed the lowest charge to any private consumer within such area, or to any local authority.

Provided that in considering any charges under sub-secs. (1) and (2) hereof due regard shall be given by the Administrator to local conditions."

E Sec. 6 provides that

"Subject to the provisions of this Ordinance, any local authority may contract with any other local authority for a supply of electrical energy, or for public purposes, (sic) provided that...."

The proviso is not material to the present enquiry.

There are no provisions in the Ordinance, other than sec. 5, regulating the charges leviable by an undertaker (which F expression includes a local authority) for electricity supplied to other consumers; and it was contended in argument before us that sec. 5, being in terms limited in its application to charges for electricity supplied to private consumers, was not intended to apply to a situation such as the present where one local authority (the Municipality of Port G Elizabeth) supplies electricity to another local authority (the Municipality of Uitenhage) and where the electricity so supplied is in part distributed to private consumers and in part applied to the needs of the local authority itself. I am inclined to agree with that contention but, for reasons which will become apparent hereinafter, there is, for purposes of the present dispute, no need to pronounce thereon.

H The agreement at present in force between the parties was, as I have already mentioned, concluded in 1953. In addition to providing for the particular form of electrical energy to be supplied, the point of delivery thereof, the metering of the supply and other incidental matters, provision was made in the agreement for a fixed charge per unit of electricity supplied, which charge would be subject to a pro rata adjustment for any variation in the cost of coal supplied to the Municipality of Port Elizabeth. It was specifically provided that the agreement was

Muller AJA

subject to the consent of the Administrator and of the Electricity Control Board, and that the tariff and conditions of supply

"shall be subject to the approval of the Administrator... in terms of Ord. 6 of 1911..."

By letter dated 10th February, 1953 the Municipality of Port A Elizabeth was informed that the Administrator

"has authorised your Council in terms of secs. 5 and 6 of Ord. 6 of 1911, to enter into an agreement with the Uitenhage Municipality as per draft submitted..."

One of the conditions of approval was that any amendments to the agreement "shall be subject to the Administrator's consent".

The reference in the said letter to secs. 5 and 6 of the B Ordinance was, as it seems to me, clearly erroneous inasmuch as sec. 5 has, as I have already stated, no bearing on the matter, and sec. 6, while it authorises a local authority to contract for the supply to it of electricity by another local authority, makes no provision for approval of such a contract. But, be that as it may, the fact remains that the Administrator's approval was obtained as required by the C agreement. The Electricity Control Board also notified the parties by letter of its approval of "the tariff of charges contained in the agreement". The Board's approval was presumably obtained because of the provisions of sec. 39 of the Electricity Act, 42 of 1922, then in force.

In 1962 the parties agreed upon certain variations of the 1953 D agreement, one of which concerned the charges for electricity supplied, and in this regard clause 13 of the agreement was amended to read as follows:

"Electricity shall be supplied by the Council in terms of this agreement to the consumer who shall pay for such electricity measured at Swartkops as provided in clause 11 in accordance E with the terms of the Port Elizabeth Urban Electricity Tariff published in Provincial Notice 68 of 4th February 1955, as amended from time to time, such payments to be in terms of the scale applicable to high voltage bulk consumers and presently known as Scale "C" of the said tariff as in force from time to time, less a deduction of 0.75 per cent of the amount due under such scale in respect of line losses within the Port Elizabeth municipal area and, further, subject to the applicable discount on payments to be made under such scale as provided in the Port F Elizabeth Urban Electricity Tariff referred to above."

Provision was then also made for additional charges in respect of capital expenditure on certain plant, apparatus and equipment and maintenance costs, etc., but these additional charges are not material to the present enquiry.

G The amended agreement was submitted to the Administrator for approval and, by letter dated 28th February, 1962, the parties were notified that the Administrator had approved thereof "in terms of sec. 2 of Ord. 17 of 1916". It seems clear that the reference in the letter to sec. 2 of Ord. 17 of 1916 was erroneous as the said section can have no application to the circumstances of the particular case. The section, in its terms, requires approval of agreements for the supply of H electricity to private consumers outside the area of a local authority; which is not the case here for the reason, as I have already mentioned, that the Municipality of Uitenhage is not a private consumer, nor is the electricity in question supplied outside the area of a local authority as defined in sec. 1 of Ord. 6 of 1911. The fact remains, however, that the Administrator's approval of the agreement as amended was obtained. The amended agreement was also approved of by the Electricity Control

Muller AJA

Board - presumably in terms of sec. 40 of the Electricity Act, 40 of 1958.

Provincial Notice 68 of 1955, referred to in clause 13 of the amended agreement (quoted above), promulgated an electric A tariff for consumers "within the Municipality" of Port Elizabeth. Although it was provided in reg. 11 of the said Notice that the tariff therein laid down was to be in force only until the end of the year 1955, its operation has...