ENERGY GOVERNANCE OUTSIDE FORMAL CONSTITUTIONAL DESIGN

1. Introduction

Energy governance outside formal constitutional design refers to the regulation, control and practical management of energy through institutions, relationships and practices that are not fully specified in the constitutional text itself.

A constitution normally establishes the broad structure of government and allocates public powers. It rarely explains in detail how electricity must be generated every hour, how utilities must manage grid instability, how tariffs must be calculated, how municipalities must recover electricity debts, or how regulators, utilities and private generators must coordinate.

Consequently, much of the real governance of energy occurs through legislation, regulatory agencies, public utilities, municipal practices, licences, grid codes, contracts, administrative decisions, technical standards and informal institutional coordination.

Thus:

Formal Constitution → Basic Allocation of Authority

Practical Energy Governance → Legislation + Regulators + Utilities + Municipalities + Markets + Technical Rules + Administrative Practice

The important legal question is whether these extra-constitutional governance arrangements remain subject to constitutional principles such as legality, accountability, rationality, procedural fairness and cooperative government.

2. Why Energy Governance Extends Beyond the Constitution

Modern electricity systems are extraordinarily technical. Constitutional provisions cannot determine every operational matter relating to generation, transmission and distribution.

In South Africa, the Constitution gives municipalities important responsibilities regarding electricity reticulation and requires local government to ensure sustainable service provision. But the actual electricity system involves institutions such as Eskom, municipalities, NERSA, private generators, consumers and other governmental bodies.

The Constitutional Court has recognised that municipalities are not merely intermediaries through which electricity happens to pass. They constitute an autonomous sphere of government with constitutional responsibilities toward residents.

Energy governance therefore develops through a network rather than a simple constitutional hierarchy.

3. Administrative Energy Governance

A substantial amount of energy governance takes place through administrative law.

Regulators and utilities make decisions concerning:

tariffs;

licences;

grid access;

electricity disconnections;

generation authorisations;

technical standards;

municipal electricity distribution;

debt recovery; and

electricity-supply restrictions.

These decisions may not be individually described in the Constitution, but they remain exercises of public or statutory authority.

National Energy Regulator of South Africa v Borbet SA (Pty) Ltd (2017)

The case concerned NERSA's approval of an additional 1.4% electricity tariff increase sought by Eskom.

The Supreme Court of Appeal dealt with the statutory methodology governing tariff adjustments and the regulatory relationship between NERSA and Eskom. The litigation illustrates how crucial questions of electricity pricing are governed through specialised regulatory institutions and statutory methodologies rather than directly through constitutional provisions.

The broader principle is:

Specialised regulatory governance remains legally controlled even where its detailed rules exist outside the constitutional text.

4. Public Utilities as Governance Institutions

Eskom demonstrates how a public utility can become a powerful institution of governance.

Its operational decisions concerning bulk electricity supply can influence municipalities, businesses, hospitals, households and entire communities.

This means that technically framed decisions can have profound constitutional consequences.

Eskom Holdings SOC Ltd v Vaal River Development Association (Pty) Ltd (2022)

This Constitutional Court case concerned Eskom's reduction of bulk electricity supplied to municipalities experiencing serious financial and operational difficulties.

The Court confronted a complicated institutional relationship involving Eskom, municipalities, residents, statutory electricity regulation and constitutional obligations. The judgment emphasised that municipalities have constitutionally assigned responsibilities to provide municipal services and cannot simply abdicate those responsibilities.

The case demonstrates that practical energy governance may involve several institutions whose powers overlap without becoming identical.

5. Governance Through Municipal Institutions

Municipalities constitute another important site of practical energy governance.

They distribute electricity, collect revenue, adopt by-laws, administer credit-control systems and interact directly with consumers.

Joseph v City of Johannesburg (2009)

This landmark Constitutional Court case concerned tenants whose electricity was disconnected because their landlord had accumulated substantial arrears.

The tenants had no direct contractual relationship with City Power. Nevertheless, the Constitutional Court rejected the proposition that contractual privity completely determined their position.

The Court explained that electricity is an important basic municipal service and that local government's obligations to provide municipal services arise from constitutional and statutory public-law responsibilities. It held that the affected occupants were entitled to procedural fairness before termination.

This case is especially significant because it demonstrates that:

Energy governance extends beyond contractual relationships.

Public-law obligations may structure relationships between electricity providers and persons who are not formal contractual customers.

6. Informal Governance and Institutional Interdependence

Energy systems frequently depend upon practical cooperation between institutions.

For example:

Eskom generates/supplies bulk electricity → Municipality purchases electricity → Municipal network distributes it → Residents consume electricity → Municipality collects revenue → Municipality pays Eskom.

A failure at one point can destabilise the entire governance chain.

Consequently, energy governance often becomes relational governance: institutions must coordinate even where no single constitutional provision comprehensively regulates their relationship.

This is particularly visible when financially distressed municipalities fail to pay Eskom.

7. Cooperative Governance

The Constitution nevertheless imposes boundaries upon this institutional interaction.

Eskom Holdings SOC Ltd v Resilient Properties (Pty) Ltd (2020)

The Supreme Court of Appeal considered decisions by Eskom to interrupt electricity supply to municipalities that owed it substantial amounts.

The Court emphasised constitutional principles of cooperative government. Among the problems identified was the failure adequately to use intergovernmental mechanisms before taking steps capable of seriously affecting municipal service delivery. The Court also considered the potentially catastrophic effects of electricity interruptions upon other organs of state and communities.

The case demonstrates an important principle:

Institutional autonomy does not justify unilateral energy governance where constitutional cooperative-governance obligations apply.

8. Governance Through Revenue and Enforcement

Electricity governance also operates through financial mechanisms.

Municipalities require revenue to maintain infrastructure and provide sustainable services. Consequently, credit control and electricity termination can become instruments of governance.

Rademan v Moqhaka Local Municipality (2013)

The applicant withheld payment of municipal rates because she was dissatisfied with service delivery. Her electricity supply was subsequently disconnected.

The Constitutional Court considered the interaction between the Municipal Systems Act, municipal powers and the Electricity Regulation Act. The judgment recognised municipal constitutional responsibilities concerning sustainable service provision while examining the statutory mechanisms available for recovering amounts owed.

The case illustrates that energy governance occurs through everyday administrative mechanisms such as billing, account consolidation, debt collection and service restriction.

9. Constitutionalisation of Extra-Constitutional Energy Governance

The fact that energy governance occurs outside detailed constitutional design does not mean that it occurs outside constitutional law.

The Constitution establishes an outer framework within which specialised institutions operate.

Accordingly:

Technical decision ≠ constitution-free decision

Commercial relationship ≠ absence of public-law responsibility

Statutory discretion ≠ unlimited discretion

Institutional autonomy ≠ freedom from accountability

The courts therefore constitutionalise energy governance indirectly through principles such as legality, administrative justice, rationality, cooperative government and institutional accountability.

The Vaal River litigation particularly illustrates the complexity of this process: the Constitutional Court dealt with the respective responsibilities of Eskom and municipalities rather than simply treating electricity provision as the responsibility of one undifferentiated entity called “the State.”

10. Network Governance Model

Modern energy governance can consequently be represented as:

Constitution

↓

Parliament and Legislation

↓

Government Departments + NERSA + Eskom + Municipalities

↓

Grid Codes + Licences + Tariffs + Contracts + By-laws

↓

Private Generators + Businesses + Communities + Consumers

Rather than operating through one constitutional command structure, electricity governance emerges from continuous interaction among these institutions.

This can be described as polycentric energy governance because several centres of authority simultaneously influence the electricity system.

11. Risks of Governance Outside Formal Constitutional Design

Extra-constitutional institutional governance provides flexibility, but it also creates risks.

Technical agencies may acquire enormous practical power. Utilities may make decisions affecting fundamental interests without sufficient public participation. Contractual structures may obscure public responsibilities. Municipal financial crises may shift costs onto residents, while fragmented responsibility may allow institutions to blame one another for system failures.

Therefore, constitutional oversight becomes particularly important precisely because energy governance is institutionally dispersed.

Courts do not normally operate electricity systems themselves. Their role is instead to ensure that those institutions exercising energy-related authority remain within the boundaries established by law, constitutional responsibility and administrative justice.

12. Conclusion

Energy governance outside formal constitutional design describes the reality that electricity systems are governed through far more than constitutional text. Regulators, utilities, municipalities, legislation, licences, contracts, tariff methodologies, technical rules and administrative practices collectively determine how electricity is actually produced, distributed and consumed.

Cases such as Joseph v City of Johannesburg, Rademan v Moqhaka Local Municipality, NERSA v Borbet, Eskom v Resilient Properties, and Eskom v Vaal River Development Association demonstrate that South African courts recognise this complex institutional structure. They also show that governance occurring outside detailed constitutional design does not escape constitutional control.

The central principle can therefore be stated as:

Energy governance may operate outside the Constitution's detailed institutional design, but it does not operate outside the constitutional legal order.

The modern electricity system is consequently best understood as a polycentric constitutional-regulatory network in which formal government institutions, regulators, utilities, municipalities, markets and technical systems exercise interconnected forms of authority, while constitutional principles provide the ultimate framework of legality and accountability.