OUTA wins court challenge against Nersa  and Karpowership with costs

6 June 2024

The Pretoria High Court was supposed to hear the Organisation Undoing Tax Abuse’s application to compel the National Energy Regulator (Nersa) to provide OUTA with the full, unredacted record of Nersa’s decisions to approve generation licences for Karpowership but Karpowership recently withdrew its opposition (see here) and Nersa offered to settle minutes before the trial was supposed to start.

In February 2020, Minister of Mineral Resources and Energy Gwede Mantashe made a determination that 2 000 MW of emergency generation capacity should be procured and the three Turkish Karpowership projects were given the green light to provide 1 220 MW of gas-fired generation capacity over a 20-year period to South Africans. The cost, environmental impact and length of this controversial contract were opposed by civil society.
 
In April 2022, OUTA filed an application for the review and setting aside of the decisions by Nersa to grant the three Karpowership independent power producer (IPP) generation licences. This application was opposed by Nersa and Karpowership.

“OUTA strongly believes that Nersa’s decision should be reviewed and set aside as it was procedurally unfair, premature and lacking in transparency. OUTA in the main application (the review application) called for Nersa to provide copies of all documents relating to the decisions to grant Karpowership the generation licences, together with the reasons for the decisions,” says Adv Stefanie Fick, OUTA’s Executive director of the Accountability Division.

In June 2022, Nersa provided only a redacted version of the record and OUTA was therefore forced to compel Nersa to produce the full, unredacted record of Nersa’s decision. OUTA’s application to compel production of the full record was set down for hearing in the high court on 4 and 5 June 2024.

Following Karpowership’s withdrawal of its opposition to the application to compel on 17 May 2024 (a mere 10 days before the matter would be heard), it was still unclear whether Nersa would persist in its opposition. Despite numerous requests for clarity from OUTA, on 4 June the matter was due to proceed.

Just before the hearing commenced, Nersa’s counsel advised that they have received instructions to present a settlement agreement to the parties, whereby the parties would receive the full unredacted record, subject to the parties agreeing to a confidentiality regime.

Although OUTA partially accepted the settlement agreement, it was still of the opinion that it should reserve its right to argue at the review hearing or any other application that the provided record (which Nersa and Karpowerhip believe to be confidential) should be made publicly available. Nersa agreed to this additional proviso from OUTA. The agreement was made an order of court and can be found here.

Further to the above, OUTA believed that the costs tendered by Nersa were grossly insufficient and, as such, OUTA on 4 June 2024 proceeded with a cost argument, asking the court to award a punitive cost order against both Nersa and Karpowership due to their conduct in this matter.

During arguments it became clear that Nersa was only willing to settle because Karpowership gave Nersa  permission to conclude confidentiality agreements. “It is despicable to think that Nersa, our independent national energy regulator, will keep information away from public scrutiny unless it is given permission to do so by third parties. Transparency is crucial for accountability and when parties want to do business with government they should accept that their conduct will be under a microscope. Public entities act on behalf of society, they should not make deals if they are not willing to share the details,” says Fick.

In a written judgment handed down by Judge L. Windell on 5 June 2024, she found in favour of OUTA and specifically ordered that Nersa and Karpowership pay the cost of the application on a punitive scale, including the cost of OUTA’s counsel. The court found inter alia the following:

- Nersa has not disclosed any defence in respect of its opposition to OUTA’s application to compel.

- Nersa was granted “permission” by Karpowership to disclose the records.

- Nersa and Karpowership are ordered to pay, jointly and severally, the one to pay the other to be absolved, the cost of the interlocutory application (the application to compel production of the full record), on an attorney and client scale. This is a punitive costs scale.

“From the outset it was unclear why Nersa and Karpowership vehemently opposed the application to compel. It has always been OUTA’s position that the record should be made available for perusal as the National Energy Regulator Act requires that every decision by Nersa be “in the public interest” and “based on reason, facts and evidence. There was therefore no valid reason for Nersa or Karpowership to oppose the application. In fact, OUTA should never have been forced to bring this application in the first place,” says Fick.

OUTA believes that by obtaining the full unredacted record, it would be in a better position to evaluate Nersa’s decision-making in awarding the generation licenses to Karpowership. This is a victory for civil society and a step closer to transparency.

OUTA’s main application for a review of Nersa’s decisions to grant the Karpowership licences continues.

Issued by Stefanie Fick, OUTA Executive Director: Accountability Division, 6 June 2024