Egoli Gas defends decision to stop supplying some Joburg east customers

Residents were left reeling after the company announced it would disconnect households with just a month's notice

11 October 2023 - 15:58
By Khanyisile Ngcobo
The Egoli Gas offices. The company has come under fire for its decision to stop supplying piped natural gas to some residents in the eastern parts of Joburg.
Image: Fani Mahuntsi/Gallo images The Egoli Gas offices. The company has come under fire for its decision to stop supplying piped natural gas to some residents in the eastern parts of Joburg.

Customers affected by Egoli Gas's disconnection of supply to some residents in the east of Joburg now have until the end of January 2024 to switch to an alternative service after the company again extended its cut-off date and tripled the compensation offered to affected residents to help “sweeten” the deal for unhappy customers.

The gas company left residents piping mad last month when it abruptly announced its intention to terminate the supply of piped natural gas to some customers in Bezuidenhout Valley, Malvern, Bertrams and Kensington because its “network infrastructure has reached the end of its lifespan”.

Egoli gas, in a letter sent to affected customers, explained that the pipes in the ground were laid more than 90 years ago and while it had been maintaining the network over the years, it now needed to be replaced or shut down. It had opted for the latter for various reasons.

The company has more than 300km of pipes supplying the affected suburbs.

The cut-off date was initially set for the first week of October but was later extended to November after an outcry from residents about the short notice.

TimesLIVE afforded the company an opportunity to respond to the numerous claims made by these residents, including that the decision was taken without proper consultation, that the company was “favouring” upmarket suburbs at the expense of “middle and lower-middle class” areas and that it had not tried to attract more customers through proper marketing.

It provided a full list of Joburg east suburbs to be affected: Bezuidenhout Valley, Dewetshof, Judith Paarl, Lorentzville, Kensington, Malvern, South Kensington, Bertrams, and City and Suburban. The suburbs will all be disconnected by January 31 next year.

Egoli Gas said a number of factors influenced the “unavoidable” decision to disconnect the suburbs.

“First, we are faced with a significant external environmental factor, namely corrosive soil, which has affected the integrity of our low-pressure steel pipelines over the years. This has required Egoli Gas to regularly perform significant maintenance on its pipeline in this region.

“A natural and inevitable next step in the maintenance is to replace the pipeline at a substantial cost as the current pipeline, while still safe, is reaching the end of its useful life. The costs associated with replacing the pipeline run into hundreds of millions of rand and this naturally is a significant factor in our decision. However, this is not the sole factor that we have considered in reaching our decision.

“It is a stark reality that the future supply of natural gas to Egoli by our sole natural gas supplier is uncertain. While we are doing all we can to extend our supply, the offshore gas fields from which the natural gas is sourced have a finite lifespan. We are now not guaranteed a future supply of gas by our supplier beyond June 2026. Given the uncertainty, we now have no plans to extend our pipeline network and have not done so since 2016.”

Egoli Gas went on to explain that while it wanted to ensure that supply to its customers continued in the medium and long term, this could “result in a significant gas price increase in the future”.

It is a stark reality that the future supply of natural gas to Egoli by our sole natural gas supplier is uncertain. While we are doing all we can to extend our supply, the offshore gas fields from which the gas is sourced have a finite lifespan. We are not guaranteed a future supply of gas by our supplier beyond June 2026
Egoli Gas

“As you will appreciate, in a market where our client base has dwindled from about 5,000 in 2005 to 500 now, it is simply impossible for us to commit hundreds of millions of rand to an extremely small market which is likely to reduce even further in the event of future increases in the cost of gas.

“We have a duty to act responsibly and to protect our customer base as best we can. It would be irresponsible for us to jeopardise our future existence and our ability to be of service to our broader customer base by recklessly committing huge capital expenditure to patently uneconomic projects. It is our intention to return to these areas should there be a guarantee of future long-term supply of gas at an affordable price.”

Egoli Gas moved to dispel what it said were “misconceptions” around its service, namely that it supplied natural gas in Waterfall, Midrand, and that it was favouring affluent areas over the working class. 

The company said its network reaches only to Alexandra.

It insisted that the decision to disconnect the areas was not final or irreversible and once the process to secure a long-term supply of natural gas was concluded and there was “sufficient public demand” in the affected areas, it would “most certainly take all steps necessary to revive the supply of natural gas to the affected areas”.

The company clarified reports that it would do a complete disconnect in these suburbs, instead saying: “We will continue to operate our high-pressure pipeline in the affected areas. 

“As with the rest of our network, we will continue to maintain the pipeline to ensure that it remains safe and in good working order. We will be connecting as many customers as possible to the alternative line. However, it will not be possible to connect all of our affected customers to this pipeline.”

The company said it was in discussions with liquefied petroleum gas (LPG) installers to try to negotiate, as far as possible, preferential pricing for customers unable to connect to the alternative pipeline.

Touching on the “conversation rebate” offered to customers, Egoli Gas said this did “not arise from any legal obligation” but was rather a “bona fide offer made in good faith to assist the affected customers”.

“We appreciate that the conversion costs may exceed the monetary value of our initial ex gratia offer. Notwithstanding the absence of a legal obligation to make an offer, we have decided to increase this offer to R8,000 per household and where good cause is shown, we may, in limited situations, review the quantum of our ex gratia offer,” the company said.

Brett Anderson of the Kensington Community Association (KCA) confirmed that the association had secured an advocate in their impending legal fight against Egoli Gas.

He had previously confirmed that they would seek an urgent interdict in the Johannesburg high court.

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