The Electricity Regulation Amendment Bill, which President Cyril Ramaphosa signed into law at the weekend, sets out reforms to the country’s electricity sector, including the establishment of a competitive electricity market.
THE ELECTRICITY Regulation Amendment Bill, which President Cyril Ramaphosa signed into law at the weekend, sets out reforms to the country’s electricity sector, including the establishment of a competitive electricity market.
The bill amends the Electricity Regulation Act of 2006 to “open up pathways to greater competition and reduced energy costs; increase investment in new generation capacity to achieve energy security; establish an independent transmission company as the custodian of the national grid; and impose severe penalties for damage to and sabotage of infrastructure”.
The act provides for the establishment, duties, powers, and functions of the Transmission System Operator SOC Ltd (TSO) – which must be established as an independent entity within five years – and for the National Transmission Company of South Africa to act as the TSO in the interim. It also provides for an open market platform that allows for competitive, wholesale or retail buying and selling of electricity.
The Presidency said: “The act provides for market operation as a new activity that may be licensed by the National Energy Regulator of South Africa (Nersa). In addition, it requires the development of a Market Code that will establish rules to govern the future competitive market, and outlines the process through which the code will be approved. The act further clarifies the principles that apply to the setting or approval of prices, charges and tariffs.”
Meanwhile, those found damaging, removing or destroying any transmission, distribution or reticulation cable, equipment or infrastructure could face fines of up to R1 million or five years in prison or both.
“Penalties for persons who unlawfully receive such cables, equipment or infrastructure face fines of up to R5 million or 10 years in prison or both,” the Presidency said.
In light of the government’s rapid move towards a competitive energy market, experts have expressed concern as private independent power producer (IPP) projects race to grab up already limited grid space. This after Nersa recently rejected Eskom’s application for grid capacity reservation, which was part of its efforts to “protect public procurement programmes and improve their prospects of success”.
The Alternative Information and Development Centre (AIDC) at the time also raised concerns about the risk of market concentration as larger companies enter the competitive electricity market first.
They further raised concerns about Eskom’s long-term viability, given the potential impact of declining demand and rising costs.
Following the news of the amended act, energy analyst Hugo Kruger said the evidence that liberalised markets lead to lower prices is questionable.
“Several US states with regulated markets have lower costs. If Eskom has to truly compete in a true market then theoretically it risks bankruptcy. It means that the IPPs can also go bankrupt.
“In a true market you have competition. If solar is cheaper 100% of the time, then you only end up with solar.
“The government’s thinking with the IRP is that they can slice up what percentage every generator gets. Then call that a market. In terms of energy security, they are somewhat correct, competition theoretically should attract investment, but it remains to be seen how the market will work in practice.
“There are a lot of ‘what ifs’ and hypotheticals at the moment,” Kruger said.
