Bill brings SA closer to competitive power market
SA’s power market is set for transformation with the passing of the Electricity Regulation Amendment Bill by the National Assembly.
The bill’s approval received overwhelming support on Thursday afternoon, with 234 votes in favour and only 25 votes against. However, its prospects of being signed into law before the general elections in May seem doubtful.
The ANC and DA backed the bill, while the EFF opposed it, arguing the proposed changes would result in the privatisation of electricity generation in SA. The EFF opposes any privatisation of state-owned entities.
While the bill does not allow for the privatisation of any part of Eskom, it does pave the way for SA to transition to a multimarket model for electricity trading.
Addressing the National Assembly on Thursday, mineral resources & energy minister Gwede Mantashe rejected claims that the introduction of the bill was aimed at privatising Eskom. “The deregulation of embedded generation opens up opportunities for anyone to generate electricity,” he said.
The amendments to the bill will, among other things, provide a legal framework for setting up and operationalising the National Transmission Company of SA and later the Transmission System Operator. These are essential steps towards liberalising the electricity market.
The objectives of the bill are to create a competitive electricity market and establishing an independent Transmission System Operator, which will manage the national electricity grid and create a platform for the competitive contracting and trading of electricity.
The establishment of the Transmission System Operator will also insulate the trading platform from Eskom’s generation interests, thus removing the conflict of interest where Eskom is both a generator, owner and operator of a monopoly transmission grid.
The DA chose to support the bill, despite some reservations with some of the amendments.
Kevin Mileham, DA MP and party spokesperson for mineral resources & energy, said during the debate the DA was concerned the bill did not “go far enough” in ensuring the independence of the Transmission System Operator.
At its core, Mileham said, the bill sought to create the Transmission System Operator which would be responsible for the establishment of an open market platform that allows the competitive trading of electricity, but some of the clauses in the bill undermined that objective.
“By assigning the National Energy Regulator of SA (Nersa) the power to ‘set and approve prices and tariffs’ as per clause 5 of the bill, we are, in essence, removing competition from the playing field. It is the antithesis of competition. Everyone will have to conform to a price determined by Nersa,” he said.
The DA also had concerns about the broad powers assigned to the minister responsible for energy to make determinations for new or additional generation capacity beyond what is provided for in the Integrated Resources Plan.
“Despite our misgivings, it is vital that the system operator be established and the electricity sector opened up to private sector participation,” Mileham said.
The bill was “a great step forward”, said Peter Attard Montalto, lead for political economy, markets and the just energy transition at SA research-led consulting company Krutham.
But there were still some fundamental questions, such as whether the bill went far enough
in, for example, firmly mandating the national transmission company and Transmission System Operator as independent entities, he said.
“Overall, the bill is about mindset and the importance of creating a commercial market. It is a very important component of energy reform in SA, but it is not the be-all and end-all. Many other things must happen around this, including the finalisation of the Energy Security Bill, which will deal with some of the loose ends from the Electricity Regulation Amendment Bill.”
Montalto said it was unlikely that the bill would be sent to the president to sign into law before the general elections in May, as it now still had to go for consultation to the different provinces. This process will include public consultation in each province.
Mileham said after the bill was approved by cabinet in April 2023, it was introduced to parliament only in August.
Because it is a section 76 bill that affects provinces, it must be considered in the National Assembly and the National Council of Provinces (NCOP). Before provincial delegations vote on the bill in the NCOP, it must be discussed by each provincial legislature, which may hold public hearings.
It was unlikely that the bill would be considered by the NCOP before the end of the sixth parliament in May, which meant it would most likely not be signed into law before the end of 2024, Mileham said.