Pieces falling into place to end Eskom monopoly

The National Assembly has passed a key piece of legislation that will help end Eskom’s electricity supply monopoly. The Electricity Regulation Amendment Bill will pave the way for SA to transition to a multimarket model for electricity trading by legislating for the unbundling of the transmission system from Eskom. 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 (TSO).

Separating transmission from Eskom and establishing the TSO are key to removing the inherent conflict of interest — Eskom is now the primary producer and seller of electricity while also being sole owner of the grid transmitting power across the country — that is blocking electricity market reform.

The National Transmission Company is on its way to being fully operationalised. It has a board, licences to operate and last week the national energy regulator approved the transfer of Eskom’s powers related to power purchase agreements with independent power producers to the transmission company.

The Electricity Regulation Amendment Bill now sits with the National Council of Provinces, which has invited the public to submit written comments before April 29. But further pieces of legislation and planning are still needed to complete the puzzle and put the country on the path to never again experience the energy crisis that has kept the economy in limbo.

SA took a step forward when it removed the licensing threshold for new generation projects by independent power producers in 2022. This, along with interventions by the Treasury and the urgent need created by the escalation of load-shedding, led to exponential growth in private electricity generation in 2023.

It is hoped that once the government announces terms for private sector investment in the grid this will unlock similar growth in transmission infrastructure investment, which is sorely needed to connect more renewable energy to the grid faster.

President Cyril Ramaphosa said in his state of the nation address in February that the Energy Security Bill, which is backed by the Treasury and the national energy crisis committee, will pick up loose ends left by the Electricity Regulation Amendment Bill, “streamline the regulatory framework and accelerate the construction of a renewable energy project”.

There is also the long-delayed integrated energy plan envisaged in the Energy Act of 2002, which is supposed to provide an overarching road map to address the energy crisis and ensure reliable energy supply. The plan will look at energy security holistically — beyond just electricity — to include other energy needs such as petroleum and gas supply.

The department of mineral resources & energy is putting together the final version of the integrated resources plan of 2023, which will guide government-backed new electricity generation projects up to 2050. But there are big challenges that are not yet being addressed. By opening the market for private electricity trading, municipalities that sell electricity at a profit to fund their budgets will be deprived of this source of income.

Many municipalities cannot cover their operational costs, never mind investing in building and maintaining infrastructure such as roads and water supply. While opportunity does exist for municipalities to become active players in the liberalised energy market, either by generating electricity or by charging service fees for letting households and businesses feed electricity generated by small-scale solar power generation back into the grid, their lack of resources and capacity will mean many municipalities will miss out on such opportunities.

Left with shrinking revenue streams, it will be the poor, who are not in a position to procure essential services from the private sector, who will suffer most. Similarly, if Eskom does not invest in cheaper, cleaner sources of electricity generation, those who can afford it will turn to the competitive market where they can get electricity at a lower price than the Eskom tariff.

Again, it will be those who can least afford it who will be stranded, left reliant on Eskom in an environment in which the users who help subsidise free basic electricity become independent of Eskom. No single piece of legislation can address all these issues, but planning is necessary to ensure that the move to a liberalised electricity market benefits all South Africans equally.

THE NATIONAL TRANSMISSION COMPANY IS WELL ON ITS WAY TO BEING FULLY OPERATIONALISED