End of Eskom monopoly
NERSA TAKES BIG STEPS IN THE UNBUNDLING OF POWER UTILITY National Assembly has approved the Electricity Regulation Amendment Bill.
Atrio of decisions announced by energy regulator Nersa over the weekend represents a big step forward in the unbundling of Eskom, especially the establishment and operationalising of an independent transmission company.
It was back in October 2019 that Public Enterprises Minister Pravin Gordhan published a roadmap for the unbundling of the power utility into three separate entities.
Nersa has now approved:
The transfer of Eskom Holdings’ powers and duties related to the Power Purchase Agreements (PPAs) with independent power producers (IPPSs) to the National Transmission Company of South Africa (NTCSA),
The issuance of a cost recovery letter to the NTCSA as the buyer of electricity from the IPPs, thereby replacing Eskom Holdings in this role – this enables the NTCSA to recover the cost of buying the electricity through tariffs paid by its clients, including municipalities and its retail clients; and
The amendment of the IPPs’ generation licences to designate the NTCSA as the buyer of the electricity they produce, thereby replacing Eskom Holdings in this role. The NTCSA’s trading licence will be amended accordingly.
Nersa said in a statement that Eskom applied in December for
the transfer of its relevant powers and duties to the NTCSA in what was “a pivotal step in its unbundling process”.
Roadmap
The roadmap for the unbundling of Eskom in a “reformed electricity supply industry” unveiled by Gordhan in 2019 envisaged a structure where Eskom Holdings would have three separate subsidiaries – generation, transmission and distribution – with transmission being the first to be established.
According to the roadmap, the yet-to-be established transmission entity would have two functions:
Systems operator: Management of supply and demand balances in real time through a range of least-cost options, and
Market operator: Contracting with suppliers and distributors (including Eskom Distribution).
Gordhan then set out strict timelines, which would have seen the “complete creation and operation of the transmission entity as a legal subsidiary of Eskom Holdings in the last quarter of 2022”.
This was however much delayed. Among other things, Gordhan delayed appointing a board for the newly established NTCSA until January this year.
Grid expansion plans
The appointment of the NTCSA board in January however complicated Electricity Minister Kgosientsho Ramokgopa’s plans to expedite grid expansion.
He started working on the funding plan for this late last
year, and among other things held an investor conference.
Clarification of roles, responsibilities
In January Ramokgopa signed a memorandum of understanding with Gordhan, which clarified their respective roles and responsibilities.
National Assembly approves Amendment Bill
In another significant development on the road to a competitive electricity supply industry, the National Assembly approved the Electricity Regulation Amendment Bill on Thursday with an overwhelming majority.
The Bill that will provide the legal framework is likely to be enacted only in 2025.