Eskom kisses its electricity monopoly goodbye

Parliament’s National Council of Provinces (NCOP) has passed the Electricity Regulation Amendment (ERA) Bill, which will end Eskom’s 100-year electricity monopoly.

The ERA Bill will help create an open market platform for competitive electricity trading in South Africa. Simply put, Eskom will be only one of the players in the electricity generation market.

The bill also supports the creation of the Transmission Systems Operator (TSO) to act as a wheeler and dealer of electricity.

Among other things, the TSO will take over responsibilities from Eskom’s System Operator.

Eskom’s System Operator is responsible for maintaining the power grid’s stability and determining which stage of load-shedding to implement when there is a generation shortfall.

The TSO will operate the national transmission grid, manage supply and demand to balance the grid, and establish an open market platform for electricity trading.

In addition, the bill strengthens the role of the National Energy Regulator of South Africa (Nersa) by including powers to license entities that will implement the competitive market.

Nersa will further have regulatory oversight during the transition to a competitive market in South Africa but will no longer be required to regulate pricing.

Instead, it will be responsible for setting and approving tariffs. These must allow licensees to recover their costs and earn a reasonable return.

Licensed energy providers may then compete with one another on end-user pricing, which Nersa will not set or approve.

It will also introduce provisions on offences and penalties to address the theft and vandalism of electricity infrastructure.

The ERA Bill went through a parliamentary process, including public consultation, since its introduction to the house.

The National Assembly (NA) and the NCOP have now passed the bill.

Professor Anton Eberhard, an energy policy investment specialist who helped with the bill, welcomed the latest development.

He said Parliament’s NCOP joining the NA in passing the bill was a momentous day for South Africa’s power sector.

“The bill will help unbundle transmission from Eskom and create a market operator that will enable greater competition and investment in power generation,” he said.

He added that the bill would create a more viable electricity company, invest in protecting the heart of the system, and facilitate more electricity generators.

Proposed multi-market model for South Africa

Private sector will replace Eskom as the biggest electricity generator

Former Eskom CEO André de Ruyter said the private sector will largely take over electricity generation from Eskom in future.

He said Eskom will always have a role to play in South Africa, but the utility’s role will largely be limited to transmission in the future.

The private sector is more capable and efficient at generating electricity in the country than Eskom and has more resources to do so.

If given the opportunity, the private sector will be able to supply electricity to South Africa more efficiently and cheaply than Eskom currently does.

De Ruyter said the government must avoid the temptation to sink increasing amounts of money into Eskom’s ageing, deteriorating coal-fired power stations.

Rather, those funds should be refocused on extending the utility’s transmission grid, allowing the private sector to take over generation from Eskom.

He said Eskom’s unbundling, which the ERA Bill provides for, will seal the utility’s fate in this regard.

The bill will create a level playing field in which all generators — not only Eskom — will have equal access to the grid.

De Ruyter’s views align with those of other business leaders, including Remgro CEO Jannie Durand and renowned economist Dawie Roodt.

Durand said that Eskom will become irrelevant in five years’ time with the private sector taking over electricity generation and distribution.

Roodt agrees with Durand, saying Eskom is “simply dying” and that electricity production is being privatised.

This is not privatisation as a government policy. However, the state is simply collapsing, and the private sector is merely taking over state functions.

“In the long term, electricity generation will be private. Eskom will merely distribute electricity with the utility being relegated to buying electricity from other entities and selling it on,” said Roodt.