Eskom fighting to keep monopoly

Eskom appears determined to defend its monopoly and return South Africa to a scenario where the state-owned power utility is the sole electricity supplier.

That is the view of EE Business Intelligence head and energy expert Chris Yelland and Efficient Group chief economist Dawie Roodt, who recently spoke to Sunday newspaper Rapport regarding Eskom’s opposition to the issuing of new electricity trading licences to four private companies.

Eskom made its unexpected opposition known at a recent public hearing by the National Energy Regulator of South Africa (Nersa) discussing the approval of electricity trading, import, and export licences.

“If Nersa approves the trading licences applied for by the applicants, the trading licence holders will be able to sell electricity to existing Eskom customers,” Eskom said.

“This would result in multiple licensees supplying in the same area or customers within another licensee’s supply area, which is prohibited in the current rules.”

The rules that Eskom referred to were Nersa’s Licensable Distribution Areas of Supply, which prohibit two or more licensees from supplying in the same area.

Six companies have already obtained trading licences from Nersa — including five private companies and the recently established National Transmission Company of South Africa (NTSCA), which falls under the Eskom Group.

Eskom’s response to the latest applications is curious, given that it had not opposed any of the other private companies’ applications in the past.

The main reason for Eskom’s opposition is that it stands to lose some of its most valuable large power users, such as mines and industrial customers.

Eskom said the private applicants would be able to “cherry pick” large power customers and not supply to residential or small business users.

As it stands, the power utility is able to cross-subsidise for certain tariff categories by charging large power users more for their electricity consumption than households.

If Eskom were lose its large power users, it argues that it would have to signficantly increase the tariffs it charges to households.

South African Independent Power Producers Association spokesperson Brian Day told Rapport that competition for the most lucrative customers is exactly how an open market functions.

Day maintained that the solution to tariff cross-subsidisation is the restructuring and correction of tariff determinations, not Eskom retaining its monopoly.

He said that Eskom must focus on providing a reliable transmission network and operating the power market and system, rather that retaining its customers.

Yelland said that the reduction in load-shedding has re-energised Eskom’s morale and given its leaders the confidence to try and return the power utility to its glory days as the country’s sole electricity supplier.

“I think and hope Nersa will tell Eskom Distribution to take a hike,” Yelland said in a post on Twitter/X.

Although Nersa has not yet made a decision on the new trading licence applications, its members at the public hearing pointed out that only distribution licences were limited to one provider per area, not trading licences.

Eskom’s latest position could set it on course for a collision with electricity and energy minister Kgosientsho Ramokgopa, who is highly supportive of the private sector taking on a bigger role in power provision.

It also undermines official government policies on opening the market to make it more competitive, including the Electricity Regulation Amendment Bill, which was passed in May 2024.

These changes will likely force Eskom into the uncomfortable position of reducing its headcount to compete with more fit-for-purpose electricity generators and distributors.

Failing to do so would force the utility to increase electricity tariffs, making it difficult to compete with private companies.

Roodt labelled Eskom’s behaviour as typically monopolistic and a sign that it was desperate for more money after years of corruption and inefficiency.

“Eskom is already getting paid hopelessly too much and there is a growing realisation that electricity prices cannot keep increasing so much,” Roodt said.