Election threatens load-shedding progress

South Africa’s national election on 29 May threatens to curtail the progress made by the country and Eskom in bringing load-shedding closer to its end as a new government may derail the reform of the electricity sector.

This is feedback from energy analyst Chris Yelland, who told Classic Business that the country has made progress regarding load-shedding.

However, South Africa will have to continue to do the right things for a long time before it is a thing of the past.

The trend of households and businesses turning away from Eskom-supplied electricity is set to accelerate as the cost of electricity from Eskom keeps rising, strengthening the business case for alternative sources of energy.

Yelland explained that this is one of the main reasons behind South Africa’s reduced load-shedding. Eskom’s fleet is performing at levels similar to last year’s, but demand for its electricity has declined.

Simply put, businesses and households use less Eskom power and reduce their need for electricity generated by the utility, making them less reliant on its performance.

“It is quite clear that demand for Eskom’s electricity is declining and has been for several years. This does not mean the country is using less electricity. It just means it is not coming from Eskom,” Yelland said.

As a result, Eskom is being forced to begin reinventing itself and reexamining its business model.

The government is also pushing the utility to change through the National Treasury, forcing its restructuring through its debt relief plan and legislation reforming the electricity sector.

Under the proposed structure of the new Eskom, a holding company called NewCo will operate with three subsidiaries that function independently –

  • Generation: Eskom Holdings Generation (current Eskom)
  • Transmission: National Transmission Company of South Africa (NTCSA)
  • Distribution: National Electricity Distribution Company of South Africa (NEDCSA)

The most progress has been made in establishing the NTCSA as the legal separation of the transmission company into a subsidiary is complete, and it has the necessary licences to operate.

Progress on creating a separate distribution company has been slow and still requires additional political will and work from Eskom.

The other part of the reform of the electricity sector in South Africa is the Electricity Regulation Amendment (ERA) Bill, which is going through the legislative process.

This bill sets the legal, policy, and regulatory framework for an entirely new electricity supply industry in which the private sector will play a much greater role.

“This is a welcome step forward because things cannot continue the way they are,” Yelland said.

“We are seeing good momentum building and broad multi-party support for these reforms, which is a good sign.”

However, the country’s national elections threaten to derail this progress.

“These reforms are not yet a fait accompli. They are in progress, and there may be sufficient momentum to drive them through.”

“But, ultimately, there are also a lot of political and reactionary naysayers and ‘dolittles’ who have got every reason to protect the status quo and have vested interests in the status quo. We have to get through this,” Yelland urged.

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Election threatens load-shedding progress