- South Africa’s Electricity and Energy Minister Dr Kgosientsho Ramokgopa has called on Eskom to drop its court challenge to energy regulator Nersa.
- News that Eskom had served papers to make good on its earlier threat to challenge the licence awards prompted sharp responses from industry.
South Africa’s Electricity and Energy Minister Dr Kgosientsho Ramokgopa has called on Eskom to drop its court challenge to energy regulator Nersa’s approval of five electricity trading licences and one import/export licence.
He seemingly balanced the interest of the utility and its regulator, both reporting to him, by recognising Eskom’s concern about the lack of clear rules for these activities and announcing that Nersa has expedited its timeline for finalising the rules from one year to three months.
Since Eskom launched the court challenge, Nersa has approved two more trading and two import/export licences, with several more under consideration.
Electricity traders play an important role in making renewable energy accessible at an affordable price for smaller businesses that are unable to enter into bilateral agreements with independent power producers on their own. While electricity trading has been part of the electricity supply market for more than a decade, the number of companies wanting to enter the space has increased exponentially since the market reform has picked up momentum.
News that Eskom had served papers to make good on its earlier threat to challenge the licence awards prompted sharp responses from industry. Chris Yelland, MD of EE Business Intelligence, accused the utility of “institutional amnesia, denialism and resistance to long-standing reform commitments that Eskom itself has acknowledged for decades”.
In its court papers, Eskom raised the concern that the approval of the licences will result in a “free-for-all,” with traders targeting the large power users that are the best-paying clients of both Eskom and the municipal distributors, thereby undermining their sustainability. It argues that it has the exclusive right to sell electricity in its licensed distribution areas, as do municipal distributors.
Professor Vally Padayachee, special advisor to municipal electricity distributors (but speaking in his personal capacity), said, “At the heart of this dispute lies Eskom’s assertion that it is not against competition per se; rather, it advocates for a structured approach whereby existing entities like Eskom, as well as new entrants into the market, can coexist and engage fairly.
The special advisor noted, “This point is especially important as the court application brought by Eskom seeks to protect not only its own interests but also those of municipal electricity utilities. As the largest state-owned distribution electricity utility, Eskom holds a significant role in the electricity energy ecosystem of SA and recognises that a potential ‘free for all’ licensing of traders – who also operate in municipal electricity supply areas – has the potential to disrupt this balance.”
Peter Attard Montalto, managing director at Krutham, however, described Eskom’s court challenge as “a failure of the board, of the department of electricity and energy, and of its minister to provide proper oversight, guidance and shareholder guiderails on how Eskom behaves during reforms.”
In a scathing joint statement on August 7, Business Unity South Africa (Busa) and Business Leadership SA (BLSA) urged Ramokgopa to engage Eskom’s board and relevant government entities to secure:
- An immediate cessation of all lawsuits and legal disputes initiated by Eskom against Nersa;
- A public commitment from Eskom to work collaboratively with all stakeholders to fast-track the integration of new generation capacity onto the national grid, in parallel with expanding the grid; and
- Clear directives from the appropriate government authorities instructing Eskom to cease its anti-competitive and discriminatory behaviour and fully support the liberalisation of the energy sector.
A day later, on Friday, Ramokgopa responded, saying he had noted the statement made by the business organisations.
Minister responds
“The minister has engaged Eskom on this matter and is fully apprised of the utility’s longstanding concerns regarding the absence of a clear, rules-based framework to manage the transition to a competitive electricity market,” the statement read.
“Eskom’s view has consistently been that unregulated or premature market liberalisation, absent an agreed and sequenced rules-based transition, may lead to systemic instability and unintended consequences. These concerns are underpinned by prevailing electricity pricing assumptions and cross-subsidisation mechanisms embedded in the current distribution framework.”
He adds that Nersa “has since revised the indicative timeframe for the review and finalisation of new trading rules, reducing it from the original 12 months to a more accelerated three-month period.”
According to Ramokgopa, “this development reflects a welcome recognition of the urgency of the matter, and the need to provide policy and regulatory clarity to all participants in the electricity market.”
Given the regulator’s accelerated process, Ramokgopa, according to the statement, “encourages Eskom to consider staying or withdrawing its court action to allow for this participatory regulatory process to unfold without parallel legal processes that may undermine confidence or delay reform.”
Ramokgopa called on stakeholders to engage with Nersa in a collaborative fashion, to ensure the finalising of a fit-for-purpose trading framework within the revised timeline and confirmed his commitment to the unbundling of Eskom as a step towards the establishment of a competitive electricity market.
“By separating Eskom into distinct entities for generation, transmission, and distribution, this initiative is designed to create opportunities for new entrants, promote fair competition, and reduce the historical monopolistic hold in the power sector,” he said.