Transforming SA’s Electricity Market

By Josias Pila

South Africa is on a path to transform its electricity system that will in future end load shedding and ultimately lower the price of electricity for all South Africans. The recent signing into law of the Electricity Regulation Amendment Act creates a competitive and sustainable electricity sector that meets our nation’s energy needs.  

The new Act brings into effect far reaching amendments to transform, and ultimately better capacitate our energy sector. At the heart of the amendments are efforts to enhance energy security by drawing more participants into energy production.

This means that Eskom will no longer be the sole supplier of electricity as private sector players can now compete directly with the power utility in the generation of electricity. While the energy transmission network will remain state-owned, there will be multiple electricity companies competing in the generation of electricity.

In creating an electricity industry with a multi-market structure, it moves us away from regulated pricing to more market-orientated pricing that will allow consumers to choose their own electricity supplier based on price.

The introduction of competition will also give customers the right to choose their own electricity supplier based on reliability and efficiency of services. It also means that customers and businesses can opt for companies that use renewable energy sources for their energy generation. 

To ensure a level playing field for competition between multiple electricity generators, the new Act provides for a system operator in the form of a Transmission System Operator (TSO) that will create a fair and transparent platform for the purchase of electricity. It will also ensure that access to the transmission and distribution power system is done in an objective, transparent and non-discriminatory manner. 

The Act further establishes the National Energy Regulator of South Africa (NERSA) as the custodian of the national electricity regulatory framework. It sets out NERSA’s powers and its role in licensing electricity generation, transmission, distribution, import and export as well as trading activities.

This means NERSA will no longer be required to regulate pricing but will take on the responsibility of setting and approving tariffs. In setting approved tariffs, energy generators will be allowed to recover their costs, including a reasonable return. As it does so, the regulator may consider factors such as security of supply, the diversity of supply and the promotion of renewable energy.

The Act is one of the most significant interventions contained in the Energy Action Plan introduced by President Cyril Ramaphosa in 2022 to end loadshedding. It also supports the restructuring of Eskom into separate companies for generation, transmission, and distribution.

This will create a more streamlined operation and assist the utility to deal with its financial and debt challenges. The unbundling will also support the country’s focus on emissions reduction and a just energy transition through driving renewable energy.

Another key aspect of the new legislation is its effort to address the theft and vandalism of electricity infrastructure. Those found perpetuating these criminal acts can be imprisoned for up to 5 years or fined up to R1 million. Penalties for persons who unlawfully receive such cables, equipment or infrastructure face fines of up to R5 million or 10 years in prison, or both.

The changes to our energy sector through the Electricity Regulation Amendment Act will forever change our nation’s energy prospects. In implementing the Act, we can create an energy secure nation and ensure more citizens access electricity going forward.  

It allows us to build on successes we have made towards achieving universal access of electricity in the country. According to Stats SA access to mains electricity rose from 76,7 percent in 2002 to 89,8 percent in 2023. For households in formal dwellings, this access increased from 86,4 percent to 94,6 percent while for those in informal dwellings rose from 52,3 percent to 58,3 percent.

Our electrification drive since 1994 has improved all aspects of life and has created safer communities where most people are no longer reliant on candles and paraffin stoves. Government is confident that as more energy suppliers come on stream and Eskom continues with the rolling out of micro grids in far-flung areas, we will reach universal access.