President Cyril Ramaphosa has signed into law the Electricity Regulation Amendment Act, which sets out far-reaching reforms in South Africa’s electricity sector, including the establishment of a competitive electricity market.
The presidency said signing the Electricity Regulation Act of 2006 into law will address current realities in the electricity sector, with the aim of fostering greater competition and reducing energy costs.
“It also increases investment in new generation capacity to achieve energy security, establishes an independent transmission company as the custodian of the national grid, and imposes severe penalties for damage to and sabotage of infrastructure,” it added.
The presidency explained that the Electricity Regulation Amendment Act outlines the establishment, duties, powers, and functions of the Transmission System Operator SOC Ltd (TSO).
The TSO must be established as an independent entity within five years. In the interim, the National Transmission Company of South Africa will serve as the TSO.
Additionally, the Act provides for an open market platform that enables competitive wholesale or retail buying and selling of electricity.
The Act provides for market operation as a new activity that may be licensed by the National Energy Regulator of South Africa (NERSA).
In addition, it requires the development of a Market Code that will establish rules to govern the future competitive market and draft the process through which the code will be approved.
The Act provides further clarification on the principles that apply to setting or approving prices, charges, and tariffs.
The Act also notes that NERSA must, among other things, enable an efficient licensee to recover the full cost of the licensed activity, allow for a reasonable return proportionate to the risk of the licensed activity, and may provide incentives for continued improvement of technical and economic efficiency.
“As it does so, the regulator may consider factors such as the security of supply, the diversity of supply and the promotion of renewable energy,” the presidency said.
The Act distinguishes between tariffs that must be set or approved by the Regulator, such as network charges, and those which are subject to a direct supply agreement or arise as an outcome of a competitive market.
To promote fair competition among electricity generators in the market, the Act states that the system operator must not show favouritism toward any particular generator or customer when managing the distribution or balancing of the system unless there are valid and justifiable reasons approved by the Regulator.
Additionally, access to the power system must be fair, transparent, and without discrimination.
“These changes are in line with the broader reforms guided by the Energy Action Plan and the Eskom Roadmap, which aim to modernise and transform South Africa’s electricity system to end load shedding and ensure long-term energy security.
“It is anticipated that diversity of supply and the promotion of renewables will stimulate demand for new skills, innovation and technology in the electricity sector, which will generate new industrial activity and, in turn, mitigate unemployment,” the presidency said.
The new law also reinforces the protection of public infrastructure as part of the fight against crime.
It provides for fines of up to R1 million or five years in prison—or both—for persons who, among other offences, damage, remove, or destroy any transmission, distribution, or reticulation cable, equipment, or infrastructure.
Persons who unlawfully receive such cables, equipment, or infrastructure face fines of up to R5 million, 10 years in prison, or both.
Going forward, the Act will lead to long-term energy security, a more competitive energy system, a more rapid uptake of renewable energy sources, and ultimately lower energy prices for all South Africans.