Mineral Resources and Energy Minister Gwede Mantashe has published an explanatory summary of the much-anticipated Electricity Regulation Act Amendment Bill, which is now poised to be introduced to the National Assembly for consideration.

In his introductory note to the summary Mantashe sets out the purpose of the proposed amendments to be the following:

• the strengthening of the National Energy Regulator of South Africa (Nersa);
• the strengthening of the provisions related to licensed and exempted activities;
• an amendment to Section 34 of the Act in order to clarify the circumstances under which the Minister may make Ministerial determinations;
• to provide for the establishment for the Transmission System Operator (TSO) and to define its duties, powers and functions;
• the assignment of the duties, powers and functions of the TSO to the State-owned National Transmission Company South Africa (NTC); and
• to provide for an open market platform that will allow for competitive electricity trading.

The draft Bill indicates that the TSO will be responsible for the transmission network, system and market operations, and will also house a central purchasing agency to conclude or enter into contracts for the procurement of both capacity and energy.

These roles are likely to be heavily debated during the parliamentary process.

While Cabinet approved the Bill’s submission to Parliament on March 29 and it has been tabled to Parliament, Engineering News understands that it has not yet been formally referred to the Portfolio Committee on Minerals Resources and Energy.

This committee will play a key role in facilitating consideration of the Bill by lawmakers, including the hosting of public hearings.

While the changes outlined in the Bill are relatively modest when compared with electricity market reforms elsewhere, they represent a significant shift for the South African electricity supply industry, which has hitherto been dominated by the vertically integrated State-owned monopoly, Eskom.

In his State of the Nation address in February, President Cyril Ramaphosa said the Bill would transform the energy sector and establish a competitive electricity market.

In parallel, Eskom has been preparing to unbundle its generation, transmission and distribution businesses and, in line with the current Act, is seeking to have three licences approved for the NTC, which will initially be established as a subsidiary of Eskom Holdings, but with its own independent board.

Eskom group executive for Transmission Segomoco Scheppers told a Nersa hearing on April 11 that once the national transmission, trading, as well as import and export licences had been secured, it would seek lender consent for the restructuring.

Should the licences and consent be forthcoming, it is possible that the NTC could become effective by the end of June.

As legislation and regulation is updated, however, it is unlikely that the NTC will remain a subsidiary of Eskom Holdings, with full separation prevented currently mainly because of the financial complexities involved in light of Eskom’s large debt burden.

For the time being, it is envisaged that the transmission assets will be transferred to NTC, while the debt attributed to NTC will reside with Eskom Holdings but reflected in the form of an equivalent inter-company loan.

There is no intention to privatise NTC, which has the character of a natural monopoly.