South Africa’s Energy Regulator, the highest decision-making body of the National Energy Regulator of South Africa (Nersa), has approved a 25-year transmission licence for the National Transmission Company South Africa (NTC), which is being unbundled from Eskom.

Only a transmission facilities licence was granted during the meeting on July 27, and the regulator indicated that the trading licence and an import/export licence, which had also been applied for by NTC in a bundled application, would be processed separately.

Nevertheless, Nersa chairperson Thembani Bukula, who presided over the virtual meeting, stressed that the approval represented a “milestone” for the electricity sector.

“This is a milestone decision in the sense that we have always had one Eskom with everything [generation, transmission and distribution] and the fact that we are setting up a transmission company is a milestone on its own,” Bukula said.

Nersa noted in a later statement that the NTC’s independence was also an important signal to all stakeholders, including investors, that they would have non-discriminatory access to the transmission system.

The NTC, it added, would operate the transmission system and perform the following key integrated roles: transmission network service provider; system operator, transmission system planner; and grid code secretariat.

The Energy Regulator approved the licence together with draft licence conditions, which would be shared with the NTC for comment.

Fulltime electricity regulator Nhlanhla Gumede, who presented the licence for approval by the Energy Regulator, noted that the licence application had been subjected to a public participation process, including a public hearing, which was held in April.

The licence application was in line with the Department of Public Enterprises’ 2019 ‘Roadmap for Eskom in a Reformed Electricity Supply Industry’, which envisaged the unbundling of the vertically integrated monopoly into three separate businesses of generation, transmission and distribution.

The transmission division had already been functionally separated and was awaiting the appointment of its own independent board. But given the complexities of unbundling the debt-laden State-owned enterprise, the NTC would initially continue to fall under Eskom Holdings, as would be the case with the other two businesses.

Besides the licence approvals, Eskom would have to secure lender consent for the separation of the NTC ahead of its operationalisation. The debt attributed to NTC would continue to reside with Eskom Holdings but be reflected in the form of an equivalent inter-company loan.

The utility is still aiming for the NTC to come into operation before the end of 2023, but there are some concerns that the deadline may be missed given the number of approvals that are still required.

The separation of the NTC from Eskom’s generation and distribution divisions has been prioritised in light of the importance of such an entity in levelling the playing field between Eskom generation and independent power producers.

Likewise, its establishment is seen as crucial in ensuring that sufficient capital is invested into the grid, which has become a constraint to the connection of new generators.

The current Transmission Development Plan indicates that more than 14 000 km of new lines will be needed by 2032, along with 122 600 MVA-worth of transformation capacity.

The investment value of the roll-out is currently estimated at R210-billion.