Eskom has lodged a surprise objection to the issuance of licences to private traders in areas where its distribution entity currently holds a licence, arguing that the current rules of the National Energy Regulator of South Africa (Nersa) prohibit two or more licensees supplying the same area.

The objection was made during virtual Nersa hearings being held to consider the granting of generation, trading, as well as import-export licences to various entities, including Discovery Green, CBi Electric Apollo, Green Electron Market and Africa GreenCo.

Presenting on behalf of Eskom’s distribution division, Mohlago Masekela said that should trading licences be issued to the applicants, the holders would be entitled to sell electricity to existing Eskom customers.

“This arrangement will result in two or more licensees supplying in the same areas or to customers within another licensee’s area of supply,” Masekela said, while noting that such activities were prohibited by Nersa’s Rules for Licensable Areas of Supply.

Quoting from the rules, she highlighted several prohibited activities, including a prohibition on licensees supplying the same area or customers within another licensee’s area of supply except for legacy cases;  a licensee lodging a dispute on an unlicensed electrified area after the supply area is energised, with such lodgement required before an electrification project commences; and a licensee supplying an area that qualifies as a licensable area without Nersa’s approval.

Masekela said that granting the licences would also compromise the sustainable and orderly development of electricity supply infrastructure and allow for a cherry-picking of customers.

Such cherry-picking was evident, she argued, in various applications indicating the traders intended contracting with large power users rather than residential or small business customers.

Eskom also noted that current tariffs made accommodation for cross subsidies and that if a contributing customer was removed from the cross-subsidy base, it would place pressure on the remaining customers.

“Having said that, Eskom objects to the granting of the licences where Eskom customer will be taken over,” Masekela concluded.

Eskom’s objection resulted in a flurry of questions from Nersa regulators, who asked whether acceding to Eskom’s objection would not breach competition and energy regulation  legislation, as well as run contrary to Nersa’s own mandate to facilitate competition.

Asked whether Eskom had engaged with the applicants before raising its objection at the hearing, Eskom said it had become aware of the applications only through a Nersa notice and that it had, thus, not met with the applicants prior to the virtual meeting.

During the same hearings, Eskom’s recently separated National Transmission Company South Africa (NTCSA) made no similar objection to the application of import and export licences.

Using presentation slides displaying the Eskom logo, NTCSA’s Andrew Etzinger did however highlight the need for enabling rules and processes.

He also underlined the importance of “safeguarding the recovery of all costs in compliance with the electricity pricing policy”.

“A key principle is that the use of Eskom assets may be required to facilitate the transactions of the other trading participants.

“Eskom, and the South African consumer who has funded these assets, must be compensated for usage,” Etizinger said, while calling for rules and frameworks to be developed expeditiously.