South African municipalities have eight days to influence electricity trading rules that will reshape how they operate, budget and deliver services, says digital electricity platform company Utility Consulting Solutions (UtCS).

The National Energy Regulator of South Africa's (Nersa's) recently published Consultation Paper introduces a structural shift that moves municipalities from energy retailers to regulated network service providers.

Written submissions are set to close on December 10, with public hearings to be held in January and final rules expected by March, the company says.

The Nersa Draft Rules and Consultation Paper formally introduce licensed traders into the electricity market. Customers will be able to choose their electricity supplier.

Municipalities, in turn, will stop selling energy directly and instead manage the network, billing customers only for network use, services and administration.

“Operationally, this is not straightforward,” says UtCS CEO Christo Nicholls.

“Municipalities will be required to accommodate multiple suppliers per customer, split bills between network charges and trader energy charges, reconcile high-volume data within five days, manage complex time-of-use metering and integrate information from several head-end systems.

“Most municipal systems were not designed for this environment,” he says.

Electricity sales currently underpin municipal budgets. Under the new model, this income shifts to traders. Municipalities will rely on use-of-system charges, fixed fees and administrative costs, which are structures many have not yet modelled or stress-tested.

If tariff restructuring is not accurate or cost-reflective, municipalities risk major revenue shortfalls, the company warns.

The rules provide for top-up supply charges and standby capacity fees, but both require rigorous cost justification and Nersa approval. Misalignment could undermine service delivery, it adds.

Complying with the draft rules requires advanced metering infrastructure capable of automated, real-time time-of-use readings and consolidated data integration across traders and generators.

Existing municipal systems generally cannot handle multi-supplier billing, wheeling credits per time-of-use period, or the governance burden required under the Protection of Personal Information Act.

The capacity challenge is equally significant, UtCS says. Municipalities will need specialised operational, financial, information and communication technology, metering and regulatory expertise to function effectively as network service providers.

Most municipalities are already under strain, the company adds.

Nersa’s process is intentionally fast, with Phase 1 focused on transmission and high-voltage customers and Phase 2 expanding to all customers once the market stabilises, the company says.

If municipalities do not submit technically grounded input now, the final rules may assume capabilities they do not yet have, and thereby lock them into obligations they cannot meet, UtCS states.

South Africa’s electricity market is moving decisively into a competitive environment. The transition is comparable to telecommunications liberalisation, but with higher stakes.

Municipalities can act now to have a say in shaping rules that underpin future revenue stability, service delivery and governance, UtCS says.