The Energy Regulator, which is the National Energy Regulator of South Africa’s (Nersa’s) highest decision-making body, has made three landmark decisions in support of the country’s legislated commitment to transition to a competitive electricity market from one historically monopolised by Eskom.

At its meeting on November 27, it approved the granting of a Market Operator licence to the National Transmission Company South Africa (NTCSA), a precursor to the launch of the South African Wholesale Electricity Market (SAWEM) in 2026, alongside new Grid Capacity Allocation Rules to facilitate fair and non-discriminatory access to the network.

In addition, the Energy Regulator approved the appointment of a 14-member Electricity Market Advisory Forum, or EMAF, which will advise and capacitate Nersa in navigating the shift to a competitive electricity market and interface with key public and private institutions in relation to the country’s market readiness.

Chairperson Thembani Bukula described the decisions as historic milestones in South Africa’s unfolding electricity supply industry transition, but also made it clear that many more decisions would still need to be made to meet the objectives set in the Electricity Regulation Amendment Act.

The legislation, which came into force in January, lays the basis for a phased transition to a competitive electricity market and sets a five-year timeframe for the creation of a fully independent Transmission System Operator outside of Eskom.

In the interim, the NTCSA, which remains a subsidiary of Eskom Holdings but with its own board and executive team, is expected to play the role of market operator and system operator, while overseeing the operation and expansion of the physical grid network.

The conflict of interest associated with Eskom’s ongoing shareholding of the NTCSA was evident even in the decision to grant the NTCSA a Market Operator licence, with the Energy Regulator doing so without also approving the licence conditions.

CONFLICTS OF INTEREST

Full-time regulator member Nomfundo Maseti said these conditions, along with the regulator’s reasons for decision would be finalised within 30 business days.

However, approval had been withheld, as Nersa had requested additional documentation from NTCSA, particularly in relation to what she termed an “independence roadmap” to show how it intended managing the potential conflicts of interest arising from its shareholding structure.

While the restructuring of Eskom is still unfolding, concerns have been raised about both the pace and the nature of the unbundling of NTCSA, the full legal and commercial separation of which is viewed as crucial to levelling the playing field between Eskom Generation and independent power producers (IPPs).

It was also indicated that the issuance of the Market Operator licence was but one “building block” in the establishment of the SAWEM, with the Market Code and Market Rules still to be approved.

Now that the NTCSA had received the Market Operator licence it was anticipated that it would make a submission to Nersa on the Market Code, which would be key to determining the effectiveness or otherwise of the SAWEM in ensuring whether competition would help shape future electricity prices.

Maseti indicated that Nersa was gearing up to consider the code, and was alive to ensuring that a fair balance was struck.

Here, she made specific reference to the fixed and variable cost components in coal vesting contracts amid warnings that Eskom’s move to have its primary energy classified as a fixed cost would result in such artificially low tariffs as to make it impossible for IPPs to raise finance to build new capacity to bid into the SAWEM.

Potential conflicts of interest were also a key driver behind the formulation of the Grid Capacity Allocation Rules approved by the Energy Regulator, and which would be both Gazetted and published on the Nersa website in due course.

Maseti said the new Grid Capacity Allocation Rules guaranteed fair, transparent, and non-discriminatory access to limited grid capacity.

“They prevent inactive projects from reserving capacity, ensuring only credible, ready-to-connect projects advance.

“This promotes optimal use of existing infrastructure and guides future grid development, reducing delays, disputes, and bottlenecks,” she added, arguing that they also improved queue management.

ELECTRICITY MARKET ADVISORY FORUM

Meanwhile, Nersa planned to officially launch the EMAF and name its 14 members on December 20, with the forum being established to advise and support the regulator – whose recent decisions have been prone to legal review and even errors – on what is set to be a complex transition to a competitive electricity market.

Further appointments could be made should specific expertise be required.

The EMAF’s scope would be to provide expert and independent advice on the Market Rules and Market Code, as well as on the enablers of an effective and efficient SAWEM and its regulation by Nersa.

“These three decisions are milestones in the journey that this country is going to be taking in the electricity market and are the first building blocks for what we have been tasked to do as a regulator,” Bukula explained.