Electricity Regulation Amendment Bill

/sites/default/files/pictures/Calvin.Augustine.JPG By Calvin Augustine

Our country’s energy sector will soon enter into a new era through the Electricity Regulation Amendment Bill that sets out to create a competitive and sustainable electricity sector that meets our nation’s energy needs. 

The bill proposes far reaching amendments to transform, and ultimately better capacitate the energy sector. At the heart of the amendments are efforts to enhance energy security by drawing in more participants into energy production, changing the way the sector is managed and advancing universal access to energy so that more citizens benefit.

Through the amendments we will transition from an energy system wholly dependent on Eskom for both generation and transmission to one where many energy stakeholders are invested in different aspects of the energy process.

This will create an electricity industry with a multi-market structure that will enable competition, secured energy supply and a modernised energy sector. This new energy market will be managed by a Transmission System Operator (TSO) that will create a fair and transparent platform for the purchase of electricity.

In this regard, the bill introduces new role players such as a transmitter, system operator, market operator and a central purchasing agency.  The creation of these new functions will support our efforts to unbundle Eskom into generation, distribution and transmission businesses under a state holding company.

This restructuring is necessary to ensure Eskom’s turnaround plan is successful in order to save the utility. The move will also make it easier to manage the utility, oversee costs and improve its operational performance.

The Electricity Regulation Amendment Bill is one of the most significant interventions contained in the Energy Action Plan introduced by President Cyril Ramaphosa in 2022 to end load shedding. The plan which is being steadily implemented has had a measurable impact on the frequency of load shedding experienced.

The promulgation of the bill will open access of independent power producers to the grid which will facilitate a lot more investment into the industry. The bill will also provide a national framework for wheeling which is the distribution of electricity between private players.

Through wheeling, privately generated power from renewable-based energy producers with good wind and solar generation, can be transmitted across the national grid to customers such as corporate, industrial and residential customers whose locations may be less conducive to renewable energy production.

It advances commitments by larger energy users, customers who have made commitments to be carbon neutral by 2030 and supports our nation’s decarbonisation efforts. Wheeling will also strengthen the electricity grid in the Northern and Eastern Cape where there is any increased roll-out of new renewable providers.

Importantly, the proposed amendments will streamline licensing requirements for facilities that provide electricity solely for backup and small-scale facilities which produce under 100 kilowatts to only register with National Energy Regulator of South Africa (NERSA).

Moreover, NERSA will become the custodian of the regulatory framework with authority over a broader range of activities, including the power to issue, amend, withdraw, suspend and revoke licenses.

Its powers will include the ability to investigate any matters pertaining to licensing or registration. The registration, revocation, and deregistration of entities or activities will also be under its purview.

NERSA will no longer be required to regulate pricing but will take on the responsibility of setting and approving tariffs. In setting approved tariffs, licensees must be allowed to recover their costs, including a reasonable return.

In building a competitive energy market, the bill provides a licensed energy provider to charge a tariff not approved or set by NERSA which is a result of a competitive market or a direct supply agreement.

The bill empowers the Minister of Mineral Resources and Energy to deter additional electricity and new generation capacity to ensure the uninterrupted supply of electricity. This can be invoked in cases of market failure, emergencies or national interest.

Many communities who participated in the hearings have welcomed the opening of the market for competitive electricity trading to help the country address the challenges of electricity shortages.

The changes proposed to our energy sector through the Electricity Regulation Amendment Bill will forever change our energy prospects and create an energy secure nation going forward.