Fight looming over new law that ends Eskom’s monopoly

The South African Local Government Association (Salga) opposes the Electricity Regulation Amendment Bill’s new definition of “reticulation,” claiming it limits municipal authority over electricity distribution and contradicts the Constitution. The bill, passed on May 16, 2024, aims to open South Africa’s electricity market, ending Eskom’s monopoly. Salga argues this change threatens municipalities’ financial stability and challenges their role in electricity provision, despite their competent service.

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By Myles Illidge

The South African Local Government Association (Salga) wants specific definitions in the Electricity Regulation Amendment Bill changed, claiming it is unconstitutional as it currently stands.

The National Council of Provinces (NCOP) passed the bill on Thursday, 16 May 2024. It aims to reform South Africa’s electricity industry and introduce an open market for electricity trading.

Simply put, Eskom will be only one of the players in the electricity generation market rather than having a monopoly over it.

However, the amendments to the act included a fundamental change to the “reticulation” of electricity definition, which Salga says will limit municipalities’ authority to trade and distribute electricity. This, in turn, will threaten their ability to generate revenue.

Speaking to Newzroom Africa, Lance Joel, acting CEO at Salga, said the definition change contradicts the Constitution.

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“That definition, in its nature, will limit the future scope of municipalities in providing electricity and limit it to the extent that it will negatively impact the sustainability of municipalities from a financial point of view,” said Joel.

“We are very concerned about that bill, and we have communicated our intention to challenge it.”

Asked whether part of Salga’s and municipalities’ concerns relate to municipal debt owed to Eskom, Joel emphasised that their concerns are separate.

“It has to do with removing or limiting the role of municipalities, contrary to the Constitution, in providing electricity to households, businesses, and government,” he said.

Joel added that he doesn’t believe the definition was changed because some municipalities were unable to offer electricity services competently.

From Salga’s perspective, he said most municipalities involved in electricity services are providing it competently.

Joel Lance, acting CEO at the South African Local Government Association.

“Of course, there are weaknesses in the system; we acknowledge that, and we are not going to run away from that,” said Joel.

“There are structural challenges that municipalities experience, but a lot of municipalities are competent in providing the service.”

“This conversation is not linked to the competency of municipalities. That is not the reason why the definition has been introduced,” he added.

Joel said if the system is acknowledged to have weaknesses, the national and provincial governments must meet their Constitutional responsibility to support municipalities.

He said Salga is seeking to understand the reasoning behind the new definition and that it can only make its own assumptions without clarification.

“That assumption is a growing interest to want to take over the responsibilities of local government. That is our greatest concern,” said Joel.

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The passing of the Electricity Regulation Amendment Bill was a significant milestone in South Africa’s electricity industry. It will ultimately end Eskom’s 100-year monopoly.

Eskom, formerly known as the Electricity Supply Commission (ESCOM), has held a monopoly of the generation market in South Africa since 1923.

The bill sets out guidelines for establishing a Transmission System Operator (TSO) to take over the duties of Eskom’s System Operator, among other things.

The TSO will control the transmission grid, manage supply and demand to balance it and create an open market platform for electricity trading.

Professor Anton Eberhard, an energy policy investment specialist who helped with the bill, welcomed its passing.

“The bill will help unbundle transmission from Eskom and create a market operator that will enable greater competition and investment in power generation,” he said.

Eberhard said the bill would create a more viable electricity company, invest in protecting the system’s core, and allow for more electricity generators.

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This article was originally published on MyBroadBand and has been republished with permission.