Unregulated industry: re-sale of electricity

Legislative framework

The Electricity Regulation Act 4 of 2006 (ERA) was promulgated to establish a national regulatory framework for the electricity industry and a governing body to oversee same, the National Energy Regulator of South Africa (NERSA). In order for a Municipality or Eskom to legally supply electricity to consumers they have to have been granted a license by NERSA.

Electricity trading

The ERA also caters for the instance whereby electricity is traded, which is defined as the buying or selling of electricity as a commercial activity. For example, if you are in a sectional title scheme and purchase pre-paid electricity from your body corporate, your body corporate may be purchasing bulk electricity at a discounted rate and selling you electricity at the normal tariff to make a profit. Or the Body Corporate may have out-sourced this function and signed up with a private meter reading company, which installs pre-paid or conventional meters, and then reads them for the Body Corporate, collects the costs of the electricity consumed from the tenants, possibly through providing pre-paid tokens, and pays it over to the municipality/Eskom on behalf of the Body Corporate.

Unregulated activity

In terms of the ERA, however, no person may be involved in the activity of electricity trading without a license. At present, however, NERSA does not register or issue licenses to people trading in electricity as no mechanism exists in which to apply for same. This is because NERSA has not yet promulgated the regulations that need to be in place to govern the re-sale of electricity, before they start issuing licences to trade electricity. Strictly speaking then all electricity re-sellers are prohibited from trading in electricity without a license and are all currently acting contrary to the ERA.

Legality of activity by traders

Because there are no regulations governing electricity re-sellers, consumers could be vulnerable to abuse. Although they are still protected by other laws that govern the consumer/supplier relationship, it is questionable as to whether the same laws that apply to licenced electricity suppliers (which protect the consumer from disconnection without certain procedures being followed) apply to unlicensed traders. Indeed, it is questionable whether the re-sale of even a single unit, is legal at all. No one has challenged the legality of the re-sale in court yet, but a challenge is imminent, especially since some traders regard their actions in disconnecting consumers for unpaid bills, as immune from the strict laws that apply to Municipalities/Eskom. Until this is brought before a court, we can only deal with each matter on a case by case basis, and apply the common and consumers laws to protect consumers from exploitation.