Electricity Regulation Amendment Act starts new era for SA energy sector
17 Aug 2024
President Cyril Ramaphosa has signed the Electricity Regulation Amendment Act into law. This legislation is more than just a policy update; it's a strategic overhaul designed to inject new life into the country’s electricity sector, making it more competitive, efficient, and sustainable. These reforms are designed to enhance competition, lower energy costs, and attract greater investment in new generation capacity.
The newly ascended Electricity Regulation Amendment Act is a catalyst for a brighter energy future from the Ramaphosa administration.
The amendment, which modernises the Electricity Regulation Act of 2006, introduces sweeping reforms aimed at revitalising South Africa’s creaking electricity system.
At the heart of these changes is the creation of an independent Transmission System Operator (TSO), a move that promises to revolutionise how the national grid is managed.
The TSO, mandated to be established within the next five years, will be tasked with ensuring that the transmission and distribution systems operate transparently and without bias.
In the interim, the National Transmission Company of South Africa will assume the role, laying the groundwork for a more competitive market.
Open market
But the real juice is in the introduction of an open market platform for electricity trading.
This new system will allow for the wholesale and retail buying and selling of electricity, giving rise to a dynamic and competitive marketplace.
The National Energy Regulator of South Africa (Nersa) will play a crucial role in this new environment, licensing market operators and developing a Market Code to govern the competitive landscape.
The Act also brings several new concepts into the fold, such as “ancillary services,” “balance responsible party,” and “central purchasing agency.”
These additions are not just technical jargon; they are the building blocks of a sophisticated, competitive electricity market that promises better prices and services for consumers.
More transparency
Nersa’s powers will also expand and allow it to issue, amend, withdraw, suspend, and revoke licenses, ensuring that the market operates smoothly and fairly.
The establishment of the TSO as an independent entity is another crucial step in this direction, ensuring that no single player can dominate the market to the detriment of others.
Electricity pricing is another area where the new Act makes a big impact.
The legislation ensures that tariffs are set in a way that allows licensed operators to recover their costs while still earning a reasonable return.
In setting these prices, Nersa will consider a range of factors, including the need for supply security, the importance of diverse energy sources, and the promotion of renewable energy.
Penalties of up to R1m in fines or five years in prison for those who damage or destroy infrastructure – and even harsher penalties for those who unlawfully receive stolen infrastructure.
Hard line on sabotage
The Act also finally allows the government to better address infrastructure sabotage.
Penalties of up to R1m in fines or five years in prison for those who damage or destroy infrastructure – and even harsher penalties for those who unlawfully receive stolen infrastructure – are a firm stand against the criminal activities that have plagued the sector.
These reforms are not happening in isolation.
They are part of the broader Energy Action Plan and the Eskom Roadmap which are the Ramaphosa administration’s primary efforts to end load shedding and secure South Africa's energy future.
The Act is expected to stimulate demand for new skills, drive innovation, and catalyse industrial growth, creating much-needed job opportunities in the process – creating a brighter future for the sector and country.
