The Electricity Regulation Amendment Act
Landmark electricity law opens South Africa’s electricity industry to competition
This liberalisation comes nearly three decades after the creation of a more competitive ESI was first seriously proposed with the December 1998 White Paper on the Energy Policy of the Republic of South Africa. This reform was to start with the unbundling of state-owned utility Eskom, breaking up its vertically-integrated generation, transmission and distribution arms. That process is now, finally, fully under way, with the promise that a reformed ESI can lead South Africa out of years of electricity supply problems, in the process energising accelerated economic growth. While Eskom has historically dominated the generation and T&D, its poor performance, limited competition and insufficient investment have led to serious efficiency and reliability problems. Load- shedding was first recorded in 2007; it peaked at a debilitating 6,760 hours in 2023. Up until the law’s enactment, Eskom boards and chief executives had come and gone, while financial rescue plans had signally failed to solve the deep-seated ESI crisis. By opening the market to competition, the authorities are banking on reforms that will improve power supply and end load-shedding, while bringing down electricity prices and closing South Africa’s enormous infrastructure gap. While most provisions of the ERA became effective on 1 January 2025, amended definitions of “reticulation” and “distribution power systems” will be brought in later. The South Africa Local Government Association (Salga) and metropolitan municipalities have argued that the initial definitions were unconstitutional and undermined their authority to trade and distribute electricity. Transmission among ERA’s key provisions The transition will be fully achieved by completing Eskom’s unbundling into three separate companies for generation, transmission, and distribution. Their separation brings an end to Eskom’s monopoly of the national grid and should allow more players to sell power directly into the national grid.
The Electricity Regulation Amendment Act’s introduction on 1 January 2025 marked a transformative change in the South African electricity supply industry. The transition will be fully achieved by completing Eskom’s unbundling into three separate companies for generation, transmission and distribution. The ERA fosters competition with the creation of an independent transmission system operator, which will act as a transmitter, system operator, market operator and central purchasing agency. The new system is expected to create new opportunities, especially for the private sector. The National Energy Regulator of South Africa (Nersa) will have an enhanced role in overseeing the market and arbitrating in disputes. Some questions remain about the funding of NTCSA’s vital Transmission Development Plan.
The Electricity Regulation Amendment Act’s introduction marks a transformative opportunity to overcome South Africa’s power supply crisis, delivering reforms that have been on the drawing board for nearly three decades, which are now opening the way for a more competitive, effective electricity supply industry. The introduction of the Electricity Regulation Amendment (ERA) Act on 1 January, marked a transformative change in South Africa’s electricity supply industry (ESI). Signed into law by President Cyril Ramaphosa in August 2024, the Act heralded the beginning of a liberalised and competitive market, in which multiple electricity producers can compete on an equal footing with the former state monopoly, Eskom.
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South Africa’s Energy Prospects
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