Konani Rasengane of Pinsent Masons mentioned the Electrical energy Regulation Modification Invoice “steps within the course of supporting South Africa’s long-held intention to introduce some much-needed competitors to its electrical energy market.” The proposed modifications had been first envisioned in a 1999 white paper on reforming the nation’s vitality coverage.
Political observers anticipate the Invoice, which was unveiled by President Ramaphosa in his state of the nation tackle in February, to be applied in direction of the tip of 2022. The Division of Mineral Sources and Power plans to introduce structural modifications in South Africa’s electrical energy sector, separating all transmission-related actions from the distribution and technology features of Eskom, the nation’s state-owned public utility. It’s understood that an impartial state-owned transmission firm would even be established.
In an effort to spice up business competitors, the Invoice would allow market transactions, bodily bilateral transactions and controlled transactions – a transfer away from the standard vertically built-in mannequin utilized to Eskom. A ‘transmission system operator’ (TSO) may also be created to handle a aggressive electrical energy buying and selling platform, permitting patrons and sellers to commerce with one another on an hourly and day by day foundation.
Emma Roberts of Pinsent Masons mentioned the TSO would “basically allow an open market” and “present a non-discriminatory buying and selling platform that may probably encourage personal offtakers to conclude energy buy agreements with impartial producers.” However she warned that, whereas the present Eskom transmission subsidiary is predicted to carry out the features of the TSO throughout a five-year transition interval outlined within the Invoice, it’s “unclear” what would occur after that. “It’s understood that this difficulty is being thought of by the Nationwide Transmission Firm South Africa – the entity that Eskom’s transmission enterprise will quickly be transferred to,” she mentioned.
Whereas presently solely operations actions are licensed, the Invoice would additionally introduce a brand new class of license for the development of technology services in addition to distribution and transmission methods. Roberts mentioned: “the exemption from the duty to carry a licence when it comes to Schedule 2 to the Act solely applies to the exercise of ‘operation’. Accordingly, beneath the present proposed wording, a celebration wouldn’t be exempt from the duty to acquire a licence to assemble a technology facility whatever the measurement and meant exercise.”
The Invoice additionally clarifies that buying and selling – outlined within the laws as “the wholesale or retail shopping for and promoting of electrical energy” – can be faraway from an inventory of actions that mechanically require a licence. As a substitute, ministers might be granted powers to difficulty a discover requiring people and companies engaged in a specified class of buying and selling to acquire a licence. Roberts mentioned whereas it was a “welcome change” {that a} generator will not require a licence to promote electrical energy, the Invoice “makes it clear that on-selling electrical energy bought from a generator – even to intergroup corporations – might be thought of a buying and selling exercise”.
Underneath the phrases of the Invoice, minsters may also be capable of decide a tariff, a most tariff or a suggestion tariff for a specific technology know-how as a part of the procurement course of. “This introduces the potential of set feed in tariffs being utilized in procurement programmes,” Roberts mentioned. “However it’s unclear how this can work alongside the value-for-money evaluation contained in separate rules governing new electrical energy technology. This variation wouldn’t apply to direct provide agreements in place outdoors of the federal government led programmes,” she added.
Rasengane mentioned: “One other fascinating takeaway are the developments in respect of Nationwide Power Regulator of South Africa (NERSA). The Invoice will see NERSA changing into the custodian and enforcer of a brand new nationwide electrical energy regulatory framework. It is very important observe that the Invoice permits NERSA to use or impose penalties within the occasion that technology services, for personal use or these meant to provide electrical energy to prospects following the conclusion of direct provide agreements, don’t turn into operational throughout the prescribed interval.”
“Having regard to the definition of ‘direct provide agreements’ within the Invoice, it will seem that beneath authorities led IPP procurement programmes, NERSA shouldn’t be empowered to impose the same penalty neither is NERSA entitled to impose any such penalty in relation to agreements for the availability of electrical energy concluded with distributors or merchants. NERSA will no longer solely mediate disputed issues between turbines, transmitters, distributors, prospects or finish customers – but in addition arbitrate such disputes between the aforementioned events, together with merchants, system operator and every other licence holder,” Roberts mentioned.