Only Eskom can end load-shedding

Even if the Electricity Regulation Amendment (ERA) Bill is signed into law, South Africans would still need to rely on Eskom to solve load-shedding.

This is feedback from international law firm Allen & Overy’s Alexandra Felekis, who told Newzroom Afrika that this Bill is not a quick fix to load-shedding.

Felekis’ comments come after the National Assembly passed the ERA Bill last week. This Bill makes provision for a state-owned Transmission System Operator (TSO) to be established.

This TSO will operate the national transmission grid, manage supply and demand, and create an open-market platform that will allow for the competitive trading of electricity.

The Bill lays the legal framework for moving the country’s electricity sector to a vertically integrated monopoly. 

In other words, if enacted, this Bill will move South Africa from having the entire sector in Eskom’s hands to a competitive and multimarket approach, Feekis explained.

However, while one of the Bill’s objectives is security of supply, she said it is not a quick fix to load-shedding. 

“Eventually, it will assist in securing additional sources of supply, which obviously would meet demand,” she explained. 

“But what’s very important is that it’s a first step, and a lot has to be done until there are additional sources of supply that outweigh Eskom’s supply.” 

“So the government’s plan with respect to load-shedding is still very important.” 

She explained that, for as long as Eskom is the main supplier of base load supply and until South Africa has developed gas markets and affordable utility-scale battery projects, “we’re still very much within the ambit of relying on Eskom and NECOM to solve our load-shedding issues”.

In addition, Felekis said the enactment of the ERA Bill will not necessarily drive down electricity prices in the short term as many had hoped.

From 1 April 2024, South Africans will pay much more for electricity when Eskom increases its prices as part of its drive towards “cost-reflective” pricing.

The National Energy Regulator of South Africa approved a 12.74% electricity tariff hike for the 2024/25 financial year, which will take effect on 1 April 2024.

Combined with Eskom’s 2023 electricity price hike of 18.65%, South Africans will pay 33.8% more this year than two years ago.

Many hope that increased competition in the energy sector will make electricity cheaper.

However, Felekis explained that Eskom owns and supplies 90% of South Africa’s generation capacity and will continue to do so in the near future. 

Therefore, most of the generation capacity dispatched in South Africa is Eskom’s generating assets, which means, at least in the near term, Eskom will still set electricity prices. 

“And until Eskom’s generation assets are actually unbundled and disaggregated in a real way, we fail to see in the short term at least how this would drive down electricity prices,” she said.