The National Council of Provinces ("NCOP") adopted the Electricity Regulation Amendment Bill (the "Bill") on 16 May 2024, following its passage through the National Assembly on 14 March 2024. The Bill underwent public consultations from 26 September 2023 to 29 January 2024. The next step is for President Cyril Ramaphosa to consider the Bill before signing it into law.
The Bill comes at a time when South Africa faces an acute energy crisis manifesting itself in load shedding (power cuts) with serious repercussions on the economy and significant societal impacts. The Presidency describes load shedding as "the single biggest constraint on South Africa's economic growth." Indeed, energy is the lifeblood of any economy through which the production of goods and services is significantly enhanced. The Bill aims to reform the electricity supply industry by introducing a market trading model and establishing the transmission system operator as a separate state-owned entity outside of the Eskom group. The Bill also seeks to refine the regime for the establishment of new generation capacity and contemplates private sector participation in the expansion and operation of transmission infrastructure, pursuant to a Ministerial determination that such is required.
A competitive electricity market
At its core, the Bill seeks to introduce a competitive market in the electricity sector. To achieve this, the Bill provides for the establishment of a new state-owned company, the Transmission System Operator SOC Ltd ("TSO") which will, among other functions, provide an open market platform that will allow for competitive electricity trading. The TSO will be the transmission network service provider, system operator, market operator and central purchasing agency. Until its establishment, which should not be longer than five years, those functions will be performed by a subsidiary of Eskom, the National Transmission Company South Africa SOC Ltd (which will be the outcome of the legal separation of Eskom's transmission business).
The TSO will be entrusted to:
- Develop the transmission development plan;
- Implement infrastructure plans for the transmission network and to ensure reliable grid services to generators and customers;
- Maintain and operate the transmission grid and coordinate outages;
- Develop and implement transmission use of system charges and transmission charges; and
- Provide non-discriminatory access to the transmission power system to third parties.
Access to the transmission or distribution power system is required to be provided on a transparent and non-discriminatory basis. This will facilitate an open competitive electricity market encouraging private sector participation in the electricity supply industry, and giving customers greater discretion to choose their electricity supplier. The National Energy Regulator of South Africa will no longer regulate the prices of electricity for electricity market participants but will continue to regulate the price of electricity sold to consumers through setting and approving tariffs.
Safeguarding electricity infrastructure
Cable theft and vandalism of Eskom infrastructure are also major factors contributing to the energy crisis in South Africa. As a result, the Bill seeks to protect electricity infrastructure by imposing severe penalties for the vandalism and theft of electricity facilities. A person who damages, removes or destroys any transmission, distribution or reticulation cable, equipment or infrastructure without lawful authority is guilty of an offence. Upon conviction, a penalty of ZAR1 000 000 or a maximum of five years imprisonment or both may be imposed. Unlawful trading of stolen electricity infrastructure will also be criminalised and be punishable with a maximum fine of ZAR5 000 000 or imprisonment not exceeding ten years, or both. These penalty provisions only prescribe a maximum fine or sentence by which the aforesaid offences can be punished with the result that the appropriate punishment to be imposed is left to the discretion of the relevant criminal court.
What's next?
The Bill will be submitted to the President for assent. The Constitution of the Republic of South Africa, 1996 does not prescribe a set period within which the President must assent to Bills. It is therefore difficult to foretell with precision the date on which the Bill could become an Act of Parliament. However, in his presidential tenure from 2018 to 2020, it is reported that President Ramaphosa has taken an average of 70 days to sign a Bill into law. Another possibility is that the President may refer the Bill back to the National Assembly if he has concerns regarding its constitutionality.
*Reviewed by Pippa Reyburn, Executive in ENS' Public Law practice
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