President Cyril Ramaphosa has proclaimed January 1 as the date the new Electricity Regulation Amendment Act (ERAA) will be implemented, but as was the case with the controversial Basic Education Laws Amendment Act (Bela), except for two sections.
In the case of Bela, he delayed the implementation of two clauses about the role of school governing bodies for three months to allow further negotiations with especially Afrikaner groupings. The three months come to an end today with no clear resolution yet.
With ERAA, a crucial piece of legislation that provides for a new, competitive electricity supply industry, Ramaphosa is equally kicking the can further down the road.
The definitions of “reticulation” and the “distribution power system” will come into operation “at a later date” to be determined by the president.
Ramaphosa signed the bill into law in August, but the proclamation was delayed due to objections by local government to the two sections, which go to the core of municipal participation in electricity distribution — one of their main revenue streams.
Currently reticulation includes the distribution of electricity as well as trading, and municipal distribution areas are exclusive. The ERAA through the two definitions changes that to separate the management of the distribution network, which remains exclusive, from trading.
That mean that municipalities will remain in charge of the wires business, but will have to compete with traders from the private sector, should the two definitions be implemented.
The National Energy Regulator of SA (Nersa) has already granted several trading licences to private companies and all of them are valid countrywide.
Until recently Eskom and municipalities were quiet in this regard, but in July they objected when four applications for new trading licences came before Nersa.
Eskom, while giving the assurance that it is in favour of competition, explained its position thus: “If Nersa approves the trading licences applied for by the applicants, the trading licence holders will be able to sell electricity to existing Eskom customers. This would result in multiple licensees supplying in the same area or customers within another licensee’s supply area, which is prohibited in the current rules.
“Additionally, some of the applicants for a trading license have confirmed in their application that they will not supply residential or small business customers but rather only large power users and this is ‘cherry picking’ of customers.
“The current rules and tariff decisions accommodate cross-subsidies for certain tariff categories. If a group of contributing customers is removed from this cross-subsidy base, it will exert further pressure on the remaining customers.
“Large power users cherry picked by the licence applicants are subsidy contributing customers.”
Nersa nevertheless approved the licences in October, which prompted Eskom to declare its intention to have the approval reviewed and set aside in court.
The SA Local Government Association (Salga) indicated that it would support such litigation.
When the ERAA Bill, which was rushed through the National Council of Provinces (NCOP), came to Ramaphosa for his signature, Salga and some large metros petitioned Ramaphosa, voicing their concern about the two definitions.
He then gave Salga and electricity and energy minister Kgosientsho Ramokgopa three months to resolve the matter.
Despite a recent assurance by Ramokgopa that the matter had been resolved, Ramaphosa is now proceeding with the implementation of the ERAA without the inclusion of the two clauses.
The implementation of the ERAA will allow the National Transmission Company of SA to apply for a licence for a market operator and establish a central purchasing agency, which are key elements of the competitive wholesale market that is expected to become operational in the next three years.
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