An Eskom court challenge to national energy regulator Nersa’s approval of five electricity trading licences and one import/export licence shows a failure of oversight and guidance on how Eskom behaves during reforms.
This is according to Peter Attard Montalto, MD of the consultancy Krutham.
His comments follow Eskom’s filing of an application in the Gauteng high court to have Nersa’s approval of trading licences for Green Electron Market, CBI Electric Apollo, Greenco Power Services, Discovery Green and Noa Group Trading reviewed and set aside.
The licences have all been awarded since late last year and the traders, also called aggregators, have entered into agreements with independent power producers (IPPs) and companies that will be the end users of the electricity on the other side.
This enables smaller businesses that cannot on their own enter into long bilateral power purchase agreements with IPPs to access renewable energy and thereby decrease their carbon footprints.
Chris Yelland, MD of EE Business Intelligence, calls it “resistance to long-standing reform commitments that Eskom itself has acknowledged for decades.”
Eskom in its court papers complains traders will “cherry-pick” its most reliable and biggest clients by offering them lower tariffs. This, it says, constitutes unfair competition, because the traders don’t have the same “redistributive obligations” it has.
It further states such large power users cross-subsidise the tariffs of poor customers and by creating a “free-for-all” for the traders, Nersa will be undermining Eskom’s whole tariff regime.
The power utility further argues Nersa acted unlawfully by approving the licences in the absence of specific rules for trading, which the regulator has subsequently published for public comment.
Eskom maintains the distribution licences awarded to itself and municipalities include the right to trade in electricity and Nersa’s own distribution rules prohibit two or more distributors operating in the same licensed areas.
Yelland says the notion of third-party electricity trading, open access to the grid and competitive supply was explicitly articulated as early as 1998 in the white paper on the energy policy.
“That seminal document — endorsed by government and cited countless times by Eskom itself — called for the unbundling of Eskom and the creation of a competitive electricity supply industry to improve efficiency and ensure energy security.”
Montalto says while much is read into the court case itself, this moment really is a failure of the board, of the department of energy and electricity and minister Kgosientsho Ramokgopa to provide proper oversight, guidance and shareholder guidance on how Eskom behaves during reforms.
“Eskom’s basic case is that all ducks are not in a row — and this is true — but they never will be, hence leadership [which is lacking] is needed to guide through this process and push back against a mixture of motivations [risk aversion in the main, but also monopoly ‘blob’ instincts] in Eskom.”
Montalto says the case also highlights the as yet unsatisfactory resolution of the Eskom shareholder compact issue “where too much control in writing has been given to Eskom rather than held by the ministry.”
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