Amendment bill sparks fear of higher electricity costs

Published Oct 17, 2023


Civil society organisations have expressed concern over proposed changes to the Electricity Regulation Amendment Bill, which they fear could lead to higher electricity costs, potentially impacting the most vulnerable, as it seemed written to favour energy suppliers and not consumers, they say.

The bill aims to amend the Electricity Regulation Act of 2006, to introduce a competitive market in the electricity sector through increased private-sector energy generation.

Among others, the bill also seeks to provide for the establishment, duties, powers and functions of the Transmission System Operator SOC Ltd, “to provide for an open market platform that will allow for competitive electricity trading”.

Last month, the portfolio committee on mineral resources and energy opened a call for comments on the proposed amendments, which closed on Friday.

The Alternative Information and Development Centre (AIDC) made a submission advocating for the halting of the independent transmission company set-up process, citing, the inclusion of the “vague and wide-ranging” proposed subsection 15(4), that “indicates that the ultimate intention is to allow for end-user tariffs dictated by the function of market forces”.

“We are deeply concerned for the well-being of electricity users, especially the millions of energy-poor South Africans who do not have safe, affordable and reliable access to electricity.

“Our concern is that these reforms will undermine the state’s capacity to ‘achieve the efficient, effective, sustainable and orderly development of electricity supply’, and will result in added risk on the state’s finances; there is a lack of clarity on how tariffs will be set in a competitive energy market, and we caution that it may result in rising tariffs and perpetuate energy poverty,” the AIDC said.

Similarly, Stop CoCT’s chairperson Sandra Dickson, who advocates for affordable electricity tariffs, said the amendment bill provided no protection for consumers in relation to tariffs that may be charged in the envisaged "open market".

"This Amendment Bill is grossly ambiguous and is in its current form bound to be a minefield for the National Energy Regulator of South Africa (Nersa).

“The consumer is once again left with no protection against hawkish tariff setting,” said Dickson.

Both Eskom and the Department of Mineral Resources and Energy (DMRE) did not respond to requests for comment by deadline on Monday.

Meanwhile, Nersa’s head of electricity regulation, Nhlanhla Gumede, speaking at the Green Energy Africa Summit that ran parallell to the Africa Oil Week conference last week, said the challenge the country faced was that it had one integrated entity, Eskom, which is responsible for transmission, generation and distribution.

“The world is changing and we have to ask if the policies, laws and regulations in South Africa are changing at the same pace as the rest of the world.

“We believe this is not really happening and some people say ‘better the devil you know’.

“The Electricity Regulation Amendment Bill that is before Parliament is part of that change,” said Gumede.

He said, however, the change would take time.

“Globally when it comes to generation people say it does not have to be done centrally, neither by a utility.

“The private sector can also participate, so basically we are saying that part of the value chain should be liberalised, at this stage it is not.

The liberalisation of that sector is an integral part of the bill,” said Gumede.

“We need to have an independent transmission system operator so that you know, firstly, the investments that are required in the grid will be made in a cost-effective way.

“The charges that are going to be made if you are introducing your own power will be above board, that you are not going to have special price for Eskom plants and you need to do that.

“Then of course there is the bigger elephant in the room which is distribution.

“Hopefully the bill will also deal with it. It has been an outstanding matter for the longest time in South Africa,” he said.

The private sector banks were also called to support initiatives through investment.

Cape Times