President Cyril Ramaphosa has signed into law the Electricity Regulation Amendment Act which sets out far-reaching reforms of the country's electricity sector, including the establishment of a competitive electricity market.
In a statement on Friday, the Presidency said the bill assented to by the President amends the Electricity Regulation Act of 2006. This is so as to respond to current realities in the electricity sector.
It also opens up pathways to greater competition and reduced energy costs; increases investment in new generation capacity to achieve energy security; establishes an independent transmission company as the custodian of the national grid; and imposes severe penalties for damage to and sabotage of infrastructure.
The Electricity Regulation Amendment Act provides for the establishment, duties, powers and functions of the Transmission System Operator SOC Ltd (TSO) - which must be established as an independent entity within five years - and for the National Transmission Company of South Africa to act as the TSO in the interim.
It also provides for an open market platform that allows for competitive, wholesale or retail buying and selling of electricity.
The Act provides for market operation as a new activity that may be licensed by the National Energy Regulator of South Africa (NERSA).
In addition, it requires the development of a Market Code that will establish rules to govern the future competitive market and outlines the process through which the code will be approved.
The Act further clarifies the principles that apply to the setting or approval of prices, charges and tariffs, providing, among others, that NERSA must enable an efficient licensee to recover the full cost of the licensed activity, must allow for a reasonable return proportionate to the risk of the licensed activity, and may provide for incentives for continued improvement of technical and economic efficiency.
As it does so, the regulator may consider factors such as security of supply, the diversity of supply and the promotion of renewable energy.
In addition, the Act distinguishes between tariffs that must be set or approved by the regulator, such as network charges, and those which are subject to a direct supply agreement or arise as an outcome of a competitive market.
"To ensure a level playing field for competition between multiple electricity generators, the Act provides that the system operator shall not discriminate between different generators or customers in relation to dispatching or balancing the system, except for objectively justifiable and identifiable reasons approved by the regulator.
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"Access to the transmission and distribution power system must be objective, transparent and non-discriminatory," said the Presidency.
These changes are in line with the broader reforms guided by the Energy Action Plan and the Eskom Roadmap, which aim to modernise and transform South Africa's electricity system to end load shedding and ensure long-term energy security.
It is anticipated that diversity of supply and the promotion of renewables will stimulate a demand for new skills, innovation and technology in the electricity sector, which will generate new industrial activity and in turn mitigate unemployment.
Reinforcing the protection of public infrastructure as part of the fight against crime, the law provides for fines of up to R1 million or five years in prison - or both - for persons who, among other offences, damage, remove or destroy any transmission, distribution or reticulation cable, equipment or infrastructure.
Penalties for persons who unlawfully receive such cables, equipment or infrastructure face fines of up to R5 million or 10 years in prison, or both.
Going forward, the Act will lead to long term energy security, a more competitive energy system, more rapid uptake of renewable energy sources, and ultimately lower energy prices for all South Africans.
The Electricity Regulation Amendment (ERA) Bill was passed through a majority in the National Assembly in March.
READ | National Assembly passes Electricity Regulation Amendment Bill
