Dr. Kgosientsho Ramakgopa, Minister of Electricity and Energy
Electricity and energy minister Kgosientsho Ramokgopa on Tuesday announced further regulatory reforms to address concerns over Eskom’s grid monopoly and enable more private sector participation in electricity distribution.
The reforms update the 2012 rules governing network charges and introduce unbundled tariff codes for corporate entities distributing electricity through the national grid.
“We are now making it possible for someone to generate electricity in one part of the country and supply it to an off-taker in another,” said Ramokgopa. “We are defining the rules of how that electricity moves from the generator through Eskom’s transmission lines and into municipal networks.”
The announcement follows the national transmission company’s move in April to allow private sector participation in grid expansion to tap into renewable energy from designated corridors.
He said the revised rules, which build on government concessions in the Electricity Regulation Act of 2006 to allow electricity to be traded as a commercial activity, have been updated to specify the licensing requirements to trade on Eskom’s grid.
Companies generating electricity at low, medium and high-voltage levels will now be able to wheel their energy over the national and municipal transmission lines.
Wheeling refers to the process by which an independent generator sells electricity — which the minister clarified will be to large-scale utility users rather than households — through using existing networks.
Ramokgopa added the wheeling rules and the associated charges aim to ensure non-discriminatory grid access, foster competition in energy generation and enable transparent cost recovery to Eskom.
“Transmission lines are the highways of electricity and Nersa [National Energy Regulator of South Africa] will be the tollgate operator for electricity wheeled from private generators to end-users through the network service provider,” said the minister.
He said the regulatory changes would bring certainty to investors and are designed to stimulate green energy investment.
As the state remains the sole operator of the national grid, Ramokgopa said that it must impose network charges on third-party energy transport. Tariff unbundling will be central to the new framework, ensuring generators and consumers pay fair rates and that municipalities and Eskom recover costs in a transparent manner.
Nersa’s wheeling tariffs are meant to cover the capital, operational, maintenance and administrative costs incurred by network providers when allowing third-party grid use.
The newly published rules address concerns that the 2012 regulations did not specify how entities can access the grid or what contracts they needed to sign for distribution.
To participate, said the minister, a generator must hold a Nersa-approved trading licence and sign a connection and use-of-system agreement with Eskom. An electricity supply agreement and power purchase agreement are also required to legitimise commercial activity.
The new regulations outline three typical wheeling scenarios under the new framework, Ramokgopa said.
In the first, electricity is wheeled across Eskom’s transmission and distribution network directly to the end-user. This requires a supply agreement with Eskom, a use-of-system contract and a power purchase agreement between the generator and the buyer.
In the second scenario, power is wheeled from a generator across Eskom’s transmission grid and into a municipal distribution network before reaching the consumer. This requires coordinated agreements between Eskom, the municipality and the generator.
The third scenario involves wheeling electricity exclusively through municipal networks, without using Eskom infrastructure. In this case, agreements must be made with the municipality and a valid power purchase agreement secured.
Ramokgopa said the reforms are the most important regulatory action since President Cyril Ramaphosa announced plans to accelerate infrastructure investment for energy security.
On Monday, the minister said the department was prepared for winter demand, with units 1, 2 and 3 at the Kusile power station, in Mpumalanga, operating at full capacity. Unit 4 is expected to return to service by the end of May with load reduction capped at level 2.
The minister added that he expected the new wheeling rules to force Eskom to be more competitive and, consequently, bring down electricity prices.
“We are no longer relying on Eskom as the sole generator of electricity. There will be multiple generators, and with competition comes innovation, efficiency, research and investment — and, ultimately, more affordable electricity,” Ramokgopa said.