Energy Distribution Dispute Exposes Complexities Of Public-private Competition

A brewing dispute over energy distribution licenses could be an early litmus test for the Government of National Unitys (GNU) stated commitment to economic reform and public-private partnership, says John Lawson , CEO of the Chamber of Commerce and Industry.

Eskom is calling on the National Energy Regulator of SA (NERSA) to reject applications for private trading in energy production.

These objections emerged during virtual hearings held by the NERSA, which is considering granting generation, trading, and import-export licenses to entities like Discovery Green, CBI Electric, Apollo, Green Electron Market, and Africa Green Co.

This arrangement will lead to multiple licensees supplying the same areas or serving customers within another licensees supply zone, said Mohlago Masekela , Senior Legal Advisor at Eskom. Masakela said such actions were prohibited by NERSAS Rules for Licensable Areas of Supply.

Liberalising the energy generation and distribution market would be a massive tonic for the economy, evidenced by the sizeable investments already made, says John Lawson , CEO of the Chamber of Commerce and Industry.

No doubt Eskom finds this legislative arrangement if it pertains rather convenient given its market position, Lawson said in article published on the Chambers website. But maintaining the status quo of Eskom domination would be a decade-long setback for just about everybody else except Eskom, particularly the poor who are most affected by the soaring electricity tariff.

Private energy stakeholders say government needs to make a clear distinction between contracts for energy capacity and usage of the transmission network. Misplaced concerns about duplicating physical infrastructure should not be used as a ruse to prevent private players from entering the market.

The issue is particularly significant given the potential massive investment in the energy market, and the need for possible customers to shop around for affordable and sustainable energy sources.

Lawson adds that the GNU should appreciate how local energy systems allow for a strengthened circular economy, where prosumers, those who benefit from self-generation for self-consumption, can freely trade energy via local distribution networks while acting as good-grid citizens to support a strong stable national grid.

Both at the technical and economic level, local energy systems are the foundation of the shift to a fair and inclusive clean energy system.

Power engineering organisations are preparing electrical standards to allow for the millions of local and community energy systems to form the foundation of a future smart grid. As these technologies align, our government must take advantage and lead a paradigm shift forward towards a smart grid for all.

Bringing his argument closer to home, Lawson says energy reform has particular relevance to the Western Cape, given the provinces burgeoning renewable energy sector, which has huge job creation potential.

The province has already seen huge investment and innovation in this space. The regional economy would also see immediate benefit from accelerated public-private partnership, particularly in the logistics sector.

Governments approach to energy reform could give a clear indication as to its overall willingness to allow more private sector participation in key areas of economic activity, previously the preserve of state-owned enterprises, said Lawson.

Both Eskom and municipalities are legally mandated to operate in their respective areas under NERSA licenses. Eskoms objection centres on the belief that allowing private traders to enter these areas would violate NERSAs own rules, which prohibit multiple licensees from supplying the same area, he said.

The introduction of private traders could have severe consequences for Eskom and its customers, Padayachee said. New entrants might cherry-pick the high-paying customers, eroding the revenue streams necessary for Eskom and municipalities to fund maintenance, refurbishment, and infrastructure development and, in the worst case scenario, lead to bankruptcy, he said.

Competition, although it may bring in better prices, has to be done in an environment that leads to a win-win situation for all parties, Padayachee said.