President Cyril Ramaphosa has endorsed a landmark report by the Eskom Restructuring Task Team (ERTT), setting out the framework for establishing a fully independent state-owned Transmission System Operator (TSO).
The report sets the stage for a restructuring of the electricity sector to “create competition, unlock investment, reduce electricity prices and ensure energy security for sustained economic growth and job creation.”
“This report shows how government can ensure that the architecture of the electricity sector can change as the sector continues to evolve, creating the foundation for South Africa’s growth.
“It is welcomed that all the key stakeholders are aligned on this objective,” President Ramaphosa said in a statement on Friday.
According to the Presidency, the report sets out recommendations for an “independent Transmission System Operator separate from Eskom.”
“The TSO is a key enabler of a successful competitive wholesale electricity market that is expected to deliver reliable and cost-effective electricity. This reform will support higher rates of economic growth, investment and job creation,” the Presidency said.
The report includes recommendations that:
- show that the restructuring is feasible, in line with international best practice, and can be done in a manner that does not compromise Eskom’s financial sustainability.
- highlight that the growth in municipal arrear debt to Eskom needs to be addressed because of the threat it poses to Eskom and the broader electricity sector.
- identify several actions that can be taken immediately to enable the restructuring.
“In Phase II, which starts immediately, the detailed transaction structure and implementation plan will be developed. Phase II will proceed over the next three months.
“The ERTT has proposed that a working group develop a consolidated action plan, encompassing all initiatives aimed at arresting the growth in municipal arrears and identifying those to be scaled up and accelerated.
“Such initiatives include stronger enforcement of credit controls, rolling out smart meters and Distribution Agency Agreements (DAAs), and stricter license enforcement, as well as the continued implementation of the Municipal Debt Relief Programme, Metro Trading Services Reform and the Electricity Distribution Industry (EDI) Reform Roadmap,” a Presidency statement noted.
Actions that can be implemented immediately include:
- strengthening interim measures to support the existing National Transmission Company of South Africa’s (NTCSA’s) independence and the internal ring-fencing of the NTCSA’s different licensed activities.
- taking first steps toward unbundling tariffs.
- clarifying the payment waterfall within the restructured market environment.
- developing mechanisms to insulate market participants from non-payment.
“The proposals to strengthen NTCSA’s independence during the interim period until the TSO is established include various requirements to ensure good governance and strengthened regulatory oversight.
“Directors serving on the Eskom board will not be appointed to the board of the NTCSA or serve on the boards of both the NTCSA and Eskom. The appointment of the Chief Executive Officer (CEO) and senior management of NTCSA will be the sole responsibility of the NTCSA Board,” the statement read.
Furthermore, there will be “clear delegation of authority from Eskom to the NTCSA of all decision-making related to the market, financial and operational ring-fencing of NTCSA from Eskom”.
“Decisions on access to the transmission network are to be relocated to the NTCSA and eventually to the TSO. This includes cases in which connections are at the distribution level but have implications for the market or transmission network.
“Eskom Distribution will retain a Grid Access Unit to manage connections to its distribution network where projects connect at this level,” the statement concluded. – SAnews.gov.za
