Eskom’s NTCSA Unbundling Gets Green Light from Lenders

Major Step Forward for South Africa's Electricity Sector Reform

by Ikeoluwa Juliana Ogungbangbe
Eskom NTCSA unbundling

Electricity Minister Kgosientsho Ramokgopa has confirmed that all eight lender groups of Eskom have agreed to the formation of the National Transmission Company South Africa (NTCSA) as an independent entity under Eskom Holdings. This consent is a crucial step towards the operationalization of the NTCSA, slated for April 1, indicating progress in Eskom’s restructuring plan aimed at improving efficiency and reliability in the nation’s electricity supply.

The transition, which also involves the appointment of an independent NTCSA board and the acquisition of necessary licensing approvals from the National Energy Regulator of South Africa (Nersa), marks a significant milestone in Eskom’s unbundling strategy. The strategy, outlined in the ‘Roadmap for Eskom in a reformed electricity supply industry’ by the Department of Public Enterprises in 2019, seeks to segregate Eskom’s generation, transmission, and distribution operations into distinct entities to foster a more competitive and sustainable energy landscape.

In early 2023, Nersa played a pivotal role by publishing three licenses essential for NTCSA’s operation and transferring powers regarding power purchase agreements with independent power producers from Eskom to NTCSA. This move is expected to create a level playing field for all electricity producers and facilitate a market platform for buying and selling electricity, potentially leading to reduced prices, enhanced supply reliability, and greater consumer choice.

Moreover, the recent approval of amendments to the Electricity Regulation Act (ERA) by the National Assembly aligns with these structural changes, aiming to democratize the sector further and promote competition and innovation. Despite concerns from opposition lawmakers about the extended discretionary powers to the Energy Minister and Nersa’s future role in price and tariff settings, the amendments are seen as a positive step towards remaking South Africa’s energy sector.

The legislation now awaits the National Council of Provinces’ approval before it can become law, a step eagerly anticipated by proponents of the energy reform. As South Africa moves towards a more efficient and competitive electricity market, the establishment of the NTCSA is seen as a cornerstone in the country’s journey towards energy sustainability and economic growth.

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