President Cyril Ramaphosa has officially signed the much-anticipated Electricity Regulation Amendment (ERA) Act into law. This critical legislation sets the stage for the establishment of an independent Transmission System Operator (TSO) within the next five years, marking a significant shift in South Africa’s electricity sector.
The ERA Act, which lawmakers approved ahead of the May 29 elections, aims to reshape the country’s electricity industry. The President’s assent to the Act has stirred some debate, particularly regarding certain provisions that could impact the authority municipalities currently hold over electricity distribution. Despite these concerns, the Act enjoys broad support among various stakeholders, including organized business groups, who argue that these changes are crucial for leveling the playing field between Eskom and independent power producers (IPPs). The Act is also seen as a necessary step to align the electricity supply industry with South Africa’s ongoing energy transition.
One of the Act’s most significant provisions is the creation of a State-owned TSO, which will operate as an independent entity. This new entity is expected to be established within five years, marking a pivotal development in the restructuring of South Africa’s electricity market. The TSO will be responsible for overseeing the transmission of electricity across the country, ensuring that the system operates efficiently and without bias. The legislation mandates that this entity must not discriminate between different electricity generators or customers when dispatching or balancing the system, except for reasons that are objectively justifiable and approved by the National Energy Regulator of South Africa (Nersa).
In addition to creating the TSO, the ERA Act requires the development of a market code. This code will establish the rules governing the future competitive electricity market in South Africa. The process for approving this code is also outlined in the legislation, underscoring the government’s commitment to creating a transparent and fair electricity market. The new law further introduces market operation as an activity that Nersa may license, paving the way for greater participation by independent entities in the electricity sector.
To ensure fairness in the competitive market, the ERA Act stipulates that access to the transmission and distribution system must be objective, transparent, and non-discriminatory. This provision is intended to foster competition and encourage investment in the sector, which has been dominated by Eskom for decades. The Act also outlines the economic regulations that will govern the industry, distinguishing between tariffs set or approved by the regulator and those determined through competitive market outcomes. Nersa is required to ensure that licensed entities can recover the full costs of their activities, with a reasonable return on investment. Additionally, the regulator may offer incentives for improvements in technical and economic efficiency.
The interim TSO role will be fulfilled by the National Transmission Company of South Africa, which began operating as a separate subsidiary of Eskom Holdings on July 1. This arrangement will remain in place until the new independent TSO is fully established. The establishment of the TSO is seen as a crucial step in modernizing South Africa’s electricity system and addressing the ongoing challenges of load shedding and energy security.
In a statement, the Presidency emphasized the importance of the ERA Act in responding to the current realities of the electricity sector. The new law is part of broader reforms guided by the Energy Action Plan and the Eskom Roadmap, both of which aim to modernize and transform South Africa’s electricity system. These efforts are crucial to ending load shedding, increasing investment in the sector, and ensuring long-term energy security.
Another significant aspect of the ERA Act is its provisions for penalties related to the damage or sabotage of electricity infrastructure. The legislation allows for fines of up to R1 million or five years in prison—or both—for individuals who damage, remove, or destroy transmission, distribution, or reticulation cables, equipment, or infrastructure. Those who unlawfully receive such cables, equipment, or infrastructure face even harsher penalties, including fines of up to R5 million or 10 years in prison, or both. These provisions are intended to protect South Africa’s critical electricity infrastructure from vandalism and theft, which have been significant problems in recent years.
