Stand-Alone Body Planned to Level Electricity Playing Fields

The Department of Energy is planning to complete by end-March a new legal framework which will establish an independent system operator to buy electricity from Eskom and independent power producers. Initial suggestions were that only electricity from independent power producers would be bought by the independent system operator, but this has now been broadened to include Eskom's power. The aim of the new system is to create a level playing field between Eskom and independent producers so that the latter would not have to negotiate power purchase agreements with Eskom.

Eskom's designation as the sole buyer of electricity from independent producers has been a major stumbling block to developing a vibrant independent generation industry, as the utility has been reluctant to buy relatively more expensive power from independent producers. This has meant the government has not met its target to have at least 30% of all power generated by independent producers.

The new model - used extensively in countries where the private sector contributed to power generation such as Australia, the US, Argentina and Norway - would not affect Eskom's viability, the energy department's director-general, Nelisiwe Magubane, said yesterday. This was because both Eskom's power and that of the independent producers would be bought by the independent body at the tariffs determined by the National Energy Regulator of SA (Nersa). The same tariff would apply to all power purchased.

Magubane said that more private players would be attracted to the industry once tariffs rose after Nersa had decided on Eskom's 35% tariff application. She said the Cabinet had instructed the department at its last meeting last year to develop the model of independent power purchase and to report back to it before the end of March. Magubane said the proposed model would ensure the wholesale purchase of power by the independent operator was transparent and took place outside Eskom. The electricity would then be resold in bulk for transmission and distribution by Eskom and municipalities. "What has been happening is that Eskom has been acting like a real monopoly, trying to keep other players out of the industry," Magubane said. "We want to take that function of buying power away from it."

Magubane said Eskom was happy with the proposal and was working with the department on how best to implement it.

Source: All Africa