Episode Transcript
[00:00:01] Hi everyone. Welcome to the ESI Africa Podcast. I'm your favorite host and power and energy guru Professor Vali Padiachi here once again.
[00:00:12] Today we're diving into a critical topic currently unfolding in South Africa's energy landscape. That is, why is ESKOM going into a court battle with the national energy regulator of South Africa, nesa, after NESA recently awarded five training licenses?
[00:00:32] Eskom's recent court action represents a significant moment in our electrical or electricity energy sector.
[00:00:42] Grounded in the principles of fairness, transparency and the need for a robust regulatory framework and associated effective rules, we operate within a constitutional democracy here in South Africa. Lest we forget which underpins a rules based economy, this regulatory framework is essential to ensuring that all market participants can engage fairly and equitably.
[00:01:15] So what prompt ESKOM to to take such a momentous step?
[00:01:20] The crux of the issue lies in Eskom's objection to the licensing of these five electricity traders, which it argues was conducted without a comprehensive regulatory framework and associated effective rules governing the process.
[00:01:41] ESKOM is concerned that that this lack of structure threatens both its operational stability and the integrity of the LCCD market as a whole.
[00:01:54] This legal dispute isn't simply about competition.
[00:01:59] It fundamentally revolves around establishing a level playing field for all entities within the market space.
[00:02:10] ESKOM advocates for a structured approach that allows both itself and new entrants to coexist and engage fairly.
[00:02:22] Given escom's role as the largest state owned distribution utility in the country, the implications are far reaching affecting not only Eskom but but also municipal electricity utilities.
[00:02:40] To frame this discussion, let's think about the importance of a rules based economy operating in our constitutional democracy.
[00:02:52] The regulations governing our LCCD market are designed to achieve a variety of critical objectives as point one establishing fairness, meaning rules ensure that every participant in the market has a fair opportunity to engage, which is vital for healthy competition. Point 2 Promoting stability, meaning a clear set of regulations and rules leads to predictable outcomes, encouraging investment and innovation.
[00:03:34] Point 3 Protecting rights and interest, meaning by safeguarding consumers and businesses and utilities we can foster trust within the market.
[00:03:50] 4 Conflict resolution, meaning a structured legal framework with associated effective and efficient rules allows for the resolution of disputes, supporting harmony amongst market actors and point five encouraging responsibility, meaning adherence to rules compels entities to consider the broader impacts of their reactions on communities and the environment.
[00:04:28] Now let's delve into some specific concerns that ESKOM has raised regarding the issuance of these trading licenses. First and foremost, the absence of an established regulatory framework which with associated Effective and efficient rules ampers eskom's ability to operate effectively and efficiently and undermines its existing rights as an electricity utility.
[00:05:03] ESKOM argues that granting these licenses infringes on its exclusive rights to supply electricity in certain areas.
[00:05:14] Historically, ESKOM was assured in terms of its operating NASA license conditions that it would not face competition from multiple suppliers in its service domains.
[00:05:31] Such unauthorized licensing raises substantial concerns about the adherence to established rules and principles that govern our energy market.
[00:05:47] Another pressing issue is what ESKOM describes as cherry picking.
[00:05:55] This refers to licensed traders selectively targeting financially sound customers, particularly large industrial users, even going to the extent of leveraging favorable time off use tariff periods.
[00:06:15] This practice undermines eskom's ability to maintain a balanced tariff structure and affects cross subsidization, which allows profits from larger users to support services to residential and indigent customers and small businesses.
[00:06:40] In this way, these private traders, driven by profit motives and not by regulatory obligations, can offer lower prices and better incentives during specific times of use.
[00:06:57] This creates an unlevel playing field that compromises the financial health of public utilities like escom.
[00:07:10] Furthermore, ESKOM is emphasizing the significant lack of consultation in the trading license application process.
[00:07:21] Stakeholder engagement is crucial, especially for an entity like ESKOM that plays a key operational role in our electricity landscape.
[00:07:33] Without proper consultation, the principles of natural justice are compromised.
[00:07:42] The reinforcement of effective regulatory frameworks is paramount.
[00:07:48] ESKOM seeks not a monopoly, but an environment where competition is fair and regulated, ensuring the interests of all stakeholders are protected.
[00:08:02] This means engaging stakeholders effectively and efficiently to establish rules that promote a balanced market.
[00:08:14] As our energy landscape continues to shift, particularly with recent amendments to the Electricity Regulation Amendment Act 2024, the necessity of a comprehensive regulatory framework becomes even more imperative and critical.
[00:08:35] The latest adjustments, including increases in licensing exemption, aims to stimulate private participation, but they must not compromise the viability of establishing or established electricity utilities like ESKOM and the municipalities.
[00:09:01] For the avoidance of any doubt and misunderstanding, let me clarify that both ESKOM and municipal electricity utilities fully support fair competition on a level playing field.
[00:09:16] However, it is vital that such competition takes place.
[00:09:22] As I've indicated, on an equitable playing field.
[00:09:27] All participants must adhere to the same regulations, rules and standards, resulting in a win win situation for everyone involved in the value chain and not result in a zero sum game outcome with winners and losers. I would go further and argue that ESKOM and municipalities will, in such circumstances, come out as potential losers.
[00:10:03] In conclusion, eskom's legal action against NASA represents a pivotal moment for the future of electricity training in South Africa.
[00:10:15] It illustrates the urgent need for a well designed regulatory framework that not only fosters fair competition, but also solidly safeguards the interests of consumers, existing utilities, municipalities and new market entrants alike.
[00:10:37] This legal dispute encompasses far more than individual interests. It is about the foundation of growth, stability and fairness in our energy sector.
[00:10:52] As ESKOM and the municipalities navigate these complex waters, the commitment to a democratic process and a rules based economy will be instrumental in achieving a sustainable and equitable electricity market for all.
[00:11:15] Thank you for joining me today on the ESI Africa Podcast.
[00:11:19] Until next time, let's continue working towards a thriving energy future for South Africa.
[00:11:28] This is your favorite power and energy guru, Professor Vali Pariachi, signing off. Ciao for now.
