Eskom’s proposed grid regulations will lead to disinvestment in the energy sector

Dear Editor

• Eskom’s actions are anti-competitive, as it leverages its monopoly to hinder entry into the energy market.
• The DA will call on NERSA to review and set aside these proposed regulations.

Eskom’s recently announced grid access rules are regressive and will lead to disinvestment in the IPP sector at a time when the country can least afford it and is in the midst of a crippling electricity crisis. Instead of scaring away investors, Eskom, through its proposed new Transmission Company, should be providing incentives for private sector participation in the grid infrastructure system.

What Eskom is doing now, through these proposed grid regulations, is essentially anti-competitive behaviour. it is leveraging on its monopoly to create barriers to entry in the energy market for IPPs. With no economic impact assessment done to quantify the impact that these rules will have on investment on the energy sector, the DA will make representations to the National Energy Regulator of South Africa (NERSA) requesting that these proposed regulations be reviewed and set aside.

Increasing the investment risk premium, by asking IPPs to spend more on power generation projects with no guarantee that they will obtain grid access, is a shot in the foot that will reverse all the gains that have been made thus far to increase the proportion of independent power generation to the energy mix. Instead of playing gatekeeper to the electricity grid, arbitrarily deciding who should or who shouldn’t be connected, Eskom should instead be expending its energy on encouraging grid investment by the private sector.

The ongoing grid constraints would not have occurred if the ANC and the EFF had not shot down the DA’s Independent Electricity Management Operator (IEMO) Bill in 2020. The IEMO Bill sought to foster a public-private partnership between government and the private sector to manage the electricity grid, its planning, procurement, allocation of resources, system operation and the purchasing of electricity.

Most importantly, the Bill had the potential to loosen the grip of connected cadres and criminal networks who have turned Eskom into a feeding trough by allowing a more competitive electricity generation sector that would see IPPs treated fairly through a level playing field. As things currently stand, Eskom has a monopoly from generation, through transmission to distribution, and it can pick and choose which IPPs it wants to allow in, at a price it determines.

Energy investors are already facing significant challenges in seeking the requisite permits and bringing their projects to financial close. What they cannot afford, is to have Eskom create barriers for grid access simply because the ANC government is intent on protecting the Eskom monopoly (and its corruption feeding trough) across the electricity value chain.

Regards

Kevin Mileham MP
DA Shadow Minister of Mineral Resources and Energy