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Picture: 123RF/NINEFOTO
Picture: 123RF/NINEFOTO

The Energy Council of SA has responded to concerns raised by municipalities calling into question the constitutionality of certain aspects of a new electricity law, saying these concerns could be addressed during the planning phase that will follow once the bill has been signed into law.

Municipalities fear the Electricity Regulation Amendment (ERA) Bill, which has been approved by parliament and sent to President Cyril Ramaphosa to be signed into law, will limit their role in providing electricity to households, businesses and government in their service areas.

This, municipalities have argued, would infringe on the powers granted to local government in the constitution.

One of the powers allocated to local government exclusively is the function of electricity reticulation: the trading and distribution of electricity to all customers who do not buy electricity directly from Eskom.

However, the ERA Bill introduces a definition for the reticulation of electricity which would limit the future scope of municipalities to provide electricity, Lance Joel, acting CEO of the SA Local Government Association (Salga), told Newzroom Afrika on Tuesday.

Municipalities rely on the profits they earn from selling electricity to help fund other services, and Joel said limiting the powers of municipalities in this way would affect their financial sustainability.

Salga intends to challenge the bill, hoping to have it amended before it gets signed into law.

But James Mackay, CEO of the Energy Council, said that while there was no doubt about the responsibilities and obligations of municipalities in electricity reticulation, the council believed the question of constitutionality can be tested only once the bill has been signed into law, allowing for the electricity trading market to be designed.

“Certainly, the question of how do we bring municipalities into the energy transition and the shift to a liberalised electricity market is one area that has lagged,” he told Business Day TV on Wednesday.

However, said Mackay, the signing of the bill into law had to proceed to allow the process of developing and designing the new electricity trading market to unfold before its constitutionality could be tested.

“We have to make a leap of faith. The bill is just a guide showing the direction we must go in, in determining the rules of how the market will function. As we structure the market, there will be opportunities to challenge the new structure if it does not work [for municipalities].”

Some of the work that needed to be done included reforms at municipal level, he said.

The ERA Bill, once enacted, will allow for the establishment of a transmission system operator (TSO), which will create a transparent platform for the competitive buying and selling of electricity.

Industry expects it will take five years from when the bill is signed into law to establish the TSO as a separate entity.

In the meantime, the functions of the TSO will be performed by the National Transmission Company of SA (NTCSA), which was established out of Eskom’s unbundling and the separation of its transmission business from generation and distribution.

Eskom expects the NTCSA to be fully operational within the next two months.

Advisory and oversight bodies would also be set up “to play a watchdog role”, Mackay said.

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