End of an era for Eskom

Electricity and energy minister Kgosientsho Ramokgopa unveiled Eskom 2.0 last week, which he said marks a new era for the power utility.

He has set out expectations for Eskom 2.0, including the utility’s plan to expand new generation capacity, expand the grid, and strengthen its relationship with customers.

Another important change is how Eskom will adapt to the entry of new generators and traders in South Africa.

He said the board, under chairman Mteto Nyati, will develop a single roadmap for Eskom over the next three, five and ten years.

“It must define the utility’s public obligations, its future generation mix, its commercial position and the investment required to sustain them,” he said.

“Eskom must be able to fulfil its mandate without relying on repeated fiscal support or sustained double-digit tariff increases as its business model.”

Energy analyst Chris Yelland said that while load shedding has ended, the underlying structural problems at Eskom are unresolved.

One of the problems is the price of electricity. Years of steep tariff increases have eroded household disposable income and damaged industrial competitiveness.

The high electricity prices have also pushed Eskom customers toward alternative energy sources and away from the grid.

“Eskom 2.0 will therefore be judged less by whether it can keep the lights on than by whether it can drive down the real cost of electricity,” Yelland said.

“Eskom has to become genuinely customer-centric, and improve operational efficiency across generation, transmission and distribution.”

He added that Eskom must support, rather than frustrate, unbundling, an independent transmission system operator, electricity trading, and a competitive wholesale market.

“Eskom must attract large new customers with competitive prices while avoiding cross-subsidies that shift costs onto everyone else,” he said.

“Nyati’s second term will test whether Eskom’s recovery is genuinely structural or merely a temporary respite from crisis.”

Eskom must become an effective provider in a competitive electricity market

Business Leadership South Africa CEO, Busisiwe Mavuso, said that Eskom needs to become an effective provider in a competitive electricity market.

She said that South Africa’s electricity market must have an unbundled independent transmission system operator.

“A key requirement of the Eskom board will be to work with the shareholder to ensure the successful separation of its transmission assets,” she said.

She said that this separation is critical to the broader reform effort in South Africa and the electricity market.

“On the positive side, the Department of Electricity and Energy published the draft Electricity Pricing Policy that will support a competitive electricity market,” she said.

“However, less positive is the launch of the South African Wholesale Electricity Market (Sawem), which has been repeatedly delayed.”

She said that the market was to begin trading with external participants this month. However, that deadline is nearly here without an update.

“We have not been updated on when we can expect full operation. I hope the minister will give us clear guidance soon,” Mavuso said.

“That will be an important step toward a competitive market which may finally see prices coming under competitive pressure.”

She said that the electricity tariff hikes South Africa has faced for over a decade are a major driver of administered price inflation.

“Over the last year, electricity prices have increased by almost twice the general inflation rate,” she said.

This, she said, is why it was important to ensure the future electricity market is competitive, and helping keep inflation in check is one of them.