The Energy Regulation and Markets Review - Stikeman Elliott

South Africa
preference for limiting development of a bilateral electricity supply market, these openaccess
rules have not been developed and the statutory open-access provisions of the ERA
remain untested to date. Wholesale and retail competition does not exist.
Under the Constitution, municipalities have exclusive jurisdiction over electricity
reticulation within their respective municipal boundaries. Generally, as a term of their
distribution licences, municipal distributors have exclusivity over all load customers located
within their respective municipal boundaries. Pursuant to the Constitution 38 a municipality
may impose a surcharge on its service charges and many municipalities impose significant
surcharges on their electricity supply services, which has led to wide disparities in electricity
supply charges imposed on customers taking their electricity supply requirements from
municipalities. This disparity exists not only between customers of different municipalities
but is particularly pronounced between municipal customers and Eskom’s distribution
customers to whom these municipal surcharges do not apply. Regulatory measures at
the national government level to remove distribution pricing and service level disparities
by transferring municipal and Eskom distribution into REDs have been abandoned. 39
Proposed amendments in the ERA Amendment Bill will, if enacted and brought into
effect, remove all doubt as to NERSA’s jurisdiction to approve any municipal surcharges on
distribution tariffs. Such surcharges will be unregulated by NERSA.
Natural gas
Under the Gas Act 40 a licensee of any gas transmission or distribution facilities may
not discriminate between customers or classes of customers regarding access, tariffs and
conditions of service save for objectively justifiable and identifiable differences regarding
matters such as quantity, transmission distance, length of contract, load profile, interruptible
supply or any other distinguishing feature approved by NERSA, as the Gas Regulator.
The Gas Regulator 41 may impose licence conditions within the framework of
requirements listed in the Gas Act including:
a access for third parties to uncommitted capacity on pipelines;
b compulsory negotiations by transmission licensees with third parties regarding
the routing, size and capacity of future pipelines;
c compulsory negotiations by licensees with third parties regarding compression
of existing pipeline capacity and the equitable sharing among customers of cost
savings arising from increased volume; and
d licensees being obligated to allow technically feasible interconnections with gas
suppliers as long as the person requesting the interconnection bears the increased
costs of such interconnection.
38 Section 229.
39 Although the Cabinet approved the proposal to create the REDs in October 2006, REDs were
ultimately abandoned in 2011 following the empowerment of municipalities with respect to
electricity surcharges pursuant to the Municipal Fiscal Power and Functions Act 12 of 2007.
40 Section 22.
41 Section 21.
248