Eskom bankruptcy warning
Energy expert Professor Vally Padayachee warns that approving private electricity trading licences without establishing new rules for their participation could bankrupt Eskom and municipalities.
Eskom recently approached the High Court to challenge the National Energy Regulator of South Africa (Nersa) awarding five electricity trading licences and one import-export licence in 2024.
These traders act as middlemen between independent power producers and end-users and are expected to play a key part in opening up competition in the electricity supply market.
In its court papers, Eskom said the licensing decision would enable a “free-for-all” in which traders could poach the utility’s best customers without carrying redistributive obligations.
Eskom argued that there were no rules governing electricity trading as a separate licensed activity from electricity distribution.
“Eskom continues to hold the various obligations arising from the obligations in its distribution licences, but can now have its most reliable and lucrative customers taken from it by traders given permission to trade in the same area of supply,” the utility argued.
It accused Nersa of making its decision “under the guise of promoting competition and labouring under material misapprehensions about the law and the facts.”
In an interview with The Money Show on Radio 702 and Capetalk, Padayachee said he believed the power utility had a strong case against Nersa.
“The playing field is not level in terms of allowing for fair competition,” he said. “When you have that situation, you need rules, you need a regulated framework.
“Unfortunately, we don’t have that currently, and we are going to end up with unfair decisions being taken.”
Padayachee said one aspect where Eskom and municipalities were at a disadvantage was in setting prices within a particular area.
He argued that private traders had more price flexibility in addition to being able to pick and choose their customers.
Padayachee does not believe that Nersa followed its own rules in awarding the trading licences and that Eskom had a “strong” case.
Eskom “dangerously disingenuous”
Another energy expert — Chris Yelland — has accused Eskom of being “dangerously disingenuous” in its arguments and attempting to cling to its monopoly.
The EE Business Intelligence managing director has questioned the argument that Nersa’s decision represented a “radical and unconsulted new policy”.
Yelland said the notion of third-party electricity trading dates back to the 1998 energy policy white paper, which was compiled on behalf of the Department of Mineral Resources and Energy.
This was reaffirmed in the department’s Roadmap for Eskom in a Reformed Electricity Supply Industry document published in 2019.
Yelland explained that Eskom would continue to recover costs for maintaining infrastructure in areas where people used its distribution network, regardless of who sold the power to the end-user.
“To conflate distribution revenues with energy trading revenues — as Eskom does — is a sleight of hand aimed at preserving an outdated monopoly,” Yelland said.
“Retail competition is not ‘poaching’ — it is how liberalised and competitive energy markets function.”
Eskom’s inflated costs the real problem
Yelland said if Eskom cannot compete for customers based on service quality, price, and energy attributes — like green credentials — it was a reflection of its product offering.
“Eskom’s bloated operating model, high losses, and culture of inefficiency are the primary threat to affordability, not the emergence of competitors who can deliver electricity more efficiently or more sustainably,” Yelland said.
Yelland also blasted Eskom for suggesting that the participation of private traders would harm poor customers.
“On one hand, it laments the risk to its revenue and its ability to cross-subsidise poor households,” Yelland said.
“On the other hand, it has consistently failed to deliver on its service obligations to those very households — many of whom face load reduction, unaffordable tariffs or outright disconnection.”
Yelland said Eskom’s true concern was not harming the poor, but the erosion of its customer base by more agile, customer-centric alternatives.
“If the court entertains Eskom’s arguments, the result will be profound uncertainty for all prospective market entrants,” Yelland said.
“It will deter investment, undermine regulatory credibility, and signal that vested interests can override both law and policy.”