But there is hope. The recently promulgated Electricity Regulation Amendment Act (ERA) promises change, introducing important reforms including a new competitive structure for electricity generation and trading. If nothing else, this legislation represents one of the most significant shifts in South Africa’s energy policy since the formation of Eskom itself. If implemented well, it could break open the sector to competition, innovation, and private investment. If handled poorly, however, it risks replacing one monopoly with another and entrenching the very problems it seeks to solve.
The ERA and What It Means
The ERA is designed to establish a multi-market structure, moving away from Eskom’s historic role as both supplier and regulator of the energy sector. Central to this shift is the creation of an independent Transmission System Operator (TSO). The TSO is set to oversee transmission infrastructure and manage the new competitive market platform. It will also act as transmitter, market operator, system manager, and central purchaser of electricity on the ERA’s market platform.
This framework should, in theory, encourage multiple players - including independent power producers (IPPs), energy traders, and municipalities - to compete on an open and fair platform. The goal here is to drive efficiency, diversify supply, and ultimately stabilise South Africa’s electricity system to the benefit of all players by promoting competitive pricing.
However, issues remain. The concentration of so many critical functions within the TSO itself raises questions about whether it will be able to serve as a facilitator of competition - or simply as yet another gatekeeper. If too much authority rests with a single entity, genuine competition may never materialise - a lesson we should have learnt by now.
Energy Traders: The Missing Link
A key feature of the reformed electricity marketplace is the introduction of energy traders. These intermediaries purchase electricity from generators, often producing energy from renewable sources, and sell it on to municipalities, large corporates, or other buyers through “wheeling” arrangements that use the national grid to move power from source to consumer.
For local businesses and cities seeking reliable, affordable, and sustainable energy, traders can offer flexibility and market-driven pricing. They also play an essential role in reducing reliance on Eskom by connecting buyers directly with alternative sources of power.
At the moment South Africa has only a handful of licensed traders, but interest in this sector is growing in response to market reforms and ongoing concerns about Eskom’s reliability. However, for this market to thrive, access to trading platforms must be transparent, fair, and well-regulated from the outset. Otherwise, smaller traders risk being crowded out by dominant players such as the central purchasing agency operating under the TSO.
The role of Municipalities
Certain municipalities are looking to position themselves at the forefront of municipal energy reform. Determined to shield residents from load-shedding and accelerate the shift to renewable energy and the broader Just Energy Transition, municipalities have been actively exploring ways to procure power directly from independent producers and traders.
This does however present a practical challenge: most municipal supply chain management systems are designed for traditional procurement processes, not for the fast-moving dynamics of the era of energy trading. Without a fit-for-purpose procurement framework, cities may struggle to capitalise on the opportunities the ERA is intended to create. The need for reform of municipal procurement frameworks is likely to be given impetus by the Procurement Act 2024, which has yet to take effect. Until then, it is unfortunate that their ambitions will probably remain limited by bureaucratic constraints rather than market potential.
The Risk of Monopoly 2.0
"A resilient energy future demands more than legislative reform; it requires regulation that drives competition, builds efficiency, protects smaller players, and restores public trust". Raisa Cachalia
While the ERA represents a bold step toward modernisation, it is not without risk. There is a very real danger that South Africa could replace Eskom’s dominance with another form of centralisation under the TSO and its central purchasing agency. Out with the old and in with the new might not offer the solution that it promises.
Should this scenario come to pass, competition would be stifled, innovation curtailed, and the sector could fall prey to the very inefficiencies that have plagued Eskom. Furthermore, parallel, non-ERA-aligned trading platforms might spontaneously emerge, creating a fragmented and unstable energy landscape.
A spark in the darkness
Like so much in our country, South Africa’s energy reform stands at a crossroads. The ERA lays the legal and theoretical groundwork for a more open, competitive, resilient and sustainable electricity market. However, legislation alone cannot deliver on the promise of transformation.
Success will depend on careful and considered regulatory design, ongoing and active participation from municipalities and traders, and continued vigilance from all parties, to ensure that no single entity reclaims the very dominance that has kept us in the dark for so long.
For municipalities, this is an opportunity to become leaders in renewable, decentralised energy. For bigger businesses, it offers the possibility of reliable and cost-effective electricity outside of Eskom’s constraints. And for the rest of us, it represents the hope of an energy future free from rolling blackouts, skyrocketing tariffs and chronic instability.
The ERA provides the means. Whether it will deliver true change in the long run will depend on how those tools are managed. The future might be bright, after all.
Navigating Potential
The ERA opens the door to new possibilities, but it also raises the bar for compliance and strategy. By engaging early with these seismic changes, businesses, municipalities, and traders can move from reacting to shaping the opportunities ahead. DM
Learn more about how Caveat can support your energy transition strategy here.
Author: Raisa Cachalia, Caveat Energy Team
