South African Power Traders Want Roadmap for Eskom’s Overhaul
(Bloomberg) -- South African electricity traders want the “end state” of utility Eskom Holdings SOC Ltd. defined as a necessary measure to open up the power market.
Reforms implemented by the government that aim to end a century-old monopoly held by Eskom and bring in private suppliers should include a detailed plan for the final future structure of the state company, according to a report commissioned by the South Africa Electricity Traders Association.
“Eskom Holdings’ unbundling is central to electricity reform and requires a clearly defined and credible end state with defined timelines for achieving this,” research firm Kruthum wrote. “This includes the future role of Eskom Generation as its fleet declines, separation of commercial interests from network and system operations and a sustainable balance sheet path.”
Eskom’s unbundling restructures the utility into a holding company with three separate subsidiaries — generation, transmission, and distribution — to allow for private sector participation in South Africa’s power sector.
The state power company stabilized the grid over the last year, bringing an end to electricity shortages that curbed economic growth. Eskom Chief Executive Officer Dan Marokane has outlined plans for the utility to compete with independent renewable energy suppliers as its backbone of coal-fired stations are gradually retired.
The years-old plan to split Eskom into separate units that’s hit multiple delays experienced its latest iteration last week when South African President Cyril Ramaphosa reversed an unexpected change announced in December to keep the grid under the utility’s holding company. A “fully independent state-owned transmission entity” will be established, he said in his state-of-the-nation speech.
Eskom will support the task team created to deliver the independent transmission system operator, the utility said in a statement.
SAETA members include a growing number of power traders in South Africa including Discovery Green, Etana Energy and Mainstream Renewable Power. The group also called for an electricity reform plan endorsed by cabinet, the finalization of electricity pricing policy, and trading rules.
Clarity on Eskom’s role “will help manage the transition fairly, protect security of supply and align public support with improved operational and financial performance rather than ongoing cost shifting,” it said. “Poorly designed interventions – including vesting contracts and the utility’s strategy to create a renewables business in Eskom Green – risk entrenching market distortions just as competition is meant to deepen.”
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