South Africa has taken a significant step towards reshaping its electricity industry after President Cyril Ramaphosa approved plans to establish a fully independent Transmission System Operator (TSO), ending years of debate over Eskom’s future structure.
In a statement released on Friday, the Presidency confirmed that Ramaphosa had endorsed the Phase I report of the Eskom Restructuring Task Team (ERTT), paving the way for a standalone, state-owned transmission company responsible for owning and operating the country’s electricity grid.
Government said the move is intended to increase competition in the electricity market, attract private investment, strengthen energy security and ultimately help lower electricity costs while supporting economic growth and job creation.
Major Shift in Eskom Restructuring
The decision marks a departure from an alternative restructuring proposal championed by Electricity and Energy Minister Kgosientsho Ramokgopa, which would have kept Eskom’s generation, transmission and distribution businesses under a single state-owned holding company.
Instead, Ramaphosa has reaffirmed government’s commitment to creating an independent grid operator, a proposal first outlined during his 2019 State of the Nation Address.
To resolve disagreements over Eskom’s future structure, the President established the Eskom Restructuring Task Team earlier this year to assess whether the transmission business could be separated without undermining Eskom’s financial stability.
Report Finds Separation Is Feasible
According to the Presidency, the task team concluded that transferring Eskom’s transmission assets into an independent state-owned company is both practical and consistent with international best practice.
The report found that the restructuring can proceed without jeopardising Eskom’s financial sustainability, although it warned that rising municipal debt owed to Eskom remains a significant risk that must be addressed.
The Presidency also outlined several immediate measures aimed at strengthening the independence of the existing National Transmission Company South Africa (NTCSA) while the new operator is established.
These include ring-fencing the company’s licensed activities, separating tariff structures and introducing measures to reduce the impact of unpaid electricity debt on the broader market.
To reinforce its operational independence, members of Eskom’s board will not serve on the NTCSA board, while responsibility for appointing the company’s chief executive and senior management will rest solely with the NTCSA board.
Decision-making relating to transmission market operations and grid access will also gradually shift away from Eskom and be transferred to the NTCSA before ultimately moving to the new Transmission System Operator.
Next Phase to Outline Implementation Plan
Welcoming the report, Ramaphosa said the restructuring would modernise South Africa’s electricity sector and create a stronger foundation for long-term economic growth.
“This report shows how government can ensure that the architecture of the electricity sector can change as the sector continues to evolve,” the President said.
The second phase of the restructuring process is expected to be completed within the next three months and will set out a detailed implementation plan, including timelines for transferring Eskom’s transmission assets to the new independent entity.
If implemented as planned, the reform would represent one of the biggest structural changes to South Africa’s electricity sector since Eskom’s creation, opening the door to a more competitive power market while separating ownership of the national grid from electricity generation.
Main Image: EWN
