New National Transmission Company now official buyer of power from IPP’s in South Africa

  • The Energy Regulator has consented to the transfer of Eskom Holding’s powers and duties related to section 34 Power Purchase Agreements (PPAs) with Independent Power Producers (IPPs) to the National Transmission Company South Africa (NTCSA), in accordance with section 21(1) of the Electricity Regulation Act, 2006 (Act No. 4 of 2006). 
  • The news follows the National Assembly passing the Electricity Regulation Amendment Bill this week which will radically transform the structure of the electricity sector for the better. Read more 

In addition to this landmark decision, the Energy Regulator further sanctioned the issuance of a cost recovery letter to the NTCSA for section 34 IPP projects, and the amendment of the IPP’s generation licences to designate the NTCSA as the buyer in terms of section 16(1)(d) of the Electricity Regulation Act, replacing Eskom Holdings in this role. The NTCSA’s trading licence will be amended accordingly. 

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Eskom’s application to NERSA on 21 December 2023 for consent to transfer its powers and duties under section 34 of the Electricity Regulation Act to the NTCSA was a pivotal step in its unbundling process, as outlined in the ‘Roadmap for Eskom in a reformed electricity supply industry’ published by the Department of Public Enterprises in 2019. The transition of the Buyer role for section 34, IPPs from Eskom to the NTCSA, is a critical component of this process. 

Related news: South Africa may introduce a dedicated IPP Office for new transmission capacity procurement

Mr Nhlanhla Gumede, NERSA’s Regulator Member responsible for Electricity Regulation, expressed enthusiasm for these approvals, describing them as great and momentous decisions that are significant in advancing the unbundling process, and good for the transformation of the electricity supply industry at large. ‘These decisions mark a significant milestone in the unbundling process for the establishment and operation of the NTCSA’, concludes Mr Gumede. 

The Reasons for Decision document will be available in due course the regulator concluded in their statement.

IPP office under DMRE still manages energy procurement programme

In South Africa, the Minister of Mineral Resources and Energy (DMRE), in consultation with the National Energy Regulator of South Africa, determines new electrical energy generation capacity requirements, as allowed by Section 34 of the Electricity Regulation Act No.4 of 2006. The DMRE, National Treasury (NT) and the Development Bank of Southern Africa (DBSA) established the IPP Office for the specific purpose of managing and delivering on the IPP procurement programme objectives. The programme’s primary mandate is to secure electrical energy from the private sector for renewable and non-renewable energy sources.

Since Gwede Mantashe took over as Energy Minister in 2019 and Bernard Magoro was appointed head of the IPP Office, procurement of new generation has been very slow due to gross mismanagement, allegations of corruption, extended deadlines and bid tariff adjustments, in order to get projects bankable and over the line.  Many argue that South Africa’s energy crisis has deepened considerably under their leadership. Read more

Author: Bryan Groenendaal

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