THE African National Congress (ANC) decided at its annual lekgotla last week to sink the Independent System Market Operator Bill that would have led to the restructuring of the electricity sector.
SA’s energy shortfall was a major focus of discussion at the four-day meeting of top leaders of the ruling party, which has been sending out conflicting signals for years on the future shape of the electricity industry.
The ANC also resolved that more independent power producers must be brought into the industry over the next 18 to 30 months, that natural gas from Mozambique be procured to ameliorate the power supply crisis and that private investors be encouraged to invest alongside Eskom in ageing power stations.
But the most far-reaching decision, contained in a resolution drafted by the party’s economic transformation committee, was on the future shape of the electricity industry.
The Independent System Market Operator Bill is aimed at establishing a state company to act as the buyer of electricity from private and public producers and to sell it to distributors and buyers at wholesale prices. It would allow genuine competition between state and private producers and has been widely viewed since the 1998 white paper on energy as the best way forward.
But many in the ANC are reluctant to break up Eskom. Doing so now would negatively affect its balance sheet, particularly as the transmission side of the business is by far the most lucrative. Eskom’s large borrowing programme could be threatened if revenue falls significantly.
ANC economic transformation committee chairman Enoch Godongwana said on Friday that the debate on the future of the industry had moved forward substantially, with agreement that it was not desirable or viable to split up Eskom.
"There has been an ongoing debate over the structure of the industry. One view has been to establish an independent system market operator and a liberalised market. Another school of thought has argued that historically where this is done, the state is generally not the dominant power producer," he said.
"It also makes no sense to weaken Eskom now. This view wants Eskom to remain at the centre of industry."
Eskom’s financial situation remains precarious. In October, it secured a commitment from the Treasury for a R20bn equity injection, with the possibility of the partial conversion of a R60bn government loan to equity. This will allow Eskom to borrow to close its R225bn revenue shortfall.
The final resolution agreed to by the lekgotla makes no mention of an independent operator.
The decision to sink the Independent System Market Operator Bill is in keeping with a decision a year ago to withdraw it from Parliament. No explanation was given at the time, but in his state of the nation speech last June, President Jacob Zuma said the bill would be reintroduced to Parliament.
Democratic Alliance energy spokesman Lance Greyling said yesterday that the ANC’s rejection of the bill was a clear indication that the party lacked the political will to drive through a restructuring of the electricity industry that was urgently required.
"While the government is currently calling on the private sector to help it alleviate our energy crisis, it is refusing to implement the institutional reforms required for them to play a meaningful role in ensuring another crisis does not repeat itself," he said.
Globeleq SA MD Mark Pickering said he agreed that an independent operator was not the best route for SA, but the government urgently needed to allow a discussion on the sector’s future.
"Eskom was self-financing since 1922 and is no longer. Clearly something needs to be done to fix the sector," he said.
He believed the solution lay in separating Eskom’s generation and transmission businesses, following the example that was applied in many other countries.
"Eskom is too big and complex and needs to be broken into parts. The norm is to vertically disaggregate the industry and SA is unusual in not having taken that step," Mr Pickering said.