The Energy Council of South Africa has addressed the rising concerns from municipalities about the constitutionality of the new Electricity Regulation Amendment (ERA) Bill. The bill, which has been approved by parliament and is now awaiting President Cyril Ramaphosa’s signature, has sparked a debate over its implications for local government powers and financial sustainability.
Municipalities fear that the ERA Bill will limit their ability to provide electricity to households, businesses, and government entities within their jurisdictions. This restriction, they argue, infringes upon the constitutionally granted power of local governments to handle electricity reticulation—the trading and distribution of electricity to customers who do not purchase directly from Eskom.
Lance Joel, Acting CEO of the South African Local Government Association (Salga), voiced these concerns in an interview with Newzroom Afrika. He emphasized that municipalities rely heavily on the profits from electricity sales to fund other essential services. Joel warned that restricting municipal powers in this domain could severely impact their financial health and their capacity to serve local communities effectively.
In response, James Mackay, CEO of the Energy Council, acknowledged the municipalities’ critical role in electricity distribution but suggested that the constitutionality of the bill could only be tested once it becomes law. He stressed the need to proceed with the bill’s enactment to design the new electricity trading market and integrate municipalities into the broader energy transition.
“We have to make a leap of faith,” Mackay told Business Day TV. “The bill provides a framework for the market’s future structure. As we develop this market, there will be opportunities to address any issues that arise concerning municipal roles.”
The ERA Bill aims to establish a transmission system operator (TSO) to create a transparent platform for competitive electricity trading. Industry experts predict that it will take five years to establish the TSO as a separate entity. In the interim, the National Transmission Company of South Africa (NTCSA), formed from Eskom’s unbundling, will handle these functions and is expected to be fully operational within two months.
The controversy surrounding the ERA Bill extends beyond the political and administrative realms, significantly affecting construction sites and industries across South Africa. The construction sector, which relies heavily on consistent and reliable electricity, could face delays and increased costs if municipalities’ roles in electricity distribution are diminished. Industrial operations, particularly those in energy-intensive sectors like manufacturing and mining, also stand to suffer from potential disruptions in electricity supply and changes in tariff structures.
Municipalities’ financial challenges could lead to reduced investments in local infrastructure, further exacerbating problems for construction projects that depend on timely and efficient municipal services. Moreover, the uncertainty surrounding the new electricity market could deter investment in new industrial ventures, hindering economic growth and job creation.
As the nation waits for President Ramaphosa’s decision, stakeholders from various sectors are keenly observing the developments, aware that the bill’s implementation will have far-reaching consequences on South Africa’s economic landscape. Salga remains committed to challenging the bill in hopes of securing amendments that will preserve the financial and operational autonomy of municipalities, ensuring they continue to serve their communities effectively.
