Eskom’s transmission company moves a step closer to becoming operational with approval of two licences

Eskom’s unbundling process has reached another milestone as the National Transmission Company of South Africa (NTCSA) moved a step further to becoming operational following the approval of the two outstanding licences.

The National Energy Regulator of South Africa (Nersa) yesterday approved that the NTCSA be issued with a five-year trading licence following an application lodged in compliance with section 10 of the Electricity Regulation Act (ERA).

The NTCSA is envisioned to be an independent transmission system operator incorporating, inter alia, the currently non-licensable but integrated functions of network provision, system operation and system planning.

Nersa said the service that would be rendered under the trading licence was the buying and selling of electricity as a commercial activity only.

The NTCSA applied for a trading licence to buy and sell electricity from Eskom power stations and independent power producers (IPPs) under section 34 determinations.

This will include cross-border electricity imports and IPP generators under the Eskom Holdings programmes, such as short-term power purchases, only to Eskom Distribution.

The term of the NTCSA’s trading licence will be five years as a transitional arrangement to allow for transition from the exclusive trading arrangement and incorporation of changes that may emanate from the ERA amendment and price review processes.

This will enable Nersa to review the licence conditions after five years.

In July, Nersa approved that the NTCSA be issued with a licence to operate a transmission system within the national boundaries.

The approval of the transmission licence was the first of three steps that were required to get the NTCSA off the ground, culminating in the NTCSA acting as a system operator of the national grid.

Yesterday, Nersa also approved that the NTCSA be issued with an import and export licence, subject to licence conditions imposed.

The NTCSA intends to conduct import and export of electricity activities in terms of its import/export licence throughout the Southern African Development Community (SADC) using its transmission network and the transmission systems of other SADC member countries.

The service that will be rendered under the licence is importing and exporting power in terms of power supply agreements, power purchase agreements and Southern African Power Pool (SAPP) competitive markets.

The NTCSA will also facilitate wheeling on behalf of cross-border utilities and receiving a wheeling service from the cross-border utilities.

“The approval will enable the continuation of import and export activities presently fulfilled by Eskom,” Nersa said.

“Imports and exports are transacted based on power purchase agreements and power sales agreements entered into with cross-border utilities, cross-border generators, as well as via the SAPP competitive markets.”

Nersa emphasised that the transmission network operated by the NTCSA will be used for import and export activities.

Independent energy expert Lungile Mashele said this was brilliant news, which put South Africa one step ahead in a liberalised market.

Mashele said the NTCSA would be able to enter into import/export agreements with its SADC neighbours, thereby increasing security of supply especially from Mozambique, which had excess capacity to sell.

“This also incentivises private players to participate in the energy market; however, they will still be subject to section 34 determinations. The NTCSA can buy and sell electricity from Eskom power stations, IPPs and cross-border imports,” Mashele said.

“With the planned rolling out of the Eskom power station concession model, this will also incentivise power station managers to make sure their plants are best performing.”

Mashele also said these regulatory changes placed power to procure directly in the realm of the system operator, which was pivotal for adequate system functioning.

“More importantly, the regulator has found that the short-, medium- and long-term power purchase programmes are prudent and that there is a fair risk allocation between the parties,” she said.

“This will ensure that some of these contracts are concluded quickly, thus ensuring more capacity is made available to NTCSA quickly.”

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