Losing power increases resistance to change and allowing the energy transition to unfold

THIS past week offered another clear example of the ongoing reluctance to cede control and allow the energy transition to unfold. It reinforced once again that the energy sector remains a source of political power and financial leverage.

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The case concerns Eskom's decision to take the regulator, Nersa, to court over the issuance of trading licences to independent traders. The South African Local Government Association (Salga) has joined Eskom’s position, expressing concern that the move, taken without a comprehensive regulatory framework and adequate public consultation, poses a serious threat to the financial sustainability, constitutional mandate, and operational integrity of municipal electricity distribution systems.

Salga argues that municipalities will be left with less revenue to cross-subsidise service delivery and will inherit a disproportionate share of defaulting customers. They also contend that, since municipalities are constitutionally empowered to distribute electricity within their jurisdictions, allowing traders to operate in the same areas without coordination infringes on that right.

Further, Salga claims that traders will be able to offer competitive tariffs without the same universal service obligations, creating an uneven playing field and distorting competition. Finally, they argue that municipal debt to Eskom, now exceeding R100 billion, should be addressed within any trading framework. These claims warrant closer scrutiny.

Municipalities are already losing revenue, but not because of the energy transition or the entry of independent traders and power producers. The problem lies elsewhere, in four key areas.