South Africa took a decisive step towards a competitive electricity market last week when the National Energy Regulator of South Africa (NERSA) announced three landmark decisions:
- Granting the National Transmission Company South Africa (NTCSA) a Market Operator (MO) licence
- Adopting new Grid Capacity Allocation Rules (GCAR)
- Establishing the Electricity Market Advisory Forum (EMAF) 14-member advisory body that will guide the regulator on market rules, the Market Code and overall market readiness
Announced during a media briefing on November 27, the decisions give effect to the mandate of the amended Electricity Regulation Act to transition the country towards a competitive South African Wholesale Electricity Market (SAWEM). Until the new Transmission System Operator SOC Limited is established – within five years – the NTCSA will fulfil relevant functions.
The licence authorises the NTCSA to operate the trading platform through which generators, traders, distributors and other market participants will buy and sell electricity. Critically, the MO may not own energy. Its role is to ensure transparent, non-discriminatory and efficient competition.
NERSA Chairperson Thembani Bukula described the reforms as “historic milestones”.
“The establishment of the MO is one of the critical building blocks of a competitive market and a significant milestone in implementing the market rules,” he said. “These decisions reflect the profound transformation anticipated in the electricity sector.”
NERSA Regulator Member Nomfundo Maseti said the new regulatory tools lay the groundwork for further critical decisions on the operationalisation of SAWEM and on the MO running the platform effectively. Approval of the MO licence, she added, “will enable transparency and fair market practices, drive competition, improve efficiency, promote fair access, reduce market manipulation and strengthen investor confidence”.
Conditions still to be finalised
While NERSA has licensed the NTCSA, it has deferred final approval of the licence conditions for 30 business days to ensure there are no conflicts of interest while the NTCSA remains an Eskom subsidiary. To strengthen the licence, NERSA has requested additional documentation from the NTCSA including:
- An independence roadmap
- Conflict-of-interest mitigation measures
- Information protection protocols
- Proof of technical readiness on disaster recovery, cybersecurity and system testing
- Firm guarantees that Eskom Generation will not receive preferential access to market-sensitive information
NERSA will also need to approve the Market Rules and Market Code being drafted by the NTCSA. These instruments will govern market behaviour, pricing mechanisms, vesting contracts, legacy independent power producer (IPP) arrangements and market surveillance.
New grid allocation rules promise fairness and efficiency
NERSA also confirmed approval of the new GCAR adopted on November 12. The rules replace the long-criticised first-come, first-served system that allowed speculative projects to secure grid access without demonstrating financial or technical readiness.
Under the new regime, only credible, “ready-to-build” projects will qualify for grid capacity. The rules are designed to optimise existing infrastructure, guide future grid expansion, improve queue management and reduce delays, disputes and bottlenecks.
Maseti said the rules are essential for unlocking South Africa’s constrained grid and ensuring capacity flows to projects capable of rapidly adding electricity to the system. Bukula added that providing clear timelines, criteria and transparency strengthens investment decisions, aligns connections with system capability and supports renewable energy integration and long-term expansion planning.
Legacy arrangements for IPPs and Eskom Generation – including the future of vesting contracts – remain among the complex issues NERSA must still navigate. During consultations, stakeholders raised concerns about the duration of vesting contracts and the handling of legacy charges and fixed costs. Maseti stressed that NERSA must remain vigilant to prevent any participant from shifting fixed costs into vesting contracts in ways that may disadvantage competitors.
Electricity Market Advisory Forum to support transition
The newly established EMAF will play a pivotal role in shaping South Africa’s emerging competitive electricity market. Drawing on expertise from academia, industry, civil society and the private sector, the forum will provide independent advice on the Market Rules and Market Code, and support monitoring and compliance efforts related to the MO.
Letters of appointment have already been issued. The EMAF is expected to be launched before December 20. Members will be announced at that time. The forum will begin its operational work in January 2026, starting with the review of the draft Market Rules and Market Code once submitted by the NTCSA.
While the Department of Electricity and Energy has set April 2026 for the launch of SAWEM, Maseti cautioned that the date may need to shift if all the required elements are not yet in place.
