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NO TOTAL UNBUNDLING OF EEC

05/02/2023 16:17:00 Welcome Dlamini

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MBABANE – Energy regulator ESERA has advised against the total unbundling of power utility EEC.

Had the regulator recommended the total unbundling, this would have seen the Eswatini Electricity Company(EEC) being broken into three different companies; one responsible for generation, another for transmission and the third for distribution. Instead, the Eswatini Energy Regulatory Authority (ESERA) has recommended a ring-fencing of these three units so that each one of them will have its own financial accounts. Simphiwe Khumalo, ESERA’s General Manager (GM) Technical Regulation, informed editors during a breakfast meeting on Wednesday, that even though government’s policy suggests unbundling, they conducted a study which the outcome found that this would not be favourable. “We found that in as much as unbundling has benefits, the size of our power utility does not justify unbundling to the extent that the power utility has separate companies,” he said. He admitted though that they had not gone into detail in analysing the benefits of the total unbundling on its own.

As opposed to the total unbundling, what they then came up with, Khumalo said, was financial unbundling where the accounting could be separated and narrowed down to the key divisions of EEC. “Rather than to have three companies with three CEOs, three executives and three boards, we found it would be better to do financial unbundling. The accounting of these three units should be separated so that profits and losses, and opportunities of actually finding efficiencies can be narrowed down to each of these key divisions,” the GM said.
He said they thought this was a good middle ground to enable the regulator to make assessments that were more focused on the additional cost of running separate institutions. “So what we did as the regulator, subsequent to the study, was to develop ring-fencing guidelines that detail how they must each report their finances to the regulator,” he said.

implementation

Khumalo said the document was now available as the exercise was completed in 2021 and awaited implementation. He said they had learnt lessons from South Africa power utility Eskom, which has been holistically blamed for poor performance that has resulted to implementation of endless stages of load-shedding yet it was only the generation division that is performing poorly. In 2019, it was disclosed that embattled Eskom would be split into three separate entities – generation, transmission and distribution – in an effort to bring credibility to the turnaround of the utility and to position South Africa’s power sector for the future. However, this has still not been implemented. An opinion piece published in the Business Day on January 16, 2023, apportioned blame on Cabinet ministers for having let down President Cyril Ramaphosa on the unbundling of Eskom.

In the president’s February 2019 state of the nation address, he announced that Eskom would be split into three separate entities: generation, transmission and distribution, with the initial focus on taking transmission out of Eskom. In the opinion piece, which was penned by Professor Anton Eberhard, who in December 2018, was appointed to chair an Eskom sustainability task team with a remit to respond not only to immediate challenges, but also to propose measures to secure the long-term sustainability of the electricity sector. The task team recommended the unbundling that Ramaphosa announced but it has still not been implemented and he blames, among others, Minister of Public Enterprises Pravin Gordhan. On Friday, Moneyweb reported that the Eskom board had, in light of the imminent unbundling of Eskom, decided not to fill the position of chief operating officer currently held by Jan Oberholzer.
This was disclosed by board member Mteto Nyati on Thursday during a media briefing providing an update about the challenges the power system is facing.

Meanwhile, locally the decision not to unbundle EEC has been further confirmed by ESERA Chief Executive Officer (CEO) Sikhumbuzo Tsabedze, in a subsequent interview. He also mentioned that as the regulator they had already developed guidelines on how this separation could best be implemented. “This will create a lot of efficiency in the sense that all three units will have their separate accounts and will report their costs separately. When the time for an award comes, we will also award each one of them separately in accordance with how they have performed,” Tsabedze said.

According to the National Energy Policy (NEP) of 2018, The Ministry of Natural Resources and Energy developed legislation to govern the electricity sector in order to liberalise the electricity supply industry in Eswatini. The pieces of legislation that were promulgated as part of the unbundling process were: The Electricity Act of 2007; the Swaziland Electricity Company Act of 2007; and the Swaziland Energy Regulatory Authority Act of 2007. The promulgation of the Electricity Act of 2007 and the Swaziland Electricity Company Act of 2007 transformed the Swaziland Electricity Board into the Eswatini Electricity Company (SEC).

Further, the Swaziland Energy Regulatory Authority Act of 2007 created the Eswatini Energy Regulatory Authority (ESERA), to regulate developments in the liberalised energy sector.
As per the NEP, the driving force behind the enactment of this electricity legislation was to ensure participation of the private sector in the generation, transmission and distribution of electricity. The policy states that the generation component of the electricity supply industry in Eswatini is already fairly deregulated, as is apparent from the existence of two independent power producers (IPPs) and a range of private entities that are in the process of developing projects. It further states that further work had been done to enhance IPP participation in the generation of electricity.