Western Cape to get its own electricity provision system, potentially competing with NERSA

by | Nov 13, 2023

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Following recent calls for devolution of governance to the provincial level, the WC govt has contracted PwC to conduct a feasibility study into purchasing electricity from independent providers

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The Western Cape government aims to establish a publicelectricity buyer for independent power producers (IPPs) on behalf of its municipalities,to negotiate lower tariffs against Eskom’s increasing bills.

While the move can facilitate addition power providers, suchas the new proposed pebble-bed nuclear reactor among other projects, the mainaim is to depress the increasingly exorbitant costs of power in the province.

Controversial global consulting group PwC is tasked with assessingproject feasibility, and comparing options from a central provincial authorityto a delegated federal model at the municipal level. PwC and NERSA disagreewhether this provincial purchasing program will need NERSA’s approval, with thelatter claiming authority to dictate terms.

The national energy regulator NERSA has licensed fourtraders in the country, and focuses on long -term power-purchase agreements(PPAs) at lower tariffs than Eskom’s, with the margin covering operationalcosts and profit. But not all of these contracts are operational, and Eskomremains dominant.

The new Cape power model will be developed in mid-next yearif the feasibility study is successful and municipalities are interested. One ofthe proposed governance models entails a company with municipalities asshareholders, though this comes with risks, since there are severalmunicipalities, particularly in the Karoo, which are run by notoriously corruptand profligate officials.

So far, the study has not yet established whetherparticipating municipalities need to form a geographical unit – either administratively(i.e., part of the same province/district) or geometrically (i.e., sharingborders and infrastructure). Concerns exist about dominant municipalitiesshaping the interests of smaller ones, and well as how tariffs will bedetermined, and how contracts will be entered into or withdrawn from.

The City of Cape Town has not commented yet, but Drakensteinand Mossel Bay are mentioned as potential participants.

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