The outcomes of two public consultation processes initiated recently by the National Energy Regulator of South Africa (Nersa) are likely to have far-reaching implications for the country’s transition to a competitive electricity market.

The first is the ‘Wholesale Electricity Pricing Methodology’, a consultation paper which was published on May 18, and the second is the ‘Transitional Generation Pricing and Vesting Contract Framework’, released on May 20.

The issues canvassed in both consultation papers are complex, and are in line with South Africa’s intention to transition from a vertically integrated electricity supply industry toward a more competitive and progressively liberalised electricity market structure under the South African Wholesale Electricity Market (SAWEM).

Nersa says the Wholesale Price Framework is designed to provide a transparent, regulated approach for determining the charges that make up the wholesale cost of electricity supply.

“It ensures that essential and unavoidable system costs – such as transmission services, capacity requirements, legacy contract obligations, and subsidies – are recovered fairly from all market participants.

“By creating consistent pricing principles, rules and aligning regulated charges with emerging competitive market structures, the framework supports South Africa’s transition to the SAWEM while maintaining system stability, cost-reflectivity and financial sustainability,” the consultation paper asserts.

The Transitional Generation Pricing and Vesting Contract Framework, meanwhile, is described as a transitional regulatory mechanism to support an orderly development of competitive electricity markets while mitigating transitional risks.

The framework applies to the generation pricing component of the future electricity market structure and does not establish the full wholesale electricity market price, which will ultimately incorporate additional market and network-related components, including transmission charges, system operation charges, balancing costs, market operator charges, and other regulated market costs.

As is the norm for Nersa consultation papers, a series of questions are posed throughout to guide those stakeholders that aim to make written and/oral submissions.

The deadline for written submissions on the Wholesale Electricity Pricing Methodology paper has been set for June 26, with a public hearing set down for July 1.

Written submissions in relation to the Transitional Generation Pricing and Vesting Contract paper, meanwhile, must be provided by July 6, with a public hearing to be held on July 23.