In an industry abuzz with acronyms and abbreviations (Nersa, REIPPP, IPP, PPA etc), a few more have been added to the list in South Africa’s evolving energy landscape – ERA, TSO, NTCSA, Sawem…

The ERA Act, while aptly named – because it ushers in a new era for the electricity industry in South Africa – stands for the Electricity Regulation Amendment Act 38 of 2024. Signed into law by President Cyril Ramaphosa in late 2024, the Act came into force on 1 January 2025 and underpins what many consider to be the most far-reaching structural reform of South Africa’s electricity market since the formation of national utility Eskom in the 1920s.

The legislation makes provision for an independent transmission system operator (TSO) that will facilitate an open market platform allowing competitive electricity trading. ‘Crucially, [the ERA Act] establishes the duties, powers and functions of the Transmission System Operator SOC Limited (TSO) to provide for an open-market platform which allows for competitive electricity trading. Until the TSO is established, for no longer than five years, the NTCSA is deemed to be the TSO,’ according to a recent Norton Rose Fulbright article.

It continues that ‘the NTCSA owns and operates the South African national transmission system, oversees the enhancement of the grid, provides energy market services, and manages international trading. The NTCSA is being put forward as a catalyst for improvements and upgrades within the South African transmission infrastructure […]’.

The National Transmission Company of South Africa is a wholly owned Eskom subsidiary that operates the national transmission system and acts as market operator. It began operations in 2024 after the unbundling of the national utility’s transmission arm that year.

Eskom’s unbundling into three distinct divisions (transmission, distribution and generation), was announced by Ramaphosa in 2019. Since then there has been a lot of to-ing and fro-ing about the TSO’s independence from Eskom, with stakeholders arguing that it is a conflict of interest for Eskom to be a market participant and a gatekeeper of access to the grid.

During his most recent State of the Nation Address (Sona) in February 2026, Ramaphosa emphasised that the TSO will be completely independent of Eskom, though, of course, it remains a state-owned enterprise.

‘We are establishing a level playing field for competition, so that we are never again exposed to the risk of relying on a single supplier to meet our energy needs. We are restructuring Eskom and establishing a fully independent state-owned transmission entity. This entity will have ownership and control of transmission assets and be responsible for operating the electricity market,’ the president told Sona.

Writing in the Conversation, Mark Swilling, a Professor of Sustainable Development at Stellenbosch University and a non-executive director of the NTCSA, implies that the president’s statement came as a shock to Eskom.

‘Ramaphosa announced that the soon-to-be established Transmission System Operator will own South Africa’s transmission assets. This would include all main powerlines and sub-stations. This was contrary to what had been expected, particularly by […] Eskom. Its assumption was that it would retain ownership of the transmission assets via its subsidiary, the [NTCSA]. Ramaphosa disagreed.’

One of the reasons for unbundling transmission from Eskom in the first place was to attract private investment to expand South Africa’s constrained electricity grid. Keeping the TSO within the grasp of Eskom, not known for its prudent financial management, would certainly seem counter-intuitive.

South Africa’s Independent Transmission Project envisages private consortiums financing and building high-voltage infrastructure using a build-own-operate-transfer model, explains Chris Ahveldt, the founder of energy consultancy Blue Horizons, writing in a recent online blog post.

The country needs more than 14 000 km of new high voltage overhead lines in the next decade, at a cost of ZAR440 billion – out of reach for an organisation that is already about ZAR350 billion in debt.

More than 1 000 km of new lines have been earmarked for procurement through the first phase of the Independent Transmission Infrastructure Procurement programme, which is expected to issue a request for proposals later this year.

One of the cornerstones of the NTCSA is Sawem, which stands for the South African Wholesale Electricity Market. Envisaged as a mechanism to shift South Africa to a competitive, multi-buyer/seller market allowing real-time electricity pricing, Sawem was scheduled for implementation on 1 April 2026, but has since been delayed until the third quarter of the year.

The NTCSA was formally awarded its market operator licence in December 2025, described by National Energy Regulator of South Africa (Nersa) chair Thembani Bukula as ‘a significant milestone’.

‘The establishment of the MO [Market Operator] is one of the critical building blocks of a competitive market and a significant milestone in implementing the market rules. These decisions reflect the profound transformation anticipated in the electricity sector.’

It has since submitted its draft market operator’s ‘rulebook’ – the Market Code – to Nersa for approval. It lays out the rules by which the electricity market will operate and sets out how electricity can be bought and sold between different participants in the market, including generators, traders and large customers.

Sawem will be rolled out in phases with full implementation by 2031.

‘The initial phase will focus on establishing operational readiness and testing the trading systems and settlement processes,’ according to the NTCSA. ‘As the regulatory framework is finalised, the market will progressively open to independent generators, traders and other participants, expanding competition and participation in the electricity sector.’

Ahveldt explains that by providing non-discriminatory ‘open access’ to South Africa’s electricity grid, the NTCSA ensures ‘private independent power producers can compete on level ground with each other and Eskom’s own generation assets’.

Independent power producers (IPPs) with capacity to export in excess of 10 MW are required to register as ‘balance responsible parties’ and then accurately predict how much electricity they will export to the wholesale market and comply with new responsibilities.

‘Accuracy of forecasting, operational responsiveness and assuming financial responsibility for imbalance will therefore become a competitive advantage for some IPPs to manage in the new market,’ says Ahveldt.

The NTCSA, as the Central Purchasing Agency, will also be the home for legacy power purchase agreements (PPAs) – such as the Renewable Energy Independent Power Producer Procurement (REIPPP) programme – to maintain market stability.

‘While some municipalities view the wholesale market and distributed generation as a threat to their revenue, others see it as an opportunity to update their business model,’ he writes.

‘Participation in Sawem for all parties, including municipalities, requires financial solvency and compliance with technical and operational requirements of the market code. The current financial challenges and limited capacity of many municipalities in South Africa suggests that most municipalities will remain indirect participants under CPA-backed arrangements, and may create an incentive for many municipalities to reform.’

Swilling argues that an electricity market independent of Eskom is not the silver bullet many imagine it to be. ‘If the TSO is fully independent, then what matters is the full independence of the revenue system from Eskom, cost-reflective tariffs and revenue certainty (which includes a solution to the growing mountain of municipal arrears).’ Municipal arrears are currently estimated at a not insignificant ZAR110.5 billion.

‘The call for a fully independent Transmission System Operator may give lenders the security they need, but the hidden threat is that the risk of revenue shortfalls gets transferred to the sovereign (and ultimately the tax payer),’ writes Swilling.

Here’s the Catch-22… Swilling says that if the TSO cannot access the capital needed ‘at the right price to massively expand the grid over the next five years, then the renewables (mainly wind) plus extensive backup that the country needs to prevent load shedding by 2029/30 will not be able to connect into the national grid. That will almost certainly result in the return of load shedding’.

It seems that what the country’s electricity industry needs now is not more confusing abbreviations but more clarity.

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