Eskom Green may be on a risky path

Eskom’s new business division, Eskom Green, will need to tread carefully to avoid contravening competition and privacy laws. This is according to Ahmore Burger-Smidt, head of regulatory affairs at the law firm Werksmans.

She was responding to comments made by Rivoningo Mnisi, group executive for Eskom Renewables, during a recent high-profile event at which Eskom Green was officially launched.

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According to Mnisi, Eskom Green will obtain information from Eskom’s distribution division about customers, particularly large electricity users such as mines and other energy-intensive users, and then develop tailored solutions for them.

He added that Eskom Green was established in response to a need expressed by distribution customers.

Burger-Smidt says this raises red flags.

Firstly, regarding the “further processing” of customers’ information and its possible use for direct marketing, and secondly, because Eskom’s dominant position in electricity distribution could be used to disadvantage competitors of Eskom Green.

She says the information held by Eskom’s distribution division, including each customer’s consumption patterns, is an extremely valuable dataset.

“It is a pot of gold that they want to use,” Burger-Smidt adds, warning that it could be used to foreclose the market to competitors.

“We all know that data is extremely valuable today and can be used in other areas,” she says. The question, however, is whether information that was provided for one purpose may be used for something else.

“They will have to think very carefully about how they operate. Eskom’s distribution division is dominant in the market,” she says. The market could be defined within a specific geographic area where, for example, many mines are located.

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Tommy Garner, a board member of the South African Independent Power Producers Association (Saippa), says information about a customer’s electricity needs and consumption patterns belongs to that customer.

If an independent power producer (IPP) requires this information, it must first obtain the customer’s consent.

Armed with that consent, it can then approach Eskom’s distribution division, which currently  provides the information readily.

If Eskom Green follows the same procedure, Burger-Smidt says there should be no issue. However, it would be inappropriate for Eskom Green to bypass this process by requesting information directly from the distribution division and using it for marketing purposes.

Fears over preferential grid access

Burger-Smidt’s warning comes amid concerns that Eskom Green may also receive preferential access to Eskom’s transmission network.

Network access is currently the major bottleneck in the development of new renewable energy projects.

In the Northern, Eastern and Western Cape, where solar and wind resources are the strongest, the grid is already saturated, and further projects must now be located in other provinces where resource quality may be up to 10% lower.

This can affect production and make it more difficult to ensure projects remain financially viable without increasing tariffs excessively.

Disputes over grid access have already reached the courts.

Earlier, Eskom withdrew a grid connection point that had been allocated to the IPP Mulilo and reassigned it to a competitor. The court declared that decision invalid.

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The allocation of grid connections is also handled by Eskom’s distribution division, and Garner has previously indicated that the power utility places unnecessary obstacles in the path of developers applying for grid connections.

It also requests information that are unnecessary to process their applications, and developers fear that this could be used for Eskom’s own benefit, he said.

Push to centralise grid management

Saippa has requested that this function be transferred to the National Transmission Company South Africa (NTCSA), the Eskom subsidiary that owns and operates the transmission network.

It is currently government policy that NTCSA be separated from Eskom and operate as a completely independent and impartial entity.

Eskom previously developed a plan to retain the transmission assets. However, President Cyril Ramaphosa rejected that plan and appointed a task team to oversee Eskom’s restructuring.

The objective is to establish a fully independent Transmission System Operator (TSO) that will own and control the transmission assets and act as market operator when the wholesale electricity market is implemented.

Emeritus Professor Anton Eberhard of the Power Futures Lab at the UCT Graduate School of Business says that when this happens, NTCSA will cease to exist within Eskom.

In a statement issued on 8 June , the Presidency said the task team would deliver its first report by the end of this month, including a framework for establishing the TSO.

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Ramaphosa said: “I am encouraged by the speed and diligence with which the task team has taken forward this important task.

“The establishment of a fully independent transmission company is a critical reform which will support the introduction of a competitive electricity market and ensure a reliable, affordable and sustainable electricity supply to power the economy.”

Despite this clear policy direction given by Ramaphosa, it appears Eskom may still have different plans.

During Eskom Green’s launch event, Eskom chair Dr Mteto Nyati, responding to a question from Moneyweb about Eskom’s end-state, said the group would consist of four operating divisions: Eskom Generation, NTCSA, Distribution and Eskom Green.

Watch: ‘Eskom’s real challenge was leadership, not infrastructure’ – Nyati