269. Competition Law and South African Electricity Markets

Introduction

Competition law plays an increasingly important role in South Africa's electricity sector as the market moves from a historically centralized structure toward greater participation by independent power producers (IPPs), renewable-energy generators, municipalities and private electricity traders. The principal competition framework is the Competition Act 89 of 1998, operating alongside the Electricity Regulation Act 4 of 2006 (ERA) and regulation by the National Energy Regulator of South Africa (NERSA).

Electricity Market Structure

Historically, Eskom occupied a dominant position across substantial parts of electricity generation and also operates the national transmission system. The Constitutional Court has recognized the special regulatory characteristics of the electricity sector.

In Eskom Holdings SOC Ltd v Vaal River Development Association (2022), the Constitutional Court described Eskom as having historically enjoyed a near-monopoly in generation, transmission and distribution and emphasized the extensive regulatory powers given to NERSA under the ERA. The Court also identified competitiveness and customer choice as objectives of the electricity regulatory framework.

Competition Act

The Competition Act prohibits restrictive horizontal practices, vertical restrictions and abuse of dominance. Particularly relevant provisions include:

section 4 – restrictive horizontal practices;

section 5 – certain vertical restrictive practices;

section 8 – abuse of dominance; and

merger-control provisions concerning acquisitions that may substantially prevent or lessen competition.

These provisions can apply to electricity companies where their conduct falls within the relevant statutory tests.

Abuse of Dominance

A dominant electricity supplier may have special responsibilities not to exclude competitors or discriminate unfairly against customers and suppliers.

In Eskom Holdings SOC Ltd v Econ Oil, the Competition Tribunal considered allegations concerning Eskom's exclusion of a supplier. The Tribunal recognized Eskom's dominant position and stated that a dominant firm has special obligations under section 8, including the obligation not to engage in arbitrary discrimination, while ultimately finding that the alleged anti-competitive effects had not been demonstrated on the evidence.

This illustrates that dominance itself is not unlawful; the legal issue is whether the dominant firm's specific conduct constitutes prohibited abuse.

Excessive Pricing

Electricity tariffs can also raise competition-law questions. In Cape Gate (Pty) Ltd v Emfuleni Local Municipality (2023), a complaint alleged excessive pricing for electricity supplied by the municipality under section 8(1)(a) of the Competition Act. The matter illustrates the potential intersection between competition law, municipal electricity supply and NERSA's sector-specific regulatory powers.

However, electricity prices are also governed by the specialized statutory tariff framework administered by NERSA, making regulatory coordination important.

Collusive Tendering

Competition law is particularly relevant to electricity procurement and Eskom tenders.

In Competition Commission v Waco Africa (2023), the Competition Tribunal considered allegations that firms participating in an Eskom tender had engaged in price fixing and collusive tendering, prohibited under section 4(1)(b) of the Competition Act.

The case demonstrates that public electricity procurement is not exempt from ordinary competition-law principles.

Electricity Regulation and Competition

The Competition Act and ERA perform different but complementary functions. NERSA regulates matters such as licensing, tariffs, service obligations and electricity-system governance, while competition authorities address prohibited anti-competitive conduct and mergers.

The Constitutional Court's decision in Competition Commission v Senwes Ltd (2012) confirms the broader purpose of the Competition Act: preventing conduct that harms competition and promoting competitive markets for the benefit of consumers.

Market Liberalization

South Africa's electricity reforms increasingly allow private generation and alternative electricity procurement. Competition issues may therefore arise concerning grid access, transmission bottlenecks, balancing services, electricity trading, procurement, renewable-energy projects and access to essential infrastructure.

Future reforms will require rules preventing incumbent firms from using control over essential infrastructure to exclude competitors while maintaining grid reliability.

Conclusion

Competition law is becoming increasingly important in South Africa's electricity market as the sector develops beyond a historically centralized model. The Competition Act, Electricity Regulation Act and NERSA framework must operate together. Eskom Holdings v Vaal River Development Association, Eskom v Econ Oil, Cape Gate v Emfuleni Municipality, Competition Commission v Waco Africa and Senwes demonstrate different aspects of the relationship between electricity regulation and competition law. Future electricity-market reforms will require careful attention to dominance, discriminatory conduct, excessive pricing, collusive procurement, market access and merger control, while preserving reliable electricity supply and effective regulation of essential infrastructure.