60. COMPARATIVE ELECTRICITY MARKET STRUCTURES

1. Introduction

Electricity market structure describes the legal and institutional arrangement through which electricity is generated, transmitted, traded, distributed and supplied to consumers. Comparative electricity law generally distinguishes between vertically integrated monopoly systems, single-buyer models, wholesale competition and fully liberalised wholesale-and-retail markets. The choice of structure determines how prices are formed, how competitors enter the market, how networks are accessed and how regulators protect consumers.

South Africa is particularly important comparatively because it is moving from a historically Eskom-centred structure toward a multi-participant competitive electricity market under the Electricity Regulation Amendment Act 38 of 2024, which commenced on 1 January 2025.

2. Vertically Integrated Monopoly Model

Under the traditional vertically integrated model, one utility may control generation, transmission, distribution and supply. Competition is limited, while prices and service obligations are normally controlled through public regulation.

Historically, South Africa substantially reflected this structure through Eskom’s dominant role in generation and transmission, alongside municipal distribution. The advantage of integration is coordinated system planning, but disadvantages may include limited competition, barriers to independent generators and concentration of market power.

3. South Africa: Emerging Competitive Market

The Electricity Regulation Amendment Act 38 of 2024 represents a major structural transition. It provides for an independent Transmission System Operator (TSO) and an open market platform permitting competitive electricity trading. The legislation requires non-discriminatory transmission access and provides for transparent trading rules and market operation.

This structure separates key market functions and enables greater participation by Independent Power Producers (IPPs), traders and other market participants. The reform therefore moves South Africa closer to internationally recognised competitive wholesale-market models.

4. European Union Model

The European Union follows a highly liberalised and integrated model. Directive (EU) 2019/944 establishes rules concerning generation, transmission, distribution, storage and supply while emphasising competition, consumer choice, third-party network access and unbundling.

Consumers generally have freedom to select electricity suppliers, while transmission-system independence is designed to prevent network owners from discriminating in favour of affiliated generators or suppliers. Cross-border trading and market integration distinguish the EU model from purely national electricity systems.

5. United States Model

The United States uses a mixed electricity-market structure. Some regions retain vertically integrated utilities, while large parts of the country operate competitive wholesale markets administered by Regional Transmission Organizations (RTOs) or Independent System Operators (ISOs).

RTOs and ISOs independently operate transmission systems and administer markets including day-ahead, real-time, capacity and ancillary-service arrangements, depending on the particular region. The Federal Energy Regulatory Commission regulates interstate transmission and wholesale electricity markets, while retail regulation generally remains primarily at state level.

6. CASE LAW

New National Energy Regulator of South Africa v Borbet South Africa (Pty) Ltd and Others [2019] ZACC 31

Facts

NERSA approved Eskom’s applications relating to electricity tariffs under the statutory regulatory framework. Industrial electricity users challenged aspects of the regulatory decisions, arguing that the methodology and decision-making process were legally defective.

Legal Issue

The dispute concerned the extent to which electricity tariff decisions by the regulator had to comply with statutory requirements and principles of lawful administrative decision-making.

Judgment

The Constitutional Court considered the legality of NERSA’s regulatory decision-making within the statutory electricity-pricing framework and reinforced the importance of regulatory decisions being properly authorised and legally justified.

Legal Principle / Ratio Decidendi

Electricity markets remain subject to public-law controls even where economic and commercial considerations dominate market regulation. Regulatory bodies must exercise their statutory powers within the boundaries established by legislation.

Significance

The case demonstrates that market restructuring does not eliminate regulatory accountability. Whether a system follows monopoly regulation or competitive trading, regulators remain essential to controlling tariffs, network access and market conduct.

7. Comparative Evaluation

Comparative experience demonstrates a movement from monopoly-based electricity systems toward competitive and unbundled structures. The EU emphasises integrated markets, supplier choice and unbundling; the United States combines organised RTO/ISO markets with traditional utility structures; and South Africa is developing an open competitive trading framework while retaining strong public regulation.

8. Conclusion

No single electricity-market structure is universally applicable. Market design depends upon institutional capacity, infrastructure, energy resources and national policy objectives. South Africa’s current reforms demonstrate a shift toward competition, independent system operation and non-discriminatory network access, while comparative EU and US experience shows that successful liberalisation still requires strong regulation, reliable transmission infrastructure, consumer protection and effective control of market power.