Competition Policy Evolution in the Energy Sector

1. Introduction

Competition policy in the energy sector has changed significantly over time. Traditionally, electricity and other energy industries were organised around state-owned or vertically integrated monopolies. Governments considered this structure necessary because electricity generation, transmission and distribution required large infrastructure investments.

With economic liberalisation, renewable energy, independent power producers (IPPs), private investment and technological change, the focus gradually shifted towards competitive energy markets.

In South Africa, this evolution is particularly important because the electricity sector has historically been dominated by Eskom. Competition authorities have increasingly focused on opening the sector to IPPs, improving grid access and reducing barriers to entry.

2. Traditional Monopoly Model

Historically, electricity systems were commonly structured as vertically integrated utilities. One entity could control:

generation;

transmission;

distribution; and

sometimes retail supply.

This structure reduced direct competition because competitors would have had to duplicate expensive electricity networks.

The main regulatory objectives were therefore reliability, universal access, tariff control and security of supply rather than market competition.

3. Movement Towards Competition

The development of competition policy introduced a different approach.

Instead of treating the entire electricity industry as one monopoly, policymakers began distinguishing between:

Potentially competitive activities

generation;

electricity trading;

retail supply; and

certain energy services.

Natural-monopoly activities

transmission networks;

much of distribution infrastructure.

This distinction allows competition where economically possible while maintaining regulation of essential networks.

4. South African Competition Act

The Competition Act 89 of 1998 provides the general competition-law framework.

It addresses:

restrictive horizontal practices;

restrictive vertical practices;

abuse of dominance;

mergers; and

public-interest considerations.

The Competition Commission is responsible for investigating and evaluating restrictive practices, abuse of dominance and mergers, while the Competition Tribunal adjudicates relevant matters.

Therefore, energy companies are not outside competition law merely because the energy sector is heavily regulated.

5. Energy-Sector Liberalisation

The next stage involved encouraging Independent Power Producers.

IPPs introduced additional generation capacity and reduced reliance on a single electricity producer.

The Competition Commission has identified IPP access to the electricity grid and distribution channels as important competition issues. It has also monitored the relationship between Eskom, IPPs and municipalities.

This represents an important shift from a monopoly-centred model towards a more diversified electricity market.

6. Eskom Unbundling

A major development in South African competition policy has been the restructuring of Eskom.

Government announced a plan to separate the vertically integrated electricity business into generation, transmission and distribution components. The competition objective is particularly important for creating a more neutral transmission system.

An independent transmission operator can potentially provide network access to competing generators on a more neutral basis.

The Competition Commission has identified concerns such as:

transmission independence;

preferential treatment;

barriers to entry;

contract duration;

IPP participation; and

access for embedded generation.

7. Senwes Case

In Competition Commission of South Africa v Senwes Ltd (2012), the Constitutional Court examined exclusionary conduct involving a dominant firm and important storage infrastructure.

Although Senwes was not an electricity case, its principles are relevant to energy markets. Control over an important facility can influence competition in related markets.

The case therefore provides useful guidance for analysing situations where a dominant energy company controls infrastructure necessary for competitors to reach customers.

8. Sasol Gas Case

The evolution of competition policy is also visible in gas markets.

In Sasol Gas (Pty) Ltd v Competition Commission, Sasol Gas was described as the dominant upstream importer and supplier of piped gas in South Africa. The case also involved interaction between competition law and gas-price regulation by NERSA.

This demonstrates that sector regulation and competition law can operate simultaneously. Regulation of maximum prices does not necessarily eliminate competition-law questions concerning market power and conduct.

9. Electricity Pricing

Electricity pricing has become an important competition-policy issue.

In Cape Gate (Pty) Ltd v Emfuleni Local Municipality (2023), the complainant alleged excessive pricing in relation to electricity supplied by the municipality. The case illustrates how electricity pricing can raise competition-law questions even within a regulated electricity environment.

However, a high electricity price is not automatically unlawful. Competition law requires the statutory requirements for excessive pricing or another prohibited practice to be established.

10. Procurement and Collusion

Competition policy has also evolved to address competition problems in energy procurement.

In Competition Commission v Waco Africa, the Competition Tribunal considered allegations of collusive tendering concerning an Eskom procurement process for scaffolding and thermal insulation services.

The Tribunal considered section 4(1)(b) of the Competition Act, which prohibits specified horizontal practices such as price fixing and collusive tendering.

This shows that competition policy applies not only to electricity prices but also to the supply chains supporting energy infrastructure.

11. Renewable Energy and New Markets

The growth of renewable energy has further changed competition policy.

Solar, wind, battery storage, private generation and distributed energy create new competitors and business models.

For example, the Competition Commission continues to assess renewable-energy transactions. In January 2026, it recommended approval of a transaction involving renewable-energy businesses of Cennergi and Acciona after finding that it was unlikely to substantially lessen or prevent competition.

This demonstrates that competition policy now extends beyond traditional fossil-fuel and utility markets.

12. Modern Competition Policy

Modern energy competition policy therefore focuses on:

reducing barriers to entry;

ensuring fair grid access;

preventing abuse of dominance;

controlling anti-competitive mergers;

encouraging IPPs;

supporting renewable-energy competition;

monitoring energy prices; and

protecting consumers.

The Competition Commission has specifically identified energy as a priority sector because of market concentration and the need for greater competition.

13. Conclusion

Competition policy in the energy sector has evolved from a monopoly-oriented model towards a system combining regulation with competition.

The development of IPPs, renewable energy, private generation and Eskom restructuring has increased the importance of competition law. At the same time, transmission and distribution networks continue to require specialised regulation because of their natural-monopoly characteristics.

The Senwes, Sasol Gas, Cape Gate and Waco Africa cases demonstrate different dimensions of this evolution, including infrastructure control, pricing, regulated markets and procurement.

The modern objective is therefore not simply to privatise energy markets. It is to create a system in which competition is introduced wherever economically possible, essential networks remain fairly accessible, and sector regulation and competition law work together to promote efficient, reliable and affordable energy supply.