SLOW ADAPTATION OF REGULATORY CODES

1. Meaning and Concept

Slow adaptation of regulatory codes occurs when electricity-sector rules, technical standards, tariff methodologies and operating codes fail to evolve at the same pace as technological, commercial and structural changes in the electricity industry. Modern electricity systems are changing rapidly through renewable generation, battery storage, embedded generation, electricity trading, wheeling, smart grids, digitalisation and distributed-energy resources. Where regulatory codes remain outdated, they may obstruct investment, create uncertainty, impose inappropriate technical requirements or fail to address emerging system risks.

The problem is particularly significant in electricity regulation because codes frequently have binding consequences for generators, network operators, traders and distributors.

2. South African Legal Framework

The Electricity Regulation Act 4 of 2006 (ERA) establishes the national regulatory framework and makes NERSA the custodian and enforcer of electricity regulation. The Electricity Regulation Amendment Act 38 of 2024, which commenced on 1 January 2025, substantially modernised this framework by providing, among other matters, for competitive electricity trading, an open market platform and expanded transmission-system arrangements.

These structural reforms increase the importance of keeping subordinate rules and technical codes aligned with primary legislation.

The South African Grid Code contains a formal governance mechanism. The Grid Code Advisory Committee (GCAC) reviews proposed amendments and exemptions, while NERSA is responsible for administration and approval. The Governance Code states that NERSA should consider and respond to GCAC submissions within three months.

Thus, the legal architecture already recognises that electricity codes must be capable of continuing review.

3. Causes and Regulatory Risks

Regulatory codes may adapt slowly because of lengthy consultations, institutional capacity constraints, technical complexity, conflicting stakeholder interests or delays in approving amendments.

For example, a grid code developed mainly around large conventional generators may require revision when substantial volumes of solar PV, wind and batteries connect to the system. Similarly, tariff rules designed for one-way electricity flows may become unsuitable where consumers also export electricity.

Slow adaptation can produce regulatory uncertainty, discriminatory treatment, connection delays and inefficient investment signals. Conversely, excessively rapid amendments without consultation may undermine legal certainty. Effective regulation therefore requires a balance between adaptability and procedural fairness.

4. Case Law

National Energy Regulator of South Africa v Borbet SA (Pty) Ltd [2017] ZASCA 87

Facts: Industrial electricity users challenged NERSA's decision concerning Eskom's electricity-price adjustment and the application of the Multi-Year Price Determination methodology.

Legal Issue: Whether NERSA's regulatory methodology and resulting decision were administrative action subject to judicial review.

Judgment: The Supreme Court of Appeal confirmed that NERSA's decision constituted administrative action reviewable under PAJA.

Legal Principle/Ratio: Regulatory methodologies cannot operate independently of the statutory framework. NERSA must act rationally, fairly and consistently with legally established regulatory requirements.

Significance: Where electricity codes become outdated, regulators cannot simply disregard them informally. They should revise them through lawful procedures or justify legally permissible departures.

AfriForum NPC v National Energy Regulator of South Africa [2025] ZAGPPHC 1305

Facts: NERSA repeatedly issued municipal electricity-tariff approvals late. Evidence demonstrated delays over four consecutive financial years.

Legal Issue: Whether persistent regulatory delay violated constitutional and statutory requirements.

Judgment: The High Court held that chronic delays impaired municipal budgeting and meaningful public participation and imposed binding timelines upon the regulatory process.

Legal Principle/Ratio: Specialist regulatory status does not protect systemic administrative delay from judicial intervention.

Significance: The case is particularly relevant to slow regulatory adaptation because section 237 of the Constitution requires constitutional obligations to be performed diligently and without delay.

Eskom Holdings SOC Ltd v Sonae Arauco (Pty) Ltd [2024] ZASCA 177

Facts: The dispute concerned electricity supply and the regulatory framework governing load-shedding.

Legal Issue: What legal effect did NERSA's electricity codes have upon licensed operators?

Judgment: The Supreme Court of Appeal recognised that the applicable NERSA codes formed part of licence conditions and obliged licensees, including Eskom, to comply with them.

Legal Principle/Ratio: Electricity codes can create binding operational obligations.

Significance: Because codes have real legal consequences, obsolete provisions can materially affect electricity-system operation and should be updated through structured regulatory processes.

5. Conclusion

Slow adaptation of electricity regulatory codes can create a mismatch between law, technology and market reality. South African law provides mechanisms for Grid Code review, while administrative-law principles require NERSA to act rationally, transparently and without unreasonable delay. Effective electricity governance therefore requires periodic code reviews, stakeholder participation, technical monitoring and timely amendments so that regulatory rules remain suitable for an increasingly decentralised, digital and competitive electricity system.