Real Estate Investor Magazine South Africa November 2018 | Page 42

UTILITIES
To Contain Prices
Competition is Essential
in Electricity Markets 
BY EUSTACE DAVIE
A
market for electricity has a salutary effect on the be-
haviour of all the participants in the generation and
supply of electricity. Generating plants, transmission
grids, distribution grids, wholesalers and retailers, all behave
differently when they compete for business with alternative
suppliers.
Eskom, as a state-owned monopoly, with centrally
controlled oversight and direction, is not the best structure
for the supply of electricity, a critical energy source without
which no nation can grow and prosper. Much better structures
are those that have evolved under competitive circumstances
in the EU, US and small forward-looking countries such as
New Zealand.
South Africa will have a robust electric power supply
system only once its electricity generation, transmission,
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NOVEMBER/DECEMBER 2018 SA Real Estate Investor Magazine
distribution and control functions are separated out and
independently operated. Security of short-term and long-
term supplies demand that government change the current
faulty structure.
The world’s best electricity supply systems have several
characteristics in common. Retail customers have a choice
of buying from numerous competing electricity retailers.
If they are not happy with the service or prices charged by
one supplier, they can easily and rapidly (in New Zealand
within 24 hours) switch to another. Consumers switching
with ease from one electricity retailer to another is the best
indicator consumers can have that the price they are paying
is competitive.
In a well-functioning market, competing generating plants
supply electricity directly to large users and into a wholesale