Introduction:
South Africa’s electricity sector is entering a new legal era – for decades, the electricity supply industry has been characterised by a vertically-integrated model dominated by Eskom with generation, transmission and distribution operating within a largely state-centred framework. However, this model is now undergoing significant statutory and institutional restructuring.
The Electricity Regulation Amendment Act 38 of 2024 (hereinafter referred to as the “Amendment Act”) represents one of the most significant legislative interventions in South Africa’s electricity sector in recent years. The Amendment Act commenced on 1 January 2025 and has since introduced legal architecture for a more competitive electricity market, including an open market platform, an expanded licensing framework and the statutory establishment of an independent Transmission System Operator (“TSO”).
The significance of the Amendment Act, however, lies not merely in what it changes on paper. Its real importance lies in what it signals for the commercial structure of the electricity industry. South Africa is migrating from a system whereby electricity is predominantly generated, transmitted and supplied within a state-controlled value chain in which multiple market participants may compete, contract and trade. For energy businesses, this is more than a regulatory adjustment – it is a change in the rules of the game.
A transition toward a competitive multi-market structure:
The Amendment Act has expressly provided for an open market platform that will facilitate competitive electricity trading and introduced the concept of a “market operator”.[1] This is important because the legislation recognises that electricity need not always be bought and sold through a single vertically integrated utility. This framework enables generators, traders, customers and other qualifying participants to assume distinct roles within the electricity value chain as the competitive market is implemented. The Amendment Act accordingly expands the activities that require licensing – in addition to generation, transmission and distribution, the licensing framework now expressly encompasses trading, market operation and system operation.[2]
For businesses, this creates both opportunity and complexity. The emerging market is intended to encourage greater private participation, new trading models and increased investment in generation capacity. At the same time, however, participants will need to navigate a regulatory framework in which commercial freedom remains subject to licensing requirements, market rules and regulatory oversight. In other words, competition may be coming to the electricity market but regulation is not leaving through the back door.
The transmission system – the referee matters:
A competitive electricity market requires an independent and credible transmission system. The Amendment Act therefore provides for the establishment of a TSO as an independent entity, which is required to be established within five years of the Act’s commencement.[3] During this statutory transition period, however, the National Transmission Company South Africa (“NTCSA”) is currently performing the functions of the TSO.[4]
The importance of this reform cannot be overstated. Transmission infrastructure is the physical platform upon which the electricity market depends. Generators may compete to produce electricity but without reliable and non-discriminatory access to the grid, competition remains theoretical. The restructuring of the transmission function is consequently not simply an organisational matter concerning Eskom – it is central to the creation of a functioning market.
For investors and independent power producers, questions concerning grid access, connection arrangements, network charges and the allocation of transmission capacity will increasingly become commercial questions as much as technical ones. An independent transmission function should, in principle, assist in separating the interests of electricity generation from the operation of the grid which could ultimately strengthen investor confidence and create a more transparent environment for market participants. The challenge, however, will be ensuring that the institutional independence contemplated by the legislation translates into genuine and predictable access to the network.
A new role for NERSA:
The transition to competition should not be construed as the disappearance of regulation. Rather, it requires regulation to become more sophisticated. The Amendment Act continues to place the National Energy Regulator of South Africa (“NERSA”) at the centre of the electricity regulatory framework. NERSA will remain responsible for licensing and will have an important role in overseeing the operation of the new market.[5] The Amendment Act also requires the market operator to develop a Market Code, subject to NERSA approval, to govern the operation of the competitive market.[6] This Code is intended to create an important distinction between activities that can be determined through competition and activities that will continue to require regulatory intervention.
Network charges, for example, cannot simply be left to market forces where the underlying infrastructure remains subject to natural monopoly characteristics. The Amendment Act recognises this distinction by differentiating between regulated transactions and market transactions.[7] The regulatory challenge will therefore be to determine where competition should operate freely and where regulation remains necessary to prevent market power from undermining the very competition the reform seeks to create.
What does this mean for power purchase agreements?
The emergence of a competitive market does not mean that traditional contractual arrangements such as power purchase agreements (“PPAs”) will suddenly become obsolete – PPAs are expressly recognised within the amended legislative framework. The Amendment Act defines a physical bilateral transaction as a “transaction entered into by generators, customers and traders for energy production which involves the conclusion of a power purchase agreement to meet demand and supply as required by the system operator”.[8]
This is commercially crucial as it suggests that South Africa’s future electricity market is not intended to be a simple exchange-based model in which every unit of electricity is bought and sold through a central market. Instead, the legislation accommodates a multi-market model incorporating competitive transactions, physical bilateral transactions and regulated transactions.
It is critical to note, however, that existing and future PPAs will need to be considered against an evolving regulatory environment. It is therefore anticipated that issues such as changes in law, curtailment, grid availability, transmission charges, balancing obligations, termination rights and regulatory approvals may become increasingly important in assessing the bankability of energy projects. The ability to understand both the regulatory framework and the contractual consequences of market reform will become an increasingly valuable skill for energy-sector participants.
Where competition meets regulation:
Perhaps the most immediate commercial question arising from market reform is deceptively simple: who determines the price of electricity?
The Amendment Act provides for a distinction between prices arising from competitive market transactions and tariffs or charges that remain subject to regulatory approval.[9] It also provides principles for the setting and approval of prices, including allowing an efficient licensee to recover the full cost of its licensed activities and earn a reasonable return proportionate to the risks involved.[10]
This issue has become particularly topical. In July 2026, Cabinet approved the publication of the Revised Electricity Pricing Policy for public comment. This policy seeks to update the current Electricity Pricing Policy framework to account for developments, including Eskom’s unbundling and implementation of the Amendment Act. It also proposes greater transparency through the unbundling of tariffs across generation, transmission, distribution and retail activities.[11]
This development matters because a competitive electricity market cannot function effectively if its underlying pricing architecture remains designed for a fundamentally different market structure.
What should businesses be watching?
The market reform is no longer purely prospective. In November 2025, NERSA approved the Market Operator licence for NTCSA, an important step towards the establishment and operationalisation of the South African Wholesale Electricity Market.[12] Following NERSA’s approval of the NTCSA’s Market Operator licence in November 2025, the Market Code and Market Rules remain important components of the regulatory framework required to operationalise the competitive market.
Generators and independent power producers should consider how market reform may affect their route to market and the structure of their contractual arrangements. Large electricity consumers may need to reassess procurement strategies and the opportunities presented by direct contracting and electricity trading. Traders will need to understand the emerging licensing and market-participation requirements. In the meantime, investors will be watching closely for regulatory certainty, predictable grid access and the extent to which the new framework supports bankable projects.
This legal transition will also require businesses to think beyond compliance. The more competitive the market becomes, the more important questions of market power, access, pricing and competition law may become.
Conclusion:
South Africa’s electricity market is not being transformed overnight. The Amendment Act provides the statutory architecture but much of the practical operation of the new market will depend on the development of subordinate instruments, market rules, institutional arrangements and regulatory practice. Cabinet’s approval in July 2026 of the publication of a draft Electricity Sector Market Transformation Position Paper is particularly significant in this regard. The Paper is intended to guide South Africa’s transition from a predominantly state-controlled electricity system towards a more competitive market in line with the Amendment Act and the Energy Action Plan.
The direction of travel is therefore clear even if every destination has not yet been mapped. For South African energy businesses, the message is equally clear: electricity market reform is no longer a distant policy ambition. It is becoming the legal and commercial environment in which future energy projects will operate. The successful transition will depend on whether South Africa can achieve the delicate balance at the heart of the reform — encouraging competition and private investment while maintaining reliable supply, protecting consumers and ensuring that access to essential infrastructure remains fair and transparent. The era of electricity regulation is not ending. Rather, it is evolving and for businesses operating in the sector, understanding that evolution may prove just as important as generating the power itself.
Works cited
Electricity Regulation Amendment Act 38 of 2024.
“President Cyril Ramaphosa signs Electricity Regulation Amendment Act into law” South African Government. 16 August 2024.
https://www.gov.za/news/media-statements/president-cyril-ramaphosa-signs-electricity-regulation-amendment-act-law-16?utm_source=chatgpt.com [accessed 7 August 2026].
“Statement on the Cabinet meeting of Wednesday, 29 July 2026”. Department: Government Communication and Information System. 30 July 2026
https://www.gcis.gov.za/statement-on-the-cabinet-meeting-of-wednesday-29-july-2026?utm_source=chatgpt.com [accessed 7 August 2026].
“2025 Article IV Consultation—Press Release; Staff Report; and Statement by the Executive Director for South Africa” IMF Country Report No. 26/34. 11 February 2026.
https://www.treasury.gov.za/comm_media/press/2026/2026021102%20SA%20IMF%20Staff%20report%20for%202025%20Art%20IV%20consultation.pdf?utm_source=chatgpt.com [accessed 7 August 2026].
https://www.gov.za/news/media-statements/president-cyril-ramaphosa-signs-electricity-regulation-amendment-act-law-16?utm_source=chatgpt.com [accessed 7 August 2026]. [4] “President Cyril Ramaphosa signs Electricity Regulation Amendment Act into law” South African Government. 16 August 2024.
https://www.gov.za/news/media-statements/president-cyril-ramaphosa-signs-electricity-regulation-amendment-act-law-16?utm_source=chatgpt.com [accessed 7 August 2026]. [5] Section 32 of Act 38 of 2024. [6] Section 28 of Act 38 of 2024. [7] Section 1 of Act 38 of 2024. [8] Section 1 of Act 38 of 2024. [9] Section 1 of Act 38 of 2024. [10] Section 15 of Act 38 of 2024. [11] “Statement on the Cabinet meeting of Wednesday, 29 July 2026”. Department: Government Communication and Information System. 30 July 2026 https://www.gcis.gov.za/statement-on-the-cabinet-meeting-of-wednesday-29-july-2026?utm_source=chatgpt.com [accessed 7 August 2026]. [12] “2025 Article IV Consultation—Press Release; Staff Report; and Statement by the Executive Director for South Africa” IMF Country Report No. 26/34. 11 February 2026.
https://www.treasury.gov.za/comm_media/press/2026/2026021102%20SA%20IMF%20Staff%20report%20for%202025%20Art%20IV%20consultation.pdf?utm_source=chatgpt.com [accessed 7 August 2026].
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While every reasonable effort is taken to ensure the accuracy and soundness of the contents of this publication, neither writers of the articles nor the publisher will bear any responsibility for the consequences of any actions based on information or recommendations contained herein. Our material is for informational purposes and should not be construed as legal advice.
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