The Department of Trade, Industry and Competition (DTIC) has published the draft block exemption regulations for Energy Suppliers 2023 and similar exemptions for Energy Users under the Competition Act.
Minister of the DTIC, Ebrahim Patel, said that the new regulations would exempt certain agreements or practices by energy suppliers and users in South Africa in a bid to boost the uptake of new energy generation.
This is in direct response to the electricity supply crisis, with the changes coming under the new freedoms allowed by the declared national state of disaster.
The Exemption for Energy Users deals explicitly with securing backup energy supplies, reducing energy costs and promoting the efficient use of the energy supply.
The exemptions include agreements relating to:
- Joint procurement of backup or alternate energy supply for purposes of supply to the national grid – including power purchase agreements;
- Sharing of backup or energy generation capacity, including energy generation equipment;
- Joint negotiation and purchase of energy related to product and service supply;
- Joint financing of backup and alternative energy supply to the national grid;
- Joint purchasing of shared backup and alternative energy generation capacity;
- Energy use, saving and optimisation initiatives to limit operational downtime and reduce energy demand;
- Joint procurement and the sharing of security services for purposes of securing shared sites.
However, despite these exemptions encouraging businesses to work together on energy solutions, the department doesn’t want businesses to get too close.
The regulations specifically exclude uncompetitive behaviour from the exemptions – like price fixing and collusion – to protect South African consumers and energy buyers from anyone looking to take advantage of the demand.
This includes fixing the prices of selling goods and services to customers or consumers, as well as collusive tendering.
Patel said the sole purpose of the regulations is to increase and optimise the supply of energy in the market or reduce the costs of energy supply.
On top of this, the regulations contribute to the various other regulatory measures aimed at the prevention of the escalation to a total blackout as contemplated in the declaration of a national state of disaster, said the minister.
Both sets of regulations specifically deal with issues around price fixing, collusive tendering and anti-competitive business practices – specifically those mentioned in sections 4 and 5 of the Competition Act.
According to the law firm Cliffe Dekker Hofmyer:
Section 4(1)(b) of the Competition Act prohibits outright (per se) competing firms from:
(i) colluding to fix a purchasing or selling price or other trading condition,
(ii) dividing markets by allocating customers, suppliers, territories or specific types of goods and services or
(iii) collusive tendering.
Section 5(1) of the Competition Act prohibits agreements between parties in a vertical relationship which may have the effect of substantially preventing or lessening competition in a market unless the agreement can be justified by technological, efficiency or pro-competitive gains that outweigh the effect.
The proposed regulations will be open for comment over the next two weeks.
Shifting households and businesses off Eskom’s grid has become imperative in South Africa, with the national government now using the declared state of disaster to expedite the process.
Fnance minister Enoch Godognwana recently announced – in late February – several sweeping initiatives to make the transition more affordable.
Godongwana said starting 1 March, there will be two new incentives for investing in renewable energy. Businesses can deduct 125% of the cost of their renewable energy investments from their taxable income.
Individuals who install rooftop solar panels can receive a rebate of 25% of the panel cost, up to a maximum of R15,000. This rebate can be used to reduce their tax liability in the 2023/24 tax year and is available for one year only.
This, paired with the declaration of a state of disaster over the energy crisis by president Cyril Ramaphosa has led to a boom in procurement procedures from private generation projects, all with instances where companies may be overcharged or suppliers collude with each other.
The new regulations will ensure the keen eye of the Competition Commission is kept on business practices within the new energy market.
The full gazette is provided below: