ALMOST a decade ago, I started openly talking about an Energy Commons yet plans mooted for splitting up Eskom remain stalled. One plan calls for splitting the parastatel into two units, another into three, but the price of electricity continues to outstrip inflation in leaps and bounds.

The basic idea behind all these proposals is to have Eskom become the main cable distributor of electricity, whilst various regional power utilities compete with each other to produce energy for clients, in an open market that allows competition.

One plan calls for Eskom to go the same way as Telkom, a listed JSE company that until recently maintained a monopoly over copper cable services, that have been supplanted by fibre-to-the-door.

An open energy system would certainly benefit the consumer and allow Independent Power Producers (IPP) to coexist whilst doing wonders for the price of electricity — introducing a range of services such as virtual metering and even leasing of home appliances, that currently do not exist.

But it is not just organised labour and union bureaucrats who are opposed to the opening up of an energy commons, with opposition from misguided ideologues who myopically fear that what they call ‘privatisation’ will mean less jobs. Municipalities and Metros currently earn revenue via the bulk sale of electricity from Eskom which is then routed to consumers, a pyramid scheme if ever there was one.

Not only is such a system uneconomical, but the costs are invariably borne by the poor, the real losers in a stalled economic environment. High electricity prices have been cited as one of the major factors effecting development.

Doctrinaire Socialist think-tanks such as Cape Town’s AIDC routinely produce media attacking energy liberalisation policies, a bugbear of the left, but without providing any evidence that opening up the energy economy will have adverse effects.

Take New Zealand for example, where 82% of energy supplied is renewable, one of the least CO2 producing nations on the planet — its electrical energy generation, previously state-owned as in most countries, ‘was corporatised, deregulated and partly sold off over the last two decades of the twentieth century, following a model typical in the Western world.’

However, much of the generation and retail sectors, as well as the entire transmission sector, remains under government ownership as state-owned enterprises.

An online article states: ‘The Fourth Labour Government corporatised the Electricity Division as a State Owned Enterprise in 1987, as the Electricity Corporation of New Zealand (ECNZ), which traded for a period as Electricorp. The Fourth National Government went further with the Energy Companies Act 1992, requiring ‘EPBs and MEDs’ to become commercial companies in charge of distribution and retailing.’

In 1994, ECNZ’s transmission business was split off as Transpower. In 1996, ECNZ was split again, with a new separate generation business, Contact Energy, being formed.

The Fourth National Government privatised Contact Energy in 1999. From 1 April 1999, the remainder of ECNZ was split again, with the major assets formed into three new state-owned enterprises (Mighty River Power (now Mercury Energy), Genesis Energy and Meridian Energy) and with the minor assets being sold off. At the same time, local power companies were required to separate distribution and retailing, with the retail side of the business sold off, mainly to generation companies.

The result is a plethora of choice where consumers are concerned, the same variety and quality of retail service we find in the world of Mobile Telephony and Internet Service Provision. A liberal energy policy is behind New Zealand’s economic success story.

There is no doubt that if Telkom had remained the sole provider of communication services in South Africa, we would have missed out on the startling technological developments experienced in this sector, instead the reverse has been true so far as energy policy is concerned.

Time to bring innovation and economics back to the energy game?

Tag: New Zealand