The long-anticipated unbundling of the power transmission business from State-owned electricity utility Eskom might finally take place over the coming months as the Independent Systems and Market Operator, or ISMO, emerges as a separate entity.
The creation of the ISMO is viewed as an important mechanism to facilitate investment by independent power producers (IPPs) into the power-stressed South African environment, and the Department of Energy is currently interrogating the framework for its creation and its possible business structure.
While no decisions have been made, Engineering News Online understands that it is likely that the ISMO will, eventually, be responsible for both tariff aggregation and transmission operations.
This would be done to ensure that the "conflict of interest" between Eskom as generator and transmitter, as well as the ‘single buyer' of all cogenerated and IPP power, is removed.
It is envisaged that the ISMO will, thus, be independent from the equity interests of any one generator. This, in turn, should free it up to make purchase decisions that are in the interest of consumers without its board feeling constrained by other competing demands.
Operationally, such independence can really only be fully exercised, though, in the context of an open-access transmission system that is unbundled from Eskom and controlled by the ISMO.
Therefore, it is likely to be premised on the dismantling of the current structure of vertical integration, and the injection of Eskom's transmission assets and staff into the new entity, which would probably remained State owned.
However, a period of transition is likely, from the current structure to one where the ISMO controls the wholesale electricity market.
Ultimately, though, this new wholesaler should be in a position to buy power from a variety of generators, most probably at different tariffs, and aggregate these to provide a selling price for distributors or large direct customers.
Engineering News Online understands that the legal framework for the creation of the ISMO should be outlined soon, and could well be in place by early 2011.
It is less clear, though, as to when the transmission business might be transferred.
It is also likely that Eskom will remain the interim buyer of non-utility power for some time, with the first cogeneration contracts expected to be signed soon.