Opinion: Nersa's revised trading rules – market reform or market containment?

In this opinion article on the latest draft trading rules released by the National Energy Regulator of South Africa, renewable energy entrepreneur Frank Spencer warns that the proposed rules impose volume caps, broad non-bypassable charges, and structural barriers that will constrain generators and traders alike for years.
The National Energy Regulator of South Africa (Nersa) has published its revised draft Trading Rules for the bilateral trading market (Version 01, dated 12 April 2026) together with a consultation paper inviting stakeholder comment by 23 May 2026.
The rules deserve serious scrutiny from the entire electricity supply industry – not just licensed traders, but every independent power producer (IPP) with a wheeling contract, every aggregator, and every customer with embedded generation. Because these rules apply to all of them.
This is the second round of consultation, following the initial draft published in November 2025 and the subsequent public hearings in January 2026 at which Eskom raised significant objections. The revised rules run to 44 pages and set out a four-phase framework for the transition to retail electricity competition.
Applicability extends well beyond traders
Clause 3.1 makes the scope explicit. The rules apply to all licensed traders, all network service providers operating under distribution licences, all retailers operating under distribution licences, and, critically, all generators of capacity greater than 100 kW that are registered with Nersa, and involved in bilateral agreements supplying wheeled energy to consumers, whether directly or via traders.
An IPP with a direct wheeling power purchase agreement (PPA) to a customer faces the same volume restrictions, the same contestable customer thresholds, the same non-bypassable charge (NBC) framework, and the same reconciliation and reporting obligations as a licensed trader. Aggregators bundling multiple IPPs are in the same position. Volume restrictions are measured at the customer level: the aggregate of all third-party supply from all traders and generators combined must fall within the applicable cap (Clause 7.4.5).
Generators below 100 kW (covering most rooftop solar and small-scale embedded generation (SSEG) installations) are explicitly excluded. Their electricity "shall not be eligible for wholesale or retail electricity trading" (Clause 9.4.1).
The contestable market is extremely narrow
Phase 1 limits contestable customers to those with a Notified Maximum Demand (NMD) of at least 1 MVA, plus interval metering and Time-of-Use (TOU) tariff structures. This confines contestability to large industrial and commercial customers. All other customers (the overwhelming majority of South Africa's electricity consumers, including all low-voltage and prepaid customers below 1 MVA) are classified as captive and must continue purchasing exclusively from their incumbent distributor.
The threshold is not relaxed until Phase 3, when contestability extends to customers with a connection size of 100 kVA or more, and Phase 4, when all customers become contestable. But Phase 3 requires the South African Wholesale Electricity Market (SAWEM) to have been operational for a minimum of three continuous years, and Phase 4 requires a further three years after Phase 3 commencement. Given the uncertainty around SAWEM's go-live date (anticipated no earlier than Year 2 of Phase 1) full retail competition is realistically a decade or more away.
Volume restrictions: a six-year glide path starting at 20%
Even within the narrow contestable market, the rules impose volume restrictions on third-party supply. In Year 1, a contestable customer may source only 20% of its baseline consumption from third-party suppliers. The cap remains at 20% in Year 2, rises to 30% in Year 3, 40% in Year 4, and 50% in Year 5. Volume restrictions are removed entirely only in Year 6, contingent on non-bypassable charge thresholds having been met (Table 1, Clause 7.4).
The stated rationa...