Independent power producers (IPPs) active in South Africa could well have a legal case against energy utility Eskom, should the parastatal be found to have breached the ambits of the Competition Act by denying them access to the national electricity grid to distribute power to third parties, the South African Independent Power Producer’s Association (Saippa) heard on Tuesday.

Competition Commission department head Mziwodumo Rubushe revealed in a response to questions from the floor following an address to a Saippa seminar, in Johannesburg, that energy utility Eskom could be legally compelled to provide IPPs access to the national grid in the provision of power to third parties.

“According to the Competition Act, abuse of dominance is the refusal by the dominant industry player to offer access to an essential facility.

“It also depends on the effect of that refusal to provide access on the industry or individual players. If you are able to prove effect, then there could be a case,” he said.

While Eskom had establish a dedicated Grid Access Unit (GAU) for IPPs and generators to “facilitate nondiscriminatory grid access” and ensure transparency on pricing policy, network contracts, and operating agreements, the grid access application process had often been criticised for being lengthy and complicated.

IPPs were required, through the GAU, to embark on a consultation and application process during which they were issued with a cost estimate letter by Eskom that contained a nonbinding estimation of the costs of the works required to connect the IPP project to the national grid.

This led to a connection/use-of-system/operating agreement, which must be signed before Eskom would allow the IPP project to be connected to the transmission system.

However, some IPPs attending the Saippa seminar had suggested that Eskom remained reluctant to provide access to the grid to maintain its local market dominance and prevent the entry of power provision competitors to the domestic market.

Rubushe encouraged the industry to raise its concerns in this regard with the commission, adding that the dominant market player engaged in the activity – in this case, Eskom and the municipalities – was often unaware that its behaviour was unlawful.

“Sometimes, all we need to do is meet with the entity and tell it that its behaviour is prohibited. In many instances, it will admit that it engaged in the conduct, but was unaware that it was a contravention of the Act. This is often resolved through engagement and talking,” he commented.

Meanwhile, Eskom had revealed earlier on Tuesday that it had placed a temporary halt on the issuing of budget quotes for the Renewable Energy Independent Power Producer Procurement Programme, as its current financial plan could not support any new IPP connections or energy purchases.

The utility stressed, however, that this was a temporary measure and that it would soon find a lasting solution to deal with the matter.

PREVENTING ANTICOMPETITIVE BEHAVIOUR
Rubushe, meanwhile, cautioned the adolescent IPP industry against engaging in anticompetitive business practices itself, citing examples of domestic collusion in the engineering, consumer goods and construction sectors.

“There are areas of vulnerability for Saippa members from a competition law point of view. It’s not necessarily wrong when companies come together, but sometimes industry organisations are used for collusive purposes and use the information exchanged for collusive behaviour.

“If you are concerned about the conduct you are about to engage in, you can call on the commission for an advisory position. Then you can be confident that you are unlikely to be prosecuted by the commission for anticompetitive conduct,” he commented.

While noting that information exchange between industry players was allowed, Rubushe advised companies to avoid discussing current and future prices, price decreases or increases, the standardisation or stabilisation of prices, cash discounts, credit terms and restrictions on supply.

“The Competition Act does not forbid the exchange of information, but it does depend what that information is used for,” he remarked.