Transforming South Africa's Electricity Market: NERSA Calls For Public Participation On Draft Trading Rules

South Africa's electricity sector is on the brink of significant transformation as the National Energy Regulator of South Africa ("NERSA") unveils its draft Electricity Trading Rules (the "New Rules"). While an unofficial draft was published towards the end of October 2025, the document was swiftly removed from NERSA's website and replaced on 24 November 2025 with the final draft Electricity Trading Rules and a Consultation Paper.

Following publication of the New Rules, NERSA is inviting members of the public and stakeholders to participate in a virtual public hearing on 27 January 2026. This consultation offers a unique opportunity for inpiduals and organisations to help shape the future of electricity trading in the country.

Under p 35, read together with ps 4(a)(ii) and 4(a)(iv) of the Electricity Regulation Act, 2006 (the "Act"), NERSA may develop and enforce rules that govern South Africa's Electricity Supply Industry ("ESI"). This enables NERSA to establish regulatory frameworks covering a wide range of essential areas, including tariff structures, network charges, and other operational standards.

The New Rules are not merely administrative. Once published, they will play a critical role to ensuring transparency, fairness, and efficiency across the electricity value chain, from generation through to distribution.

The remainder of this blog provides a summary of the draft provisions which are now the topic of the public consultation process.

Nersa's New Electricity Trading Rules

The New Rules apply to traders, network service providers ("NSPs"), registered generators supplying wheeled energy through Power Purchase Agreements ("PPAs"), as well as licensed importers and exporters engaged in cross-border trading within South Africa. For participants in the South African Wholesale Electricity Market ("SAWEM"), the Market Code, developed under the Act ("Market Code"), will take precedence over any conflicting rules once in effect. In short, the New Rules, according to NERSA, aim to deliver fairness, clarity, and flexibility, paving the way for a more structured and competitive market.

The New Rules will be implemented in two phases to ensure a smooth and stable transition to a liberalised market. Phase 1 allows transmission and high-voltage customers to source part of their energy from traders, while managing risks associated with early market opening and metering readiness for smaller customers. Licensed traders may also engage in import/export activities during this stage. Phase 2 will broaden participation to include more customers and introduce wholesale market trading alongside bilateral agreements and regional import/export.

This phased approach is designed to balance innovation with system stability, with the New Rules providing transitional provisions that set the stage for a more open and competitive electricity market.

To ensure a seamless shift from Phase 1 to Phase 2, the New Rules include key transitional measures. Existing PPAs and Electricity Supply Agreements ("ESAs") signed during Phase 1 will remain valid, with traders required to comply with the Market Code. Reporting obligations to NERSA will continue until full integration with the Market Operator ("MO") is confirmed, ensuring data continuity. Additionally, transitional tariff mechanisms may be introduced to stabilise prices and prevent volatility during the early stages of market evolution. These provisions seek to maintain stability while enabling a smooth transition to a more competitive electricity market.

Phase 1

Phase 1 of the New Rules introduces transformative measures aimed at fostering a more competitive and transparent electricity market. These include:

Licensing and Market Entry:

To participate, all entities must meet strict qualifying requirements:

• Traders are required to obtain a NERSA issued trading licence and agree to comply with the New Rules.
• Generators must register their generation facilities with NERSA, secure a trading licence, and obtain written permission from the relevant NSP for grid connection.
• Import/export traders face additional obligations, including holding an Import/Export licence, ensuring technical feasibility with the system operator, entering into a balancing agreement with the MO for energy imbalances, and complying with Southern African Power Pool ("SAPP") rules for regional transactions.
• Entities currently trading under legacy distribution licences must apply for a separate trading licence within twelve (12) months of the New Rules coming into effect.

Once licensed, traders will be recognised as independent market participants and may enter into use of system agreements for wheeling power. These measures are designed to ensure transparency, compliance, and a level playing field for all participants in the new market structure.

Reporting to NERSA

Under the New Rules, traders must submit semi‑annual and annual reports to NERSA which provide information on PPAs, supply arrangements, counterparties, and energy volumes.

NERSA retains the right to audit this information with prior notice, and traders are required to provide access to all relevant contractual documentation within the stipulated timeframe. In addition, traders must report any complaints received, their resolution, and any further information requested by NERSA.

These measures are intended to ensure compliance and foster trust as the market transitions to a more competitive environment.

Supplier Switching

Customers with existing ESAs may switch to alternative suppliers by providing notice to their current supplier in accordance with the ESA provisions. The agreement must be amended to confirm the customer's right to procure wheeled energy from one or more sellers without specifying inpidual sellers, outline the obligation to notify the NSP of anticipated volumes, and designate the NSP as the provider of top‑up supply under NERSA‑approved conditions and charges.

Customers already supplied by a trader may switch based on the terms of their existing agreement, with any incidental switching charges passed through by the NSP. To ensure a seamless transition, NSPs are required to provide meter data to both the outgoing and incoming suppliers, subject to customer consent, on the effective switching date.

Meter Data and Reconciliation

NSPs must provide sellers with real‑time access to customer meter data, subject to customer consent, in a NERSA‑approved format. NSPs may recover reasonable costs for this service. They are also required to implement transparent reconciliation mechanisms to match electricity injected by generators with consumption across multiple sources and customers within defined time periods. Sellers must submit monthly statements of wheeled energy supplied within five (5) days of each billing cycle, after which NSPs will reconcile these figures against meter data. Importantly, wheeled energy attributed to a customer cannot exceed their actual metered consumption for any time‑of‑use period.

Settlements and Billing

All settlement and billing processes must be transparent, auditable, and applied fairly across all network users. Customers will receive an invoice from the NSP for total metered consumption at the full applicable tariff, while generators or traders will issue a separate invoice for wheeled energy delivered under bilateral agreements. NSPs will apply credits for wheeled energy based on approved wholesale rates for the relevant time‑of‑use periods, ensuring credits do not exceed actual consumption. Use‑of‑system charges, administrative fees, and fixed network charges remain payable in full to the NSP. These measures ensure cost recovery for infrastructure while maintaining clarity and fairness in billing.

NSP Recoverable Charges

NSPs will act as the designated top‑up supplier for any shortfall in a customer's contracted energy and will charge for this service using a NERSA‑approved, cost‑reflective tariff. NSPs are also entitled to recover the full cost of maintaining standby capacity to ensure reliability, with charges based on each customer's peak demand and approved by NERSA. Additionally, subsidies and surcharges will be embedded in retail tariffs and recovered through a non‑bypassable charge applied uniformly to all demand‑side customers, ensuring fairness and preventing cross‑subsidisation.

Cross‑Border Trading

Traders may participate in bilateral cross‑border transactions, provided they secure an import/export licence and comply with scheduling requirements. Traders must also have the capability to balance agreed schedules or secure a balancing agreement with a SAPP operating member.

Phase 2

Phase 2 of the New Rules governs trading activities through the following avenues:

Qualifying Requirements to Trade:

Before engaging in bilateral electricity trading, all licensees and registrants must meet specific criteria.

• Traders must obtain a NERSA trading licence, register with the MO as a market participant, and comply with the Market Code, Market Rules, and Trading Rules.
• Generators must register their generation facilities with NERSA, secure MO registration, obtain network connection approval from the NSP, enter into a balancing agreement with the MO, provide financial security for energy imbalances, and adhere to all applicable rules.
• Import/export traders face additional obligations, including obtaining an import/export licence, registering with the MO, securing technical feasibility approval from the system operator, entering into a balancing agreement with the MO, providing financial security, and complying with SAPP requirements for regional transactions.

All Traders wishing to participate in SAWEM must comply with the Market Code and Market Conduct Rules, and are required to comply with the balancing and settlement mechanisms set out in the Market Code, ensuring transparency and operational integrity across trading activities.

These requirements ensure technical readiness, financial integrity, and regulatory compliance for all market participants.

Data Access and Reporting

The MO will maintain secure and auditable data systems to ensure licensed traders have access to validated meter data with customer consent. Traders are required to submit monthly reconciliations of energy volumes, financial transactions, and revenue for regulatory oversight.

Supplier Switching

To facilitate supplier switching, a central switching platform will be implemented to streamline the process and prevent fraud, supported by customer consent logs and unique identifiers.

NSP as the Balance Responsible Party

NSPs will act as balance responsible parties under the Market Code, ensuring uninterrupted supply of energy if a contracted seller fails to deliver. In such cases, the NSP will provide energy to affected customers and recover the associated balancing costs from the defaulting seller or trader at rates set by the MO.

Dispute Resolution

Disputes between market participants will be resolved in accordance with the provisions of the Market Code.

Market Evolution

The New Rules will be periodically revised to reflect operational insights and changes to the Market Code, with efforts made to avoid regulatory overlap.

Transparency and Accountability

The MO will ensure transparency by publishing market prices and trading volumes, while traders must uphold principles of fair competition and customer protection.

Conclusion

The New Rules propose to establish a robust framework aimed at ensuring compliance, technical integrity, and fair market practices. Traders and NSPs must adhere to licence conditions, technical standards, and industry codes to maintain quality and reliability. Disputes should be resolved amicably wherever possible, with NERSA providing mediation or arbitration when necessary.

The phased approach to market liberalisation prioritises system stability and readiness, beginning with transmission and high‑voltage customers before expanding to smaller consumers. NERSA retains the authority to review and revise the New Rules periodically, ensuring they remain aligned with legislative changes and evolving market dynamics. This adaptability guarantees that the trading framework continues to support efficiency, transparency, and sustainable growth in South Africa's electricity sector.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.