In 2003, Cabinet approved private-sector participation in the electricity industry and decided that future power generation capacity will be divided between Eskom (70 percent) and independent power producers, or IPPs (30 percent).

The Department of Energy was mandated with the responsibility of ensuring private-sector participation in power generation through a competitive bidding process and that diversified primary energy sources be developed within the electricity sector without hindrance.

A power generation investment plan was drawn up to take into account this 30 percent private-sector participation in power generation. The planning and development of transmission systems will be undertaken by the transmission company, subject to the government's policy guidelines.

During 2003, Eskom implemented a revised business model to prepare for capacity requirements and the impending restructuring by splitting its business into regulated and non-regulated divisions. Eskom's core business, its strategic support businesses, and target markets were reviewed and agreed on. The generation division will continue to be part of Eskom.

In 2003, the power stations in the division were paired together to form clusters to prepare the generation sector for flexibility to accommodate different options in a changing electricity supply industry (ESI). The transmission division takes responsibility for the electricity grid. Worldwide transmission is a natural monopoly.

In South Africa, an efficient regulatory body must be established that will grant all players access to the grid. For example, customers could buy from sources other than Eskom, such as the Southern African Development Community (SADC) electricity pool or IPPs, but still use the same transmission infrastructure to have power delivered to them.

The government's policy on the Electricity Distribution Industry (EDI) requires the division to be separated from Eskom and merged with the electricity departments of municipalities to form a number of financially viable regional electricity distributors (REDs). An interim body, called EDI Holdings Company, is overseeing the transition period.

For more information visit: Independent Power Producer (IPP) Projects website