Municipalities have until Wednesday this week to make written submission on new draft rules that will influence how they operate, budget and deliver services in the energy sector.

This follows national energy regulator Nersa publishing its draft electricity trading rules and a consultation paper in late November. It aims to establish a fair framework for bilateral electricity trading in the country, support market development and enable greater customer choice.

It introduces a structural shift that moves municipalities from energy retailers to regulated network service providers. While public hearings are scheduled for January, with the final rules expected to be adopted to March 2026, there are concerns that the process is being rushed with not much time for public or municipal consultations.

Christo Nicholls, CEO of energy consulting company Utility Consulting Solutions, said in a statement on Friday that immediate action on both process participation and institutional readiness is critical. “Municipalities now have a historic opportunity to shape the future of electricity trading,” he said.

Nicholls warned that complying with the draft rules requires advanced metering infrastructure capable of automated, real-time time-of-use readings and consolidated data integration across traders and generators.

Most municipal systems are not equipped to manage multi-supplier billing, calculate wheeling credits by time-of-use period, or meet the governance requirements of the Protection of Personal Information Act.

Municipal pressure

The draft rules formally introduce licensed traders into the electricity market. Customers will be able to choose their electricity supplier. Municipalities will stop selling energy directly and instead manage the network. They will bill customers only for network use, services and administration.

Nicholls said this is concerning because electricity sales currently underpin municipal budgets.

Read: Big step forward in opening South Africa’s electricity market

“Under the new model, this income shifts to traders. Municipalities will rely on use-of-system charges, fixed fees and administrative costs; structures many have not yet modelled or stress-tested. If tariff restructuring is not accurate or cost-reflective, municipalities risk major revenue shortfalls,” the statement said.

The rules provide for top-up supply charges and standby capacity fees, but both require rigorous cost justification and approval from Nersa.

According to the document, the purpose of the rules is to establish a regulatory framework for bilateral electricity trading in the retail market. They aim to facilitate customer choice, promote competition, innovation and efficiency, and ensure compliance with technical standards and legislation.

Differentiated treatment is provided for large commercial customers and small-scale residential consumers.