Restructuring the electricity distribution industry: An analysis of the proposed ownership and governance structures of regional electricity distributors

The electricity distribution industry is currently fragmented and in a financial crisis. The government proposes restructuring the industry into a number of regional electricity distributors (REDs) that will take over the electricity distribution function from municipalities and Eskom, who will be given shares in the REDs in exchange for their distribution assets. It is also proposed that REDs be controlled by boards consisting of customers, trade unions, national and provincial governments, municipalities and Eskom. This article critically examines these and other restructuring options relating to the ownership and governance of REDs. It is argued that these proposals would perpetuate the inequalities that exist between historically advantaged and disadvantaged local governments; that they would extend Eskom's monopoly of the electricity industry, and that they would obstruct good governance and private investment in the sector. To conclude, the article makes a number of recommendations that would mitigate these negative consequences.