of the country from the coal reserves of Mpumalanga.<sup>15</sup> Its plant mix also includes (table 1): two conventional hydroelectric stations, Gariep and Vanderkloof, with a joint capacity of 2,000 MW;<sup>16</sup> two pumped storage schemes, Drakensberg and Palmiet, with combined capacity of 1,400 MW which play a critical role for meeting peak demand, system balancing and control; and two gas turbine stations, Acacia and Palmiet, with total capacity of 342 MW (these stations consist of Boeing 707 jet engines that use kerosene as their primary fuel).

Eskom exports electricity to Botswana, Mozambique, Namibia, Zimbabwe, Lesotho, Swaziland, and Zambia. In 2004, approximately 13 TWh (about 6 percent of the total produced by Eskom stations) of electricity were exported to neighboring countries while 9.8 TWh were imported during the same period.<sup>17</sup> In 1998, Eskom signed an agreement with the Zambia Electricity Supply Corporation which allows South Africa to import Zambia’s excess power—300 MW during peak power generation periods.<sup>18</sup> Eskom has been operating an internal pool market for over seven years. The primary objective of the Eskom Power Pool (EPP) was to facilitate optimal dispatch by providing a competitive trading platform where prices are determined by the competitive bidding of participating generators.<sup>19</sup> However, the extent to which the EPP could lead to a competitive market within a vertically integrated monopoly has been clearly limited by the fact that all the participating generators are Eskom power stations. The national transmission network is entirely owned by Eskom and comprises of about 27,000 Km of high tension (132 to 765 kV) lines the bulk of which (15,200 Km) is at 400 kV. The distribution network consists of approximately 379,000 Km of low voltage lines. Eskom owns 288,000 Km of distribution lines (1 to 132 kV), with the remaining 91,000 Km of low voltage lines (mostly below 1 kV) being owned by the municipalities.<sup>20</sup> Until recently, the distribution segment of the industry was highly fragmented. Municipalities in South Africa have the constitutional right to supply electricity within their local boundaries. Eskom has legislative rights to supply electricity throughout South Africa where municipalities are not supplying. The municipal segment of the distribution sector is characterized by a large variance in size—it includes a small number of very large and a large number of very small distributors. In 1998, more than 120 municipal distributors supplied electricity to less than 1000 customers and more than 90

> 15 The Koeberg nuclear power station consists of two units each with a 3-loop Framatome Water Pressurized Reactor (PWR) whose condensers are cooled by seawater.  The station boasts the largest turbine generators in the Southern Hemishpere and is considered one of the safest of the world’s topranking PWR’s.

> 16 South Africa can be classified as a generally dry country, and thus has very little perennial hydropower potential.

> 17 In 2004, these sales to countries in Southern Africa included: Botswana (1,699 GWh), Mozambique (8,076 GWh), Namimbia (1,515 GWh), Zimbabwe (532 GWh), Lesotho (12 GWh), Swaziland (697 GWh), Zambia (403 GWh). Eskom Annual Report 2005.

> 18 MBendi _Information for Africa_ (2005).  South Africa: Electrical Power.

19 Van Harmelen G and R. Surtees (2003). “Internet Based Energy Trading in Southern Africa.” AMEU 58<sup>th</sup> Convention.

> 20 National Electricity Regulator (2003).  Electricity Supply Statistics for South Africa. Pretoria.

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