23 July 2010 – A fully ring-fenced Independent Systems and Market Operator (ISMO) entity would be established within Eskom’s Systems Operations and Planning Division by the end of August, an Eskom official said on Thursday.

Eskom Single Buyer Office representative Adele Greyling explained that this was the first phase of the establishment of the interim ISMO, and would ring-fence finances and governance, while the second phase would seek to establish a fully independent ISMO.

All costs, and the procurement of power from independent power producers (IPPs) would be handled in this ring-fenced entity.

Eskom employees would populate the entity, while an investment committee with external representation from government departments such as the Department of Energy and the National Treasury would play a role in decision making.

The establishment of this ISMO required significant restructuring within the organisation, and was being influenced by the inter-Ministerial Committee on energy, which would be making decisions on how it would like to see the ISMO rolled out.

Greyling added that this ring-fencing exercise was fairly simple once agreed to.

While the ISMO would initially only procure power from IPPs, it was envisaged that this entity would evolve, over time, into a fully-fledged system and market operator, outside Eskom.

The absence of clarity on the identity, composition and mandate of the entity that will eventually buy power from IPPs has been viewed as an impediment to getting projects started in the country.

The creation of the ISMO was viewed as an important mechanism to facilitate investment by IPPs into the power generation sector in South Africa, as it would remove the conflict of interest between Eskom as generator and transmitter, as well as the ‘single buyer’ of all cogenerated and IPP power.