POLICY AND REGULATION NEW TRADING PLATFORM AND WORLD-CLASS OPERATIONS AT SAPP It was recently announced that a new trading platform was to be implemented for the Southern African Power Pool’s (SAPP) energy trading activities. This new trading platform will cater for a day-ahead market, an intra-day market (up to one hour prior to dispatch), and a physical forward market; with a view to incorporating other market considerations in the future. T he SAPP, founded in 1955, is the regional organisation of power utilities within the Southern African Development Community (SADC) that was formed in 1995 through the signing of an Inter-Governmental memorandum of understanding (IGMOU) by the SADC member countries. This MOU initially covered only stated-owned utilities. However, this was updated in 2006 to include other electricity supply utilities within SADC. One of the main purposes for the SAPP is to create a competitive regional electricity market for the SADC member states so that all members share in the available energy resources in the region. Some member utilities within the SADC region started trading as early as the 1950s through bilateral agreements mainly between neighbouring countries. The completion of the interconnection between Zimbabwe, Botswana and South Africa through the Insukamini-Phokoje-Matimba 400kV interconnection line in 1996; and the interconnection between Mozambique and Zimbabwe through the Songo- Bindura 400kV interconnection line in 1997, provided the much-needed technical viability for trading between the northern and southern countries of SADC. A number of bilateral contracts were entered into among SAPP members and thus developed the rules and regulations that govern trading operations in the region. The rules and regulations were mainly based on the need for cooperation ESI AFRICA ISSUE 3 2014 among SAPP members, since at that time SAPP was more of a cooperative than a competitive power pool. Bilateral contracts were the preferred method of trading, allowing for long and short-term contracts for sourcing and consumption of power. The prices for the bi-lateral energy contracts are negotiated between the buyer and the seller. The pricing structure for bilateral contracts is diverse with some contracts having capacity and energy rates which take cognizance of the time of use, peak or off peak. Other contracts have flat energy rates. Bilateral agreements provide for the assurance of security of supply but are not flexible to accommodate varying demand profiles and varying prices. To explore further the benefits thereof, the sourcing and scheduling of electrical energy closer to the time of dispatch, the SAPP developed the short-term energy market (STEM) as one option for sourcing and securing supplies closer to real time dispatch. STEM has been designed to specifically mimic a real time dispatch. 1 In 2001, SAPP introduced more competition in the trading arrangements through the establishment of the short-term energy market (STEM). STEM, a manual/email based system was developed by SAPP as a trading mechanism for excess power and in 2002, SAPP introduced a post-STEM market where power that failed to trade on STEM was given another opportunity to be traded. STEM was very successful in SAPP especially before 2007, at which time the region ran out of excess generation capacity. In line with the SAPP vision to have a competitive regional h electricity market, a programme e w was initiated to introduce a web based Day-Ahead Market (DAM) b to t replace the STEM. Norwegian company NordPool, with its c S South African partner Enerweb, i implemented a web based system b based on the Nordic and European m market structure, which went ‘live’ o on 15 December 2009, enabling S Southern African utilities to buy and s sell energy on-line for the first time. Says Dr Lawrence M Musaba, centre coordination m manager: ‘With the rapid energy d developments happening in the r region, SAPP has decided to look at a other options that would ensure t the trading platform is able to a achieve its current day-ahead t trading arrangement. We also h have requirements for the addition 45