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The Democratic Alliance (DA) welcomes yesterday's highly significant announcement by the Minister of Public Enterprises, Barbara Hogan, that Eskom will sign co-generation agreements with independent power producers (IPPs) this month. This is a landmark, if still rather tentative, shift away from Eskom's current status as the sole power producer in South Africa. Eskom stated today in a presentation before the Parliamentary Portfolio Committee on Public Enterprises that the adequacy of electricity supply from 2011 onwards remains a serious concern. This is a clear sign that IPPs are a non-negotiable for energy stability - a viewpoint that the DA has repeatedly advanced in the past.

The next crucial step in the rationalisation of the energy infrastructure is the separation between generation and electricity transmission. In other words, IPPs must be given the opportunity to sell their surplus directly to third parties, without having to make use of Eskom.

The fact remains that Sasol has had the capacity to co-produce electricity for some time now - but the insistence by Eskom to act as buyer and supplier has halted any development in this regard. The logical step forward is the unbundling of electricity transmission. If this is done, then South Africa is sure to see exponential growth in IPPs and much lower electricity prices going forward. It is therefore crucial that the recently announced independent system operator that would buy electricity from Eskom and IPPs alike are implemented as a matter of urgency.

The statement by Minister Hogan that IPPs are an inevitable part of South Africa's future power generation is certainly welcome - the DA has repeatedly called for government to make good on its promise to increase the number of IPPs to account for 30% of total power generation. If the current co-generation agreements are managed properly, then South Africa can expect to see huge efficiency gains in power generation and stability in supply through even the worst peak times.

Increasingly the number of players in generation will also allow many South African households and businesses to become independent of the grid, and will in some cases, provide new revenue streams for entities that sell electricity back into the grid.