Electricity Regulation Bill [B20-2006]: hearings

Meeting report

MINERALS AND ENERGY PORTFOLIO COMMITTEE
10 October 2006
ELECTRICITY REGULATION BILL [B20-2006]: HEARINGS

Chairperson: Mr E Mthethwa (ANC)

Documents handed out:
South African Local Government Association (SALGA) presentation
The Association of Municipal Electricity Undertakings (SA) submission
Energy Intensive Users Group (EIUG) presentation
CENTLEC submission
Chamber of Mines South Africa presentation
Chamber of Mines submission
Eskom Holdings Limited presentation Part1 & Part2
Eskom Holdings Limited submission
City of Cape Town as service provider presentation
City of Cape Town as service provider submission
Regional Electricity Distributor 1 (Pty) Limited submission
Institute of Municipal Finance Officers submission
National Energy Regulator of SA (NERSA) submission

SUMMARY
The Committee started public hearings on the Electricity Regulation Bill. Various stakeholders made inputs with most concerns centering on the constitutionality of the Bill; definitions of reticulation, community and domestic end user; regulation of the electricity distribution industry and Ministerial powers. Some stakeholders called for the Bill to be rewritten extensively.

A brief discussion followed to obtain more clarity on the stakeholders’ positions and the Chairperson commented that all submissions would be considered; particularly the suggestion of rewriting the Bill.

MINUTES
The Chairperson welcomed the Members and guests. He stated that the procedure of the Committee would be to deliberate on the suggestions made in the hearings and that they would be guided by what would be best for the nation.

SA Local Government Association presentation
Ms Z Hlatshwayo addressed specific points in the current Bill which SALGA are concerned about. The definitions of (a) "community", (b) "domestic end user" and (c) "light industrial or commercial customer" in the Bill were classified as inconsistent and a deviation from the definition of reticulation. The powers and duties of municipalities were also mentioned with regard to the resources available to them. SALGA sought to stress the role for a regulator as it was stated that this is already covered in the Constitution. SALGA put forward that the Bill also needed to address the issues with dual regulation in the electricity supply industry.

National Energy Regulator of SA (NERSA) presentation
Adv D Singh (Part-time Regulator, NERSA) gave the regulatory objective of having the Bill changed. The problem statements concerning NERSA were discussed. The licencing of municipalities, the definition of reticulation and its regulations, as well as service delivery (impacting on lead times of service and compliance and the impact of service delivery) were put forward as problems in the existing Bill. It was suggested that ‘reticulation’ be defined as per the Electricity Regulation Act, 2006.

EIUG presentation
Mr Ian Robertson (Chairman) defined their position on Regional Electricity Distributors (REDs). The definition of ‘reticulation’ in the Bill was presented as unworkable and a solution suggested. The dual regulation by the Minister of Minerals and Energy and NERSA of the industry was questioned and said to be uncertain and a proposal was made that NERSA should regulate the entire industry. The last point that was raised was that of the definition of "domestic end user" and a suggestion was made that the customer category should be adjusted.

CENTLEC presentation
Mr M Razwinami (Company Secretary) in the presentation highlighted certain discrepancies in the Bill mainly with regard to definitions. Clarity was proffered on definition of the words: (a) "community", (b) "domestic end user" and (c) "light industrial or commercial customer". It was also recommended that Clause 40 (Intervention) be removed as it is already covered in the Constitution. Clarity on the tariff setting roles of the municipalities and NERSA was needed and suggested with regard to regulating the electrical industry.

Discussion

Adv H Schmidt (DA) wanted clarity on the enforcement powers of municipal entities and the lead time needing to be specified with regard to services rendered.

Adv Singh replied that the stated lead times would curtail delays.

Mr L du Plessis (Head: Regulatory Reform, NERSA) suggested that NERSA is the more appropriate authority to deal with transmission and generation. He also suggested that the issues needed to be addressed every six to twelve months. The technical and financial issues needed to be dealt with by the same entity to assist with quality of supply and reliability.

The Chairperson replied that the Bill should empower municipalities.

Chamber of Mines presentation
Mr Dick Kruger (Assistant Advisor: Techno-economics) recommended that the Bill be amended to regulate municipal structures and that a mechanism for customers be put in place in reticulation governance. Tariffs were discussed and a recommendation was made that the Minister should set the norms and standards as proposed by NERSA.

Eskom Holdings Limited presentation
Mr M Adam (Eskom) recommended that the definition of reticulation should be amended. The regulatory powers of the Regulator should be reviewed in relation to local government and the Minister. The enforcement powers and processes of the Regulator should be reviewed. A recommendation was also made with regard to appropriate transitional mechanisms. The tariff should be appropriately regulated to ensure consistency. The ability to transfer servitudes should also be added to the current legislation.

City of Cape Town (Service Authority) presentation
Ms Louise Muller (Electricity Restructuring Process Co-ordinator) outlined the constitutional obligation of local government to supply electricity and that the way forward would be to define what issues related to electricity service should be regulated. The question was also posed whether both the Service Authority and the service provider are to be regulated. NERSA’s role in setting national service standards had to be defined. The purpose and extent of licensing needed to be more clearly defined. The Bill also needed to define the extent of compliance and synergy with other legislation, particularly local government. A proposal was made that a joint working group of officials from the Departments of Minerals and Energy, Provincial and Local Government, National Treasury and local governments redraft the Bill in a specified timeframe.

Regional Electricity Distributer 1 (Pty) Ltd presentation
Mr S Mowzer (Chief Executive Officer) proposed that the Bill be redrafted to give a clear understanding of the role of NERSA in regulating service providers and that the role of municipalities as service authorities are clearly defined. The definition of reticulation should be amended to remove the current limitation of 5000 MWh per annum. The provisions of the Electricity Regulation Act concerning licensing should extend to reticulation. A recommendation was made that the Bill be considered in conjunction with draft legislation on the restructuring of the electricity distribution industry.

City of Cape Town (Service Provider) presentation
Dr L Recontre (Manager: Electricity) explained why the City of Cape Town was making two submissions giving the reason that it would be easier to deal with the submissions as an authority and provider as separate entities. Recommendations were made that the Bill be withdrawn and rewritten. All service providers should be licensed by NERSA and the Service Delivery Agreements (SDA) should be specific. Another recommendation was made that the municipality should order the SDA. Tariffs should also be approved by NERSA.

Discussion

Mr Schmidt commented that the corresponding revenue streams within the municipality were not dealt with. This affects 12% of users so it should be offset against the RED proposal. He asked for further clarification on the 380V level and what it would mean in practise.

The Chairperson commented on rewriting the Bill and said that a way forward must be found.

Mr Adam (Eskom) replied that intervention needed to be constitutional and dealt with case by case. It was also suggested that there be a range of tariffs introduced but that the Bill needed to be tested against the Constitution.

Mr T Skinner (Eskom) explained that 380V was the voltage defined by the asset base and that domestic users use 380V and below, but that businesses use 380V and above. The 380V are also for the smaller revenue base.

The Chairperson commented that the redrafting of the Bill would be considered. The hearings would continue on Wednesday, 11 October and the Members would discuss them on Friday, 13 October. Deliberations would start on Monday, 16 October and the amendments would be considered on 18 October. All the points that were raised would be considered.

The meeting was adjourned.