Electricity Supply Industry Regulatory Bill: briefing

The aim of this report is to summarise the main events at the meeting and identify the key role players. This report is not a verbatim transcript of proceedings.

Chairperson: Mr R. Mofokeng

Minerals and Energy Portfolio Committee Draft Programme January - March 2002

The Department briefed the committee on the Electricity Supply Industry Regulatory Bill. Though members were impressed with the efforts of the Department in restructuring the electricity industry, they had a wide array of concerns over what the Department was currently engaged in to improve service delivery at the grass roots level. Members also expressed much interest in timeframes for the establishment of Regional Electricity Distributors as well as the fact that the restructuring of the electricity industry would be in the hands of Eskom and municipalities.

The Department briefed the committee on the Bill. The Departmental delegation comprised of Ms N. Magubane, Chief Director on Electricity and Mr Z. Hlongwane, Parliamentary Officer to the Department. Ms Magubane proceeded to give the Committee a brief overview of the background, content, implications and structure of the Bill. She concluded the briefing by stating that the Bill was to facilitate the restructuring of the Electricity Supply Industry in its various stages. The Bill essentially gave the National Electricity Regulatory Authority (NERA) the powers to regulate the industry by way of setting conditions for regulation and licensing.

Ms D. Motubatse (ANC) asked what progress had been made on the establishment of Regional Electricity Distributors (REDs). She also asked whether the Department offered any incentives to those companies who produced their own electricity.

Ms Magubane stated that Cabinet had decided on the following, as far as REDs were concerned:

-The Department should establish six REDs.

- A national holding company should be formed to support those REDs that required it.

- Eskom and some of the stronger municipalities should provide support to weaker municipalities.

She also noted the progress to date to be the following:

- Cabinet had approved Memorandum and Articles of Association of the holding company.

- Consultation was also taking place with the State Law Advisors.

- Advertisements had been placed for the posts of CEO and for non-executive board members.

- A selection committee was currently in place and relevant legislation was being drafted.

- Co-operative agreements had been concluded between municipalities and local government, and the Minister was embarking on a road show to create awareness of the efforts of the Department.

On the issue of incentives, Ms Magubane pointed out that the Department was engaged in efforts to draft policy in this regard.

Mr M. Baloyi (ANC) asked if the Department was prepared for the likelihood that competition was likely to increase within the electricity supply and distribution industry. He also asked if there would be a sharing of infrastructure within the industry and what the extent of the regulation would be.

Ms Magubane pointed out that a distinction needed to be made between transmission and generation of electricity. She noted that transmission of electricity was by its very nature highly monopolistic and should be in the hands of the state. Generation of electricity was capable of being in the hands of the private sector and the Department had already decided to make a ten percent allocation towards Black Economic Empowerment (BEE).

Mr A. Nel (NNP) asked if NERA would be funded by consumers of electricity.

Ms Magubane affirmed that consumers would be funding the NERA.

Mr B. Bell (DP) asked if provinces would have any say in the transmission of electricity.

Ms Magubane made the point that the Department's aim was to strengthen local government. Local government needed to be capacitated to give effect to their constitutional mandate. The responsibility of distributing electricity would therefore lie with municipalities rather than provinces, so the provinces were not involved in the process. She added that provinces in any event do not receive any revenue from the distribution and supply of electricity.

Mr M. Ramodike (UDM) expressed concern over the unreliability of electricity supply in rural areas. In many instances faulty power lines were not repaired and electricity meters were not regularly read. He consequently felt that the Department had not implemented sufficient monitoring measures in the supply of electricity.

Ms Magubane stated that NERA had been established to address the very concern that Mr Ramodike had raised. She noted that service delivery could only be improved if issues were raised in the consumer forums. Ms Magubane reiterated what she had previously stated on the strengthening of local government.

Mr J. Nash (ANC) asked for clarity on what rural energisation entailed.

Ms Magubane responded that rural energisation refered to making other forms of energy available to rural communities. The aim of the Department was therefore not merely to make electricity available to all but to give communities energy alternatives from which to choose. What could be practical for one community might not be practical for another community. Amongst the alternatives mentioned by Ms Magubane were paraffin and gas.

Mr Nash then expressed concern over the fact that municipalities often loaded electricity bills in order to give effect to cross-subsidizing those areas where non-payment took place. He asked what was being done to address the issue.

He also asked if the Department had an Integrated Energy Policy in place and inquired about what progress had been made on the establishment of mini grids.

Ms Magubane responded on the issue of curbing the loading of electricity bills by saying that NERA had been given the powers to standardize electricity tariffs. NERA would only allow municipalities to increase tariffs if the increases are reasonable. She also answered that an Integrated Energy Plan had been drafted by the Department and was available on the Department website. Concerning mini grids, she stated that they had been established and were up and running.

Ms Motubatse asked if consumer forums would be established in terms of the Bill.

Ms Magubane stated that consumer forums had been established though it was not in terms of legislation.

Mr I. Mohamed (ANC) stated that the Department had set aside 60 million rand for the electrification programme, but it seemed that Eskom would continue implementing the programme. He asked who would own the infrastructure. He then asked how the Department was addressing problems that surfaced on service delivery, especially in the lack of reading electricity meters.

Ms Magubane noted that the 60 million rand that had been allocated towards the electrification programme was to be used by both Eskom and municipalities. A National Electrification Advisory Committee had been set up to advise the Minister on areas of priority. Representatives from both Eskom and municipalities had formed a Business Policy Unit, which made recommendations to the National Electrification Advisory Committee. Recommendations having any merit would then be forwarded to the Minister. The idea was to elicit recommendations for optimal ways of improving electrification.

Mr Baloyi asked what the Department's plans were in relation to the establishment of RED's. He also stated that he foresaw problems surfacing on the distribution side of electricity when NERA dealt with conflicts between consumers and suppliers

Ms Magubane pointed out that it was the responsibility of the holding company to oversee the implementation of the REDs. The process was expected to be complete within ± two years. Ms Magubane noted that conflicts arising with consumers were to be dealt with by the consumer forums.

Mr Ramodike asked what role traditional authorities would play in the electrification process if it was to be controlled by Eskom and municipalities.

Ms Magubane stated that all relevant structures able to facilitate the electrification process would be consulted.

The Chairperson concluded the meeting by stating that their next meeting would only be on the 13 February 2002 as members would attend training workshops during the week of the 28 January 2002.

Wed. 20 February Electrification and non-grid electrification

Wed. 27 February Workshop with Department on Budget