Department of Energy legislative programme for 2013, Impact Study Report on transfer of transmission, Committee overview of performance during 2012,

Energy

18 February 2013
Chairperson: Mr S Njikelana (ANC)
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Meeting Summary

The Department of Energy presented an overview of the legislation in progress and stated when some of the Bills may be presented to Parliament. The dates and a brief summary of the content of the Gas Amendment Bill, the National Nuclear Regulator Amendment Bill, the Electricity Regulation Amendment Bill and the National Energy Regulator Bill were outlined. The latter two were still awaiting final approval to submit to Cabinet, which should happen in March. It was noted that some of the legislation had been delayed in the National Economic Development and Labour Council processes, but that the Committee was working hard to try to resolve the issues. Members were unhappy about the delays, asked what exactly was the problem at NEDLAC, and suggested that the Department must work harder to ensure that the legislation was tabled in Parliament in sufficient time to be passed before the end of the Fourth Parliament.

Members then debated, at some length, the draft Resolution on the Impact Study Report around transfer of transmission. There was agreement, finally, that a complete due diligence study was needed, as well as a cost benefit analysis report on what would be the impact for Eskom and the country as a whole. Some Members believed that the previous presentations had been skewed and a full consideration of all the options was needed. For this reason, they asked that the resolution be amended to reflect the options of Independent System Market Operator (ISMO), Transmission System Operator (TSO) and any other option suitable for South Africa. The majority of the members agreed that the date for submission of a final report by the Department should be on 30 November 2012, although one Member had pushed hard for this to be 30 June. The same Member was anxious that the ISMO Bill may be adopted, only to find, in November, that it needed to be amended to follow another system. The Committee also agreed that the Chairperson be mandated to receive informal bi-monthly reports and hold discussions with the Department of Energy, to track progress on the restructuring of the legislation.

The Committee finally adopted minutes of 4 September 2012, 23 October 2012 and 6 November 2012 without any amendments, and minor amendments were made before adopting minutes of 11 September 2012 and 30 October 2012.

Meeting report

Chairperson's opening remarks
The Chairperson commented that the Department of Energy (DOE or the Department) would be presenting an update of the Department’s legislative programme. He noted that the DOE had committed to certain matters that were not fulfilled. He said that the Committee would want to get an explanation for why certain matters had not been presented, and an indication from the Department how it intended to deal with this. There were four main areas of concern that the Committee had outlined, and progress reports were expected.

Legislative Programme of the DOE for 2013
A Deputy Director General, Department of Energy, presented the legislative programme of the Department for 2013 (see attached presentation). An overview of the process was then given, including the fact that the proposed legislation would be referred to the National Economic Development and Labour Council (NEDLAC), which did occasion some delays. 

The Deputy Director General (DDG) noted the reference to the Gas Amendment Bill on page 4, outlined its strategic focus and noted the dates on which it would be submitted to Cabinet, whereafter it would be tabled in Parliament. The same was done for the National Nuclear Regulator Amendment Bill. The Department had been doing a substantial amount of work on this Bill. The Electricity Regulation Amendment Bill and the National Energy Regulator Bill were awaiting final approval, which would take place sometime during next week. They should be with Cabinet by 31 March 2013. He noted that the strategic focus of the Electricity Regulation Amendment Bill was to promote efficiency within the energy sector.

Discussion
Mr K Moloto (ANC) commented that this legislation essentially had to do with government matters and asked why it must be referred to NEDLAC, particularly in view of the delays that this caused. He felt that if NEDLAC could not reach consensus within eight months on a deal, the Executive should be obliged to take the Bill from NEDLAC and refer it straightaway to Parliament. He suggested that the Department should check exactly which bills needed to be referred to NEDLAC and also recommended a meeting with the Executive Council of NEDLAC to discuss the fact that apparently NEDLAC had asked for two six-month extensions, one after the other, delaying the process in all for fourteen months.

The DDG responded that in fact the additional extension requested by NEDLAC had been four months, not fourteen. The DOE was having several meetings around the delays. He reiterated that the National Energy Regulator Bill and the Electricity Regulation Amendment Bill would be submitted to Cabinet by March. The Department had been attending to matters as fast as possible, even sitting working on the legislation over weekends.

Mr Moloto said that he could not see any significant changes regarding the strategic focus, as presented by the Department, in the Nuclear Regulator Amendment Bill. 

Mr E Lucas (IFP) referred to pages 6 and 7 and wanted to confirm the date of submission of the Electricity Regulation Amendment Bill and the National Energy Regulator Bill to the State Law Advisors, as he did not want the Department to raise expectations.

Mr L Greyling (ID) referred to pages 4 and 5, noting that the Gas Amendment Bill and the National Nuclear Regulator Amendment Bill should be submitted to Parliament by March 2014. He did not think this was an appropriate date, taking the elections into consideration, and advised DOE rather to try to submit them in this year. He was pleased, however, to note that the Electricity Regulation Amendment Bill was going to be submitted to the Committee soon.

The Chairperson said that he already drafted a letter, expressing his concerns about his delays.

Ms N Mathibela (ANC) wanted to know what would happen if he Department did not meet their expectations, noting that Members would need to be in their constituencies in the run up to the elections.

The Chairperson noted several changes between the presentations in 2011 and in 2012. He noted that by this stage, only one of the bills was ready to be considered, and reiterated the concerns of other Members that there was little time left in this Parliament. He asked what DOE was doing to try to mitigate the delays.

The Chairperson wanted to know why nothing was mentioned on the Petroleum Bill.

The DDG said that DOE would request that a formal report be given on the Petroleum Bill.

The Chairperson then referred to the strategic focus on the National Nuclear Regulator Amendment Bill, and the comment that it was  “to set out the power and functions of the Regulator”. The Chairperson wanted clarity on whether the Department was creating something new, or merely amending the existing legislation.

The Chairperson also wanted to know whether the National Energy Regulator Amendment Bill and the Electricity Regulation Amendment Bill still had to be passed through the State Law Advisors, and if so, when this would happen.

The DDG confirmed that the two bills had already been submitted to the State Law Advisors and were just awaiting endorsement. They should be finalised by that office by end March, whereafter they would be submitted to Parliament.

The Chairperson then said that he had been breathing down NEDLAC’S neck, but no one had informed him that NEDLAC had requested an extension, and he had been given the impression earlier that everything would be completed by November. The Chairperson requested that the Department articulate precise reasons for the delay, for each and every bill, and also the impact of these delays. The Committee may have to invite NEDLAC and the Minister to a meeting to discuss the delays.

Mr A Kotze, Committee Secretary, reminded Members that neither during previous enquiries, nor at the briefing in March 2012, was the Committee informed about the extension.

Mr J Selau (ANC) wanted to know what was meant by “strategic focus” on page 7. He wondered if this was implying that the current legislation was not efficient.

The DDG explained that the proposal around the energy sector went beyond what was currently in the Act, and, amongst others, sought to promote regulation of efficiency in the industry.

The Chairperson said that the Department would have to come up with plans, and speak with the various stakeholders to get matters concluded. He was horrified with the comment that NEDLAC would be concluding the National Energy Regulator Amendment Bill before the Electricity Regulation Amendment Bill, because of the urgency of the latter.

Impact Study Report on transfer of transmission: Committee’s draft resolution
Members then discussed the draft resolution of the Committee on the Impact Study Report on the transfer of transmission assets.

Mr Moloto suggested that some sentences in section A must be rearranged.

Mr S Radebe (ANC) said that the date in section A should be changed from November to June, because he wanted to ensure that the pressure was kept up. On section B, he requested clarity on where the bi-monthly progress reports must be presented. He wanted to know what was meant by the reference to the National Assembly.

The Chairperson said that Mr Radebe needed to look at section 75 of the Bill on this point.

Mr Radebe also requested that the phrase “the transfer of transmission assets” must be changed to “the transfer of transmission assets from the TSO Bill to the ISMO Bill”.

The Chairperson said that he would be reluctant to phrase it in this way. He reminded the Committee that recent workshops with the International Energy Agencies gave the Committee the opportunity to share experiences with other countries. He noted that there was no attempt to prescribe one single route; it could be transmission from Eskom to a transmission system operator (TSO), or Eskom to the Independent System and Market Operator (ISMO).

Mr L Greyling (ID) said that he felt very uneasy with the type of information being provided to the Committee, and was not yet sure about the implications of using the ISMO or TSO, as both these options, as presented by Eskom and National Treasury, seemed to have huge implications. He said that he was uneasy about adopting a resolution when the information would only be provided by end November. At that stage, it would probably be too late to bring back to the Bill and deliberate whether TSO was a better route to follow. He thought that the draft resolution should be deferred to June, to give the Committee more time to look at the implications before making a decision. In the meantime, he suggested that the Committee should deliberate on Electricity Regulation Amendment Bill and the National Energy Regulator Bill. The kind of information in this resolution seemed to be biased heavily towards Eskom. A complete due diligence report on the impact on the country of TSO as opposed to ISMO was needed, and this had not been covered in the report from Eskom. Finally, he noted that if a report was requested before the end of June it would still be possible to process the legislation this year.

Mr E Lucas (IFP) suggested that the date be stated as “by the end of November” rather than “on 30 November”. He agreed with this date, and did not think it should be changed to June. He also suggested some changes to Section C.

Mr Moloto referred to Section A, and said that “feasibility” implied making of recommendations to Parliament. He was not happy with the general reference, in section C to “the restructuring of the entire electricity sector” and wondered if the Committee should not be more specific and indicate what part of the sectors required the most restructuring.

The Chairperson referred to section C and said that restructuring of the sector was not a new notion and the Department was already tasked with this. He was not happy with some of the assumptions. Eskom was both a generator and a distributor. The introduction of the ISMO Bill triggered a need to do further restructuring. The Chairperson asked if Eskom would remain a generator and distributor, even if it shared distribution with municipalities.

Mr Moloto asked when this Bill was scheduled to be debated in Parliament. He also was not happy with changing the date to June. It was crucial to know when it would be debated, to tie this to when the report must be submitted.

The Chairperson confirmed that there was no date set as yet. The suggested date for submission was in November was based on past experiences. The Task Team would be required to do a thorough due diligence, and the Committee would not entertain excuses as to why this could not be completed within the requested time. He asked Members if they wanted to look at a date for concluding now, or if they preferred to wait until all other matters had been addressed.

Mr Selau proposed that the Committee must look at, and pass, all three Bills simultaneously.

The Chairperson responded that this still would not help the Committee to determine what impact it would have. and if it would ensure entry of the ITT.

Mr Moloto believed it would be better for the Committee to deal firstly, and separately, with processing the ISMO Bill. It would be very difficult to process three bills simultaneously. Referring to Mr Greyling’s earlier comment on “implications” he asked if the word “implications” in section A of the draft resolution was general enough.

Mr Greyling asked, in relation to section A, what the implications would be for not transferring the transmission assets. He commented that he had difficulty with the notion that the ISMO Bill might be passed, and then later the Committee could get a report saying that it was not possible to transfer the assets, then necessitating a change to the Bill. He thought the Department had been given enough time and suggested again that the other Bills be passed in the meantime. Even National Treasury had indicated it preferred TSO.

Mr Moloto summarised that the Committee had two options. It could process the legislation as it was and, if necessary, amend the ISMO Bill and come up with a TSO Bill. The second option was to hold back on passing the legislation and do more work on the transmission assets. This posed a risk in that the work might not be completed by end June.

Mr Moloto referred to Mr Greyling’s earlier comment on a cost benefit analysis and suggested that reference to this should be incorporated into section B of the draft resolution, but that other wording be removed from that in view of the rapid change and movement on the matters. He believed that it was not necessary to have a formally-presented bi-monthly report, but rather a discussion between the Director General and the Chairperson. Once the Department had formulated a final report, the Chairperson could then call a meeting where this could be presented.

The Chairperson asked if other Members agreed that Mr Greyling’s point about addressing concerns beyond Eskom should be catered for somewhere in the draft Resolution.

Mr Selau suggested that, in section C], the word “expedited” be replaced with “investigated”, as it currently suggested that the Committee already knew what the end state would be.

The Chairperson reminded the Members that during the public hearings, Eskom had clearly stated that the end state must be articulated. The word “expedited” referred to the rate of processing. The DOE was already  in the process of restructuring the electricity sector although this process should be moving faster.

Mr Greyling still said that the date in section C should be changed to 30 June 2013. He wondered if, in relation to the end state, the Committee should approach the National Planning Commission, as it had the resources to work fruitfully with the Department of Energy in getting to that end state. He suggested that section A should be changed to read “Conduct a cost benefit analysis, of establishing a TSO versus establishing an ISMO, which considers all the implications to Eskom and the country as a whole and its stated objectives of electricity restructuring”.

Mr Moloto said it was very important to clarify and questioned if the stated objectives of electricity restructuring were known.

The DDG confirmed that some of the restructuring processes were old, and were not set out clearly and in a detailed manner, on paper.

Mr Moloto said that if the restructuring objectives were not clear, then the words “stated objectives” should not be used. He also suggested that the words “and any other possible arrangement” be added in, after the reference to ISMO and TSO.

Mr Lucas was not sure whether “recommends” and “requests” could be used.

The Chairperson said the advisors had verified that those words were appropriate.

Mr Selau) referred to Mr Moloto’s and Mr Greyling’s suggestions, and said that “due diligence” and “cost benefit analysis” meant the same.

The Chairperson thought the words “due diligence” would be broad enough for section A, but if Members wanted to emphasize the cost benefit analysis it could be added, as “and further conduct a cost benefit analysis”. He agreed that a reference to “and any other arrangements” could be added to Mr Greyling’s suggested wording for TSO and ISMO.

Mr Moloto added that “any other possible arrangements, suitable for the South African situation” would be more precise.

Mr Greyling said that he was happy to agree to that. Both risks and benefits of following a certain path should be included.

The Chairperson summarised that there would be reference to risks and benefits and to a cost benefit analysis. The Chairperson agreed with Mr Moloto’s suggestion that a formal progress report was not necessary although the bi-monthly reporting would be useful in tracking progress.

Mr Moloto thought that the bi-monthly reports must at least be written. He commented that he was not sure that Mr Greyling’s suggestion to involve the National Planning Commission would work, as the DOE had a discretion how to handle matters. This Committee should not micro-manage the process as it was essentially interested in the end product.

The Chairperson said that the National Planning Commission handled matters at a very broad level, and although the DOE would be able to assess best how to structure matters, it may be useful for it to seek input from the NPC from time to time, but this should be left to its discretion.

The Chairperson summarised the new wording for section A, reading: “Conduct due diligence in order to determine feasibility and implications on the transfer of transmission assets and to submit a final report to the National Assembly by 30 November 2013”. Section B was now revised to read:  “Further conduct a cost benefit analysis of establishing a TSO verses establishing a ISMO and any other possible arrangements suitable to the South African situation, that considers all the implications to Eskom and the country as a whole”. The revised section C would read “Ensure that the efforts on the restructuring of the entire electricity sector be addressed as a matter of urgency”.

Mr Greyling maintained his stance that the date of submission of the final report should be 30 June 2013.

Mr Moloto said that whilst he understood Mr Greyling’s concern, nobody knew when the debate in Parliament was scheduled, and if it was, for instance, in May, that would give only one month to the executive to draw the report.

Mr Greyling was still uncomfortable about passing the ISMO Bill hat this stage, as he did not believe the Committee had all the correct information to hand. He reiterated that in November, when the final report was presented, the Bill may have to be brought back. This would mean that there were attempts to move from ISMO to TSO, and all of this would coincide with elections.

Mr Moloto once again highlighted the two options, one to process now, as the Bill stood, and the other to work on transmission of assets and hold back on the legislation. There were still issues to be resolved with Eskom.

Mr Selau was not sure why the Committee had now reverted to debating dates, and pleaded with Members to move on.

The Chairperson said the Committee now needed finally to decide whether to carry on processing the ISMO Bill, or hold back. The majority seemed to be in favour of proceeding with the Bill. The impact study report would become part of the reference documents. This Draft Resolution, once adopted, would then be linked to the deal when it went to Parliament. He would make arrangements for the Department to submit informal bi-monthly update reports, and ensure that work was expedited. He would also try to monitor what the Department was doing to restructure the legislation.

Mr Greyling said that he would abide by the majority view. He still had a concern what would happen in November.

Mr Moloto said that the best thing to do would be a TSO, and if this was indeed the suggestion, then the Committee could seek legal advice at that stage.

The Chairperson concluded the discussion by saying that the Committee needed to provide Eskom with a tool to start the work, which would initially be following the ISMO route, even if it were later to be changed to TSO.

The draft Resolution, as amended, was adopted.

Committee minutes
The Committee adopted minutes dated 4 September 2012, without any amendments, and adopted the minutes of 11 September 2012, with some grammatical changes.

It also adopted the minutes of 23 October 2012 without amendments, and adopted those of 30 October 2012, with some grammatical changes.  

Minutes dated 6 November 2012 were adopted without amendments.

Mr Radebe suggested that the Committee try to improve its adoption of minutes.

The meeting was adjourned.


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