Independent System and Market Operator Bill [B9-2012]: adoption

Energy

27 March 2013
Chairperson: Mr S Njikelana (ANC)
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Meeting Summary

The Department Committee went through the finalised Independent System and Market Operator Bill as amended clause-by-clause. Each clause was adopted after any amendment to it by the Committee was noted. Thereafter the entire Bill was adopted. DoE still need to correct the numbering and cross-referencing in the Bill, as clause 6 had been rejected. The State Law Advisor and Chairperson would check these purely technical changes before it went to the printers.

The second part of the meeting was a discussion on the Committee Report on the ISMO Bill to the National Assembly. There was discussion about the legal implication of adopting the ISMO Bill before a cost benefit analysis of establishing ISMO had been made. Members argued that the Committee had not received enough information about the financial implications of establishing ISMO. National Treasury had indicated that it would take about eight months for a cost benefit analysis of ISMO to be completed. Members also raised concern that the report recommended a comparative cost benefit analysis of establishing a transmission system operator (TSO) and an independent system and market operator (ISMO). Agreement was reached that a comparative cost benefit analysis of the two options be removed from the report. The Committee Report was then adopted.

Meeting report

Chairpersons’ opening remarks
The Chairperson asked the Department of Energy (DoE) drafting team to explain and elaborate on the two documents handed out.

Mr Maduna Ngobeni, DoE Deputy Director General: Energy Regulation, explained that the one document was the final A-list, and the other was the ISMO Bill as amended by the Portfolio Committee. The Bill was prepared in accordance with the previous meeting’s instruction. Sections added were highlighted, however deleted items were not flagged. The A-list document was therefore for reference purposes, the main document for discussion was the B version of the Bill document

Mr K Moloto (ANC) suggested that throughout the discussion, clauses in the Bill should be adopted, clause-by-clause, with the entire Bill document adopted at the end.

The Chairperson agreed to the suggestion.

Chapter 1: Definitions
Mr Ngobeni said that the following definitions were revised and edited;

‘Ancillary services’
 ‘Dispatch’
‘Expansion plan’
‘Integrated power system’
‘Market operation’
‘System operation’
‘Transmitter’

Mr Moloto said that Members needed to indicate if they agreed with the changes or not before the clause was adopted.

The Chairperson asked if Members were satisfied with the clause.

There were no objections to the clause. The clause was adopted.

Chapter 2: Objects of Act
Mr Ngobeni said that sections 2(f), 2(g) and 2(h) were the only ones which had been edited.

Members did not raise any objections. The clause was adopted.

Clause 3: Establishment of ISMO
No changes were made to the clause and the Committee adopted the clause.

Clause 4: Functions of ISMO
Mr L Greyling (ID) asked if the Members would get an opportunity to raise any concerns about a particular clause after the whole document has been gone through.

Mr Moloto responded that Members should raise their concerns while that clause is still under discussion.

The Chairperson agreed with Mr Moloto.

Mr Greyling said that more of a planning function should come into ISMO and said that even though his initial proposal was rejected he still expressed this reservation about clause 4(1)(a).

Mr J Smalle (DA) seconded Mr Greyling’s reservation about clause 4(1)(a).

Mr Ngobeni said that section 4(b) was edited, as well as section 4(2).

Mr Moloto said that Members should be allowed to raise concerns clause-by-clause. Two new clauses were added, clause 4(2)(u) and clause 4(4).

The Members did not have any further comments or reservations. The clause was adopted.

Clause 5: Memorandum of Incorporation
No changes were made to the clause. The clause was adopted.

Clause 7: Application of Companies Act
Mr Moloto said that clause 6 was missing.

Mr Ngobeni responded that clause 6 was deleted.

The Chairperson asked if Members were satisfied with the clause.

Mr Smalle asked if Members had not previously made any changes to clause 7.

The Chairperson responded that the numbering of the clauses would be changed since clause 6 was deleted.

The clause was adopted.

Clause 8: Request for exemption from application of provision of Companies Act
No changes were made to the clause. The clause was adopted.

Clause 9: Management of ISMO by Board
No changes were made to the clause. The clause was adopted.

Clause 10: Composition of Board
No changes were made to the clause. The clause was adopted.

Clause 11: Acting Chairperson
Mr Ngobeni said that in clause 11 (1), “non-executive” was added to the clause to indicate that the Chief Executive Officer and Chief Financial Officer were excluded from acting as Chairperson.

The clause was adopted.

Clause 12: Functions of Board
No changes were made to the clause. The clause was adopted.

Clause 13: Appointment of non-executive members of Board
Mr Ngobeni said that changes were made to the following sections; 13(1), 13(3)(a), 13(4) and 13(8)(a).

Mr B Ferguson (ANC) referred to clause 13(1) and asked if it should not be specified that the advertisements would be in “national” newspapers.

Mr Ngobeni replied that advertisements are always sent out to national newspapers, and so DoE did not see the need to specify that.

Mr Smalle suggested that “national” be added to the clause.

Ms N Mathibela (ANC) supported the suggestion that “national” be added to the clause.

The clause was adopted.

Clause 14: Resignation, removal from office and vacancies of Board
Mr Ngobeni said that “of Board” was added to the title of the clause.

The clause was adopted.

Clause15: Disqualification from membership of Board and disclosure
Mr Ngobeni said that “of law” was added to 15(1)(c).

The clause was adopted.

Clause 16: Fiduciary duties of Board members
No changes were made to the clause. The clause was adopted.

Clause 17: Procedures at meetings
Mr Ngobeni said that “fifty per cent plus one” was added to 17(2).

The clause was adopted.

Clause 18: Committees of Board
Mr Ngobeni said that 18(1), 18 (c) and 18(d) were edited.

The clause was adopted.

Clause 19: Delegation of functions by Board
Mr Ngobeni said that “two thirds” was added to 19(1).

The clause was adopted.

Clause 20: Appointment of chief executive officer and chief financial officer
No significant changes were made to the clause. The clause was adopted.

Clause 21: Conditions of appointment of chief executive officer or chief financial officer
No significant changes were made to the clause. The clause was adopted.

Clause 22: Termination of employment of chief executive officer or chief financial officer
No significant changes were made to the clause. The clause was adopted.

Clause 23: Acting chief executive officer or chief financial officer
No significant changes were made to the clause. The clause was adopted.

Clause 24: Delegation by chief executive officer or chief financial officer
No changes were made to the clause. The clause was adopted.

Clause 25: Functions of chief executive officer
No changes were made to the clause. The clause was adopted.

Clause 26: Appointment of staff
No changes were made to the clause. The clause was adopted.

Clause 27: Personnel of ISMO
No changes were made to the clause. The clause was adopted.

Clause 28: Loans and Government Guarantees for loans
No changes were made to the clause. The clause was adopted.

Clause 29: Business, financial plan and strategic plans
No changes were made to the clause. The clause was adopted.

Clause 30: Judicial management and liquidation
No changes were made to the clause. The clause was adopted.

Clause 31: Funds and assets
No changes were made to the clause. The clause was adopted.

Clause 32: ISMO tariffs, fees and charges
No changes were made to the clause. The clause was adopted.

Clause 33: Borrowing secured by ISMO assets and revenue
No changes were made to the clause. The clause was adopted.

Clause 34: Application of Public Finance Management Act
No changes were made to the clause. The clause was adopted.

Clause 35: Powers of entry and inspection
No changes were made to the clause. The clause was adopted.

Clause 36: Investigation of ISMO
No changes were made to the clause. The clause was adopted.

Clause 37: Intervention by Minister
Mr Ngobeni said that sections were deleted under 37(1)(c) and a new section was added to 37(3)(1). Under 37(9)(a- d) a provision was made in case the Minster dissolved the Board, seeing that the intervention by the administrator was not provided for in the clause. The added provisions were not discussed in the previous meeting, however DoE under guidance from the State Law Advisor agreed that such a provision was necessary.

The Chairperson asked Members to comment.

Mr S Mayathula (ANC) referred to 37(9)(c)(i) and said that “may” should be changed to “must”.

Ms Ferguson referred to 37(9)(c)(i) and suggested that the wording be changed by removing the “and” in the sentence. Mr Greyling agreed.

Mr Moloto said that whether the “and” is removed or not, it was not a significant matter.

Mr Theodore Hercules, Principal State Law Advisor, State Law Advisors argued that the “and” should be retained in the sentence.

The Chairperson ruled that the “and” be retained.

The clause was adopted.

Clause 38: Offences and penalties
No changes were made to the clause. The clause was adopted.

Clause 39: Regulations and policy
Mr Ngobeni said that 39(e) and 39 (f) were originally omitted in the previous B-version by mistake and were now added to the clause.

The clause was adopted.

Clause 40: Transfer of assets, rights, liabilities and obligations
Mr Ngobeni highlighted that 40(1)(a) and 40(9) were revised and redrafted.

The clause was adopted.

Clause 41: Transfer of functions and deemed validity of licences
Mr Ngobeni highlighted that 41 (1), 41(2) and 41(4) were revised and redrafted.

The clause was adopted.

Clause 42: Short title and commencement
No changes were made to the clause. The clause was adopted.

Mr Smalle referred to the preamble of the Bill and said that “transmission system” be added so as to reflect the transmission aspect of ISMO.

Mr Greyling agreed with Mr Smalle on inserting the ‘transmission’ element to ISMO.

Mr Hercules said that the Memorandum of the Bill would be changed, as well as the re-numbering and cross-referencing in the Bill.

Adoption of the ISMO Bill
Mr Mayathula suggested that the whole Bill be adopted.

Mr Moloto said that the Bill be adopted with all the effected changes.

Mr Smalle asked who would check the changed numbering of the Bill by DoE before it went to print.

The Chairperson said that he would take responsibility for checking that all the numbering and cross-referencing would be done by DoE.

Mr Moloto said that it was standard practice that the state law advisor would go through the Bill and verify that all grammatical mistakes and numbering were changed before it was sent to the printers.

Mr Hercules said that DoE together with the state law advisor would liaise with the Committee Secretary before the Bill went to print.

Ms Ferguson seconded the adoption of the Bill.

The Bill was adopted.

Committee Report on the ISMO Bill
The Chair read out the Portfolio Committee on Energy Report to the National Assembly dated 27 March 2013.

Mr Moloto suggested that reference to a cost benefit analysis to be done on ISMO should be removed from the report.

Mr Greyling said that a cost benefit analysis in both setting up ISMO as well as a transmission system operator was needed to compare which of the two entities would be feasible to implement.

Mr Mayathula said that it was not normal practice to complete and adopt a Bill, then conduct a cost benefit analysis after its adoption.

Mr Moloto agreed with Mr Mayathula that it would be irresponsible for the Committee to adopt the ISMO Bill without understanding its financial implications. The cost benefit analysis on ISMO should be removed from the report. He asked why DoE did not conduct the cost benefit analysis before the Bill was debated and adopted. The task team should have conducted a high impact study of both the costs benefit analysis of a transmission system operator and ISMO.

Mr Greyling argued that the Committee did not fully understand the financial implications of implementing ISMO, and its implications on the national balance sheet. The implications of implementing either ISMO or the transmission system operator needed to be fully understood and compared before adoption.

The Chairperson said that if there were grave legal and financial implications to adopting the ISMO Bill, then the entire process of the ISMO Bill should be reconsidered.

Mr Hercules responded that there were no legal financial implications to adopting the ISMO Bill.

The Chairperson asked if, as the report stood, it had any potential of negatively implicating the adoption of the Bill.

Mr Hercules responded that paragraph (b) of the report should be reconsidered.

Mr Moloto said that a comparison of the cost benefit analysis of the transmission system operator and ISMO would be problematic.

Mr Mayathula said that neither of the entities could be established before a cost benefit analysis was conducted.

Mr Mthokozisi Mpofu, DoE Deputy Director General: Electricity, said that if the recommendation in the report was processed as it was, the ISMO Bill would not be processed.

Mr Mayathula suggested that the ISMO Bill be processed, and for "transmission" to be adopted at a later stage.

Mr Greyling argued that the Committee was not given enough information about the cost benefit analysis of a transmission system operator versus an ISMO. The report as it stood therefore reflected that. The Committee was informed that it would take eight months for it to receive a cost benefit analysis for ISMO.

The Chairperson asked what the legal implications were of removing from the report the recommendation for conducting a cost benefit analysis on ISMO.

Mr Hercules responded that the costs benefit analysis of ISMO still needed to be conducted.

Mr Ngobeni suggested that a separate paragraph for ISMO be considered; seeing that currently cost benefit analysis of both the transmission system operator and ISMO were grouped together.

The Chairperson agreed that a separate paragraph be adopted for the cost benefit analysis of ISMO, separating it from that of the transmission system operator.

The Committee Report was adopted.

The meeting was adjourned.
 

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