Draft Gas Bill: briefing

Meeting report

MINERALS AND ENERGY AFFAIRS PORTFOLIO COMMITTEE
28 February 2001
GAS BILL BRIEFING

Chairperson: Mr DM Nkosi

SUMMARY
The Department presented a brief outline on the Gas Bill. The Committee agreed on the importance of developing an Integrated Energy Plan.

MINUTES
Dr R Crompton, Chief Director of Hydro Carbons in the Department of Minerals and Energy, presented the main features of the Gas Bill. Here follows an outline of the presentation:

Background: Government's Objectives
· Lower intermediate input costs (energy) to create a low-cost platform for economic development
· Reduce monopoly rents in the natural monopolies
· Establish appropriate gas infrastructure to support industrial development

Background: Government's Approach
· Competition between and within energy carriers (Third party access)
· Appropriate "rules of the game" for investors
· Facilitate investment projects
· Development entities ie iGas
· Regulation where necessary

Background: Policy objectives
· Security of supply through diversity of supply.(Energy Policy White Paper Dec 1998)
· Reduce coal dependency
- mined only in the north
- environmental issues

Primary Energy
Gas Bill: Status
Consultations:
· Gas Policy Working Group formed May 1994
· SADC Study released June 1995
· World Bank Study released July 1995
· Mbeki/Gore Binational Commission; DoE Advisor
· Gas Workshop (5 day) October 1996
· White Paper on Energy Policy December 1998
· International Energy Agency survey released April 1996.
· Three Workshops during March and April 2000
· Ad Hoc Consultations with stakeholders and international
· Cabinet Approved June 2000
· Final Public Comment (late 2000)
· No Fundamental Changes Submit to Parliament
· Currently with State Law Advisor
· Scheduled Introduction to Parliament March 2001

Gas Bill: Purpose
· To promote the orderly development of the piped gas industry
· To establish a national regulatory framework
· To establish a National Gas Regulator as custodian and enforcer of the national regulatory framework

Gas Bill: Scope
· Piped Gas
· Transmission, Storage, Distribution
· Construction, Operation and Trading
· Excludes production and gas reticulation (<2 bar - Schedule 4B Constitution)
· Gas means all hydrocarbon gasses transported by pipeline (NG, syngas, CBM, LNG, LPG etc)

Gas Bill: Objectives
· Promote the efficient, sustainable, and orderly development and operation of the downstream gas industry
· Facilitate investment
· Ensure a safe, efficient and environmentally responsible downstream gas industry
· Promote competitiveness
· Ensure that gas services are equitable and that present and future needs are met
· Promote competitive markets
· Facilitate gas trade between the RSA and other countries
· Promote access to gas in affordable and safe manner

Gas Bill: National Gas Regulator
· Established as a legal person.
· Functions of the Regulator:- Issue licenses for:
- Transmission, Storage, Distribution
- Construction, Operation, Trading
· Approve tariffs to those without choice of supplier
Promote competition

· Composition:
- 5 part-time members;
- appointed for 4 years renewable;
- limitations
· RSA citizen
not employed by gas organizations, or by Government.
(Possible Co-ordination with NER/Petroleum Pipeline Regulator)

Gas Bill: Qualifications of Regulator Board
· Relevant experience.
· Representative.
· Committed and available.
· Impartial and objective.

Gas Bill: Regulator Meetings
· Procedures prescribed by regulation.
· Open to public unless confidential, propriety or commercially sensitive
information discussed.
· Record of proceedings.

Gas Bill: Duties of Regulator
· Act in a justifiable and transparent manner
· Not act in own interests
· Act independently of undue influence or instruction
· Act in a manner required and expected from the holder of a public office

Gas Bill: Decisions of the Regulator
· Legally consistent
· In public interest
· Procedurally fair
· Based on facts and evidence
· Reasonable
· Written
· Explained
· Appeals to High Court

Gas Bill: Regulator Funding
· By appropriations from National Revenue or
· Levies by separate legislation
· Fees earned, e.g. dispute resolution
· Accounts audited by Auditor General

Gas Bill: Issuing of Licenses
· Application published
· Objections considered
· Decision period set by regulation.
· Separate licenses for each gas activity
· Existing gas activities must get licenses
· Minister may stipulate that state controlled entity gets a specific transmission license

Gas Bill: License Conditions
Regulator may impose conditions
· Separate management and accounts for vertically integrated companies-no cross subsidization
· Third Party Access on commercially reasonable terms to uncommitted capacity in transmission and storage for prescribed eligible customers
· Negotiated changes in routing, diameters capacity, compression at own cost.
· Distribution exclusive areas for class of gas
· Distribution areas based on ability to supply
· Distribution obligation to supply
· Tariff approval for captive customers (inadequate competition)

Gas Bill: Licenses - Sundry
· Non-discrimination, term, amendment, revocation of license
· Graded responses to contravention of license. Appeal to High Court
· Registration of non-licensed gas activities for information
· Regulator arbitration on request

Gas Bill: General Provisions
· Entry, inspection and information gathering by Regulator
· Voluntary resolution of disputes
· Investigations by Regulator
· Expropriation - rights of way.
· Rights of Licensee (entry, street crossings, ownership of gas appliances)

Gas Bill - Regulations
· Made by Minister after consulting Regulator and inviting public comment:
- Procedures
- Record keeping
- Forms
- Publishing information
- Classes of gas
- Land rehabilitation

Mozambique Pipeline Agreement
· Gas Regulator bound by provisions of agreement for 10 years from first gas
- Certain exclusive areas
- TPA provisions
- Prices
- Obligations to supply
- Regulator administers agreement

Anticipated Impact of Gas Act
· Facilitate Investment:
- investor certainty "rules of the game";
- transparency leading to level playing field.
· Consumer Protection:
- phased introduction of competition;
- regulation where competition inadequate.
· Coordinated Development.

Discussion
Mr Nkosi asked Dr Crompton to indicate why the Bill had remained with the State Law Advisor for a long period of time. He also asked what issues were being raised in terms of the Gas Bill. Dr Crompton stated that the delay related to various procedural issues. When Cabinet approved the publication of the Bill, it was on condition that the public be given a chance to comment on the Bill. After the public's input there certain changes but the substantive content of the Bill remained the same. The Bill was then placed in the hands of the State Law Advisor, as he is required to certify the Bill. The problem here was that within the State Law Advisor's office, there was a lack of familiarity with pipeline issues.

The Department and the State Law Advisor debated what to do when a licensee is in breach of the license conditions as contained in the Bill. Should the Regulator be empowered to act on this breach? The State Law Advisor said this should be allowed. The issue of fines was discussed. The Bill provides for the imposition of fines if the licensee is in breach of the license conditions.

Dr Crompton mentioned that there are certain logistical constraints within the office of the State Law Advisor. He attributed part of the delay to the festive season.

Mr IO Davidson (DP) asked how the large amounts of energy that are produced would integrate with other existing energy industries. There needs to be an Integrated Energy Plan (IEP). Dr Crompton responded that the Department was in the process of developing an IEP for the country. The Bill creates a platform for the Energy Plan to be put in place. He also mentioned that passing the Bill would not immediately create a gas infrastructure. The Bill would create a "level playing field" for the energy carriers.

An ANC member was concerned with the lack of mention in the Bill of Black Economic Empowerment. Dr Crompton admitted that this was an omission and would be brought to the Department's attention.

Mr EJ Lucas (IFP) asked whether gas would be cheaper than electricity. Dr Crompton replied that electricity in South Africa is the cheapest in the world. Gas would really have to compete to be cheaper than electricity.

Mr Blanche (Federal Alliance) asked whether any consideration had been given to the road reserves. Is there enough of space for the laying of pipes in our roads? Dr Crompton replied that this referred to reticulation and that it was outside the scope of the Bill. Road reserves are a local government issue.

Mr Lucas stated that in terms of the Bill, the Board members would have to be people with experience; however, in South Africa there are few people who have the relevant experience for such a position. This is something new being ventured in South Africa. Would this mean that "outside people" would have to be hired? Dr Crompton referred to the Bill and said that one of the requirements for such a position is that the person must be a South African citizen. However, experts from other economies could be asked to provide advice.

Mr Davidson stated that it would be beneficial if the Committee could look at the public on the Bill. Dr Crompton stated that there were voluminous files that could be made available. Finally, the Committee decided that a list of all the submissions made by the public would be simpler to look at.

The meeting was adjourned.