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SELECT COMMITTEE ON ECONOMIC AND FOREIGN AFFAIRS
14 February 2006
BRIEFING ON ELECTRICITY REGULATION BILL
Documents handed out:
Electricity Regulation Bill [B29B-2005]
Overview of the Electricity Regulation Bill
The Department of Minerals and Energy presented the Electricity Regulation Bill giving a detailed background and overview of the Bill. The background focused on why there was need for the Electricity Bill, the industries regulated by the Bill as well as on dual regulation-electricity reticulation.
The overview of the Bill included the functions of the regulator, licenses and registration, contravention of a license and order by court, resolution of disputes, inquiries and investigations, general provisions, exemptions and National Assembly adoption.
Briefing by the Department of Minerals and Energy
Mr O Aphane (Chief Director for Electricity Regulation) said that he would run through a slide and overhead presentation and mentioned that should there be questions of clarity the Department would be more than willing to answer.
Mr Aphane stated that the energy sector was governed by the Gas Act, the Petroleum Pipelines Act amongst others and also the National Electricity Regulator as a stand-alone regulator for the energy industry. Cabinet had made a decision that all these energy regulators should be consolidated under one single entity, the National Energy Regulator Act. This National Energy regulator established the National Energy Regulator of South Africa, which would be in operation from April 2006.
The Electricity Act had to be repealed as it was not in line with the Constitution, and also to facilitate restructuring in the electricity industry; and to align its provisions with the National Energy regulator Act. The Electricity Regulation Bill repealed the Electricity Act except for section 5(b) that dealt with funding of the regulator, by providing for separate legislation relating to funding.
Mr Aphane mentioned that the Electricity Regulation Bill does not currently cover regulation of electricity reticulation and would be amended to cover it. Electricity reticulation would then have dual regulation by regulating both municipalities (Municipal Systems Act) and the national energy regulator (Electricity Regulation Bill). This would then be reverted back to the National Council of Provinces (NCOP).
Chapter 2 of the Bill focused on the functions of the Regulator, which included the issuing of licenses for transmission, generation, distribution, import and export of electricity and trading in electricity, the imposition of penalties for non-compliance, and the mediation of dispute settlements, as well as the registering of unlicensed generators in the electricity supply industry.
Section 9 gives the Minister the power to exempt any of the activities from licenses, under the advice of the Regulator, and to determine activity that requires licensing and registration.
Mr Aphane stated that the Regulator, sitting as a tribunal, may impose a penalty of the higher of R2 million per day, or 10% of annual turnover, if failed to adhere to license conditions was found (section 19(4)), and the Regulator may also revoke a license through an application to the High Court. The High Court may then refuse or grant the application.
Chapter 4 dealt with the resolution of disputes while Chapter 5 looked at inquiries and investigations. The general provisions were dealt with in chapter 6, with section 45 providing that the Minister may, by notice in the Gazette, make regulations regarding licenses, registrations, the form and the manner of applying for licenses, the publishing of advertisements by licensee etc.
The general provisions looked at the repeal of laws and savings and herein the Minister is empowered to procure New Generation Capacity. Schedule 2 listed those exempt from the obligation to apply for and hold a license, and Schedule 1 dealt with the repeal and amendment of laws. Section 76 dealt with constitutional issues.
The Chairperson commented that some documents relating to disputes, stated that notices would be in a newspaper. She questioned why this was not "newspapers" as it would then cover the issue of languages. For example, there were two major newspapers in Cape Town, and she asked which would be used. She also asked what the changes from the National Assembly would be and what the response had been from other parties.
Mr Mkono (ANC Eastern Cape) asked what some of the obstacles had been and also for an elaboration on electricity reticulation. He asked how it related to the Municipals Systems Act and how are those municipalities were expected to respond to it. He asked for clarity on the types of disputes that were referred to within the Bill and what the scope of the regulator was in dealing with these disputes. He questioned if there would be recourse to the law if someone were unhappy with the outcomes of the Regulator.
Ms Temba (ANC Mpumalanga) asked what the time frames were and if the Department would be coming to the NCOP.
The Chairperson asked if the Deputy Director General could clarify why subsection (2) was mentioned in Section 19(6), but no corresponding reference was made to subsection (6) in Section 19(2).
The Deputy Director General responded that what the Chairperson just pointed out is supposed to be chapter 4 because this is where the money is being referred to. It is the title. The Deputy Director General stated that the Electricity Act was not in line with the Constitution and it allowed expropriation of land by the regulator. It also had to be in line with other acts.
Mr Aphane responded that the Regulator got involved in disputes if invited and then became mediator. If there were a dispute involving the Regulator itself, like disputes about license then normal litigation would needed to take place. The Minister drafts regulation regarding all aspects of license applications and it is envisaged that in that regulation, the issue of language would then be covered. It would then be in newspapers and in more than one language. It would be sensitive to local languages.
Ms N Magubane (Deputy Director General) responded that the Regulator had to set tariffs in place and as to the time frames, they would be following parliamentary processes. They would adhere to the NCOP's six-week cycle.
The Chairperson asked whether the Department would start with the National Assembly or the NCOP.
Ms Magubane responded that she was not sure about the process. She stated that the response of other parties had been that the Bill was generally accepted, with the exception of some parts. The difference had been more on ideology and Cosatu had wanted to exclude the private sector. However, the Department expected challenges relating to chapter 76.
Mr Hendricks (UIF – Western Province) asked how previously disadvantaged people had been accommodated.
Ms Magubane stated that independent power producers had been introduced, and she made reference to Kwazulu-Natal sugar planters.
Mr Hendricks asked whether they had been legislatively accommodated.
Ms Mkono asked for clarity on the reference to Attorney General.
Ms Magubane responded that it was meant to refer to the National Prosecuting Authority and not the Attorney General.
Mr Aphane responded that there was a whole framework for that kind of legislation within government processes, as promulgated by the National Treasury and the code of ethics for Black Economic Empowerment.
The meeting was adjourned.
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