Electricity Regulation Amendment Bill: briefing

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Mineral Resources and Energy

20 September 2006
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Meeting report

MINERALS AND ENERGY PORTFOLIO COMMITTEE AND SELECT COMMITTEE ON ECONOMIC AFFAIRS
20 September 2006
ELECTRICITY REGULATION AMENDMENT BILL: BRIEFING

Chairperson: Mr E Mthethwa (ANC)

Documents handed out:
Electricity Regulation Amendment Bill [B20-2006]
Presentation by Department on Electricity Amendment Bill

SUMMARY
The Department of Minerals and Energy briefed the Committee on the Electricity Regulation Amendment Bill, a Section 76 Bill dealing with electricity reticulation by local government. The main problems identified by the department were the controversy surrounding the definition of reticulation; the norms and standards for reticulation; the lack of compliance of local government; and the lack of capacity at local government level. The Committee was concerned that the Bill was infringing on the capacity of local government to deal with issues surrounding electricity reticulation, as guaranteed by Schedule 4 (Part B) of the Constitution. The Committee was further concerned that the impact on smaller municipalities would be greater than on others, and also felt that the problems surrounding lack of capacity could only be dealt with through structural development at local government level. Members felt that the forthcoming public hearings on the Bill would help shape the process. Some Members also felt that care had to be taken as local government used electricity sales to balance their books and regulating them too strictly could result in an unfair increase in electricity prices.

MINUTES

Briefing by the Department of Minerals and Energy (DME)

Ms Nellie Magubane (Deputy Director General: Electricity and Nuclear) opened the presentation by emphasising that the Bill had initially been introduced as a ‘mixed’ bill, and that Parliament had requested separation of Section 75 and 76 matters. She pointed out that, in line with Parliament’s requests, the reticulation matters had been removed from the original version of the Bill. In the presentation the objects of the Bill were discussed, and particular reference was made to the subject of definitions. The powers and duties of municipalities were outlined, and policies and by-laws in respect of energy reticulation were discussed. Ms Magubane further outlined numerous issues relating to external service providers; key performance indicators; capacity and infrastructure; access to information; and the regulation and monitoring of municipal performance. She asked the Committee to assist in concluding issues such as the definition of reticulation; the norms and standards for reticulation; the procedures in event of non-compliance; and the framework for tariff setting by municipalities.

Discussion
Before the floor was opened to discussion, the Chair asked Ms Magubane, in light of the many stakeholders involved in the electricity supply process, how far the DME had gone in consulting other stakeholders.

Ms Magubane stated that the initial Electricity Regulation Bill had been open to public comments and consultation. She stressed that the DME had ensured that service providers were consulted with respect to the definition of reticulation, but she maintained that the definition was not unanimously accepted and was a contentious issue. Ms Magubane emphasised that everything in the Bill hinges on the definition of ‘reticulation,’ and thus is an issue which needs to be addressed. It was stated that the interpretation of the Constitution is also problematic in this regard, particularly with respect to the relationship between the regulator and local and provincial government. The DME had also consulted with organisations such as the Competition Commission, Eskom and BHP Billiton in this regard. Ms Magubane stated that certain municipalities had been consulted, but that it was very difficult to do this uniformly.

Adv H C Schmidt (DA) asked, with respect to Section 3 of the Electricity Regulation Act (No 4 of 2006), what powers and duties of other government officials were being referred to. He asked whether the Bill would limit the rights of reticulation of local government, as per Schedule 4 of the Constitution. Mr Schmidt also asked why the right of the National Energy Regulator of South Africa (NERSA) to access to information was being dealt with in respect of the Promotion of Access to Information Act, 2000 (PIA). He went on to ask why Clause 40 (3) of the Bill had no follow-up statement.

Mr C D Kekana (ANC) asked for clarification as to the ‘size’ or nature of a Gigawatt, and asked for a tangible example with respect to population numbers and average consumption.

Mr W D Spies (FFP) stated that reticulation of energy is an exclusive function of municipalities. He stated that the Bill appeared to limit this exclusive function and thus deteriorated this specific competency.

Mr E J Lucas (IFP) mentioned that municipalities use electricity sales as a mechanism to balance their books. He expressed his concern as to whether municipalities had sufficient capacity to implement the Bill effectively, and asked whether this lack of capacity would lead to further intervention by government. He stated that if electricity tariffs were regulated extensively, the consumers would end up suffering in the long run, which was not fair.

Ms Magubane stated that municipalities had a very possessive attitude towards energy reticulation, and that this was particularly difficult to deal with. She stated that the Bill does not wish to remove any of their authority with respect to energy reticulation, but is aimed at clearly defining the responsibilities and boundaries of both national and local and provincial government. She maintained that after this process had been completed the restructuring of the sector would be easier to complete.

Mr Oompie Aphane (Chief Director: Electricity) stated that the Constitution provided energy reticulation as a Schedule 4 issue. However, he pointed out that the Constitution also provides for national oversight in Section 155 (7) and stated that this was what the Bill was trying to achieve. He said that the Constitutional framework must be considered in respect of Schedule 4, but that the DME also needs to effectively regulate issues such as quality of supply, etc. With regards to Mr Kekana’s question relating to gigawatt hours, he stated that the average consumption of one household is 1000 kilowatt hours per month and that one gigawatt hour is roughly equal to the electricity consumption of one million households per month. He stated that the limit of 5 gigawatt hours was adequate to keep municipalities solvent, and highlighted that municipalities would be free to add surcharges if they so wished.

Ms Magubane stated that the lack of a follow-up to Clause 40(3) was a complete oversight on their part, but also pointed out that the department did not wish to regurgitate the entire Act during the presentation. With respect to access to information, municipalities have a strict duty to provide information in this regard. She added that the applicability of the PIA in this clause was to ‘comfort’ municipalities. She stressed that many Constitutional provisions were interlinked, and this made the Bill particularly difficult to deal with. She gave the example of Section 152 of the Constitution which states that the objective of local government, subject to Schedule 4, is to ensure the provision of services. However, Section 155 of the Constitution states that national government has an oversight role to play. Ms Magubane emphasised that the Bill is designed to make sure the energy sector is regulated in line with the Constitution.

Mr C T Molefe (ANC) suggested that municipalities be consulted in a more formal manner in order to gain the perspectives of the community. He asked who was speaking on behalf of the poorest of the poor.

The Chair informed Mr Molefe that public hearings and debates were still pending, and that this would give perspective on the opinions of the community.

Adv Schmidt stated that the definition of ‘community’ and ‘domestic end user’ appear to be confused at times and needed clarification. He asked, in light of the general problem relating to lack of investment by local government, whether the maintenance of electricity infrastructure was going to be addressed. He inquired whether there was any form of assistance being offered to smaller municipalities which would assist them in developing their capacity.

Mr Kekana suggested that the definitions be based on ‘real life situations,’ and highlighted that the definitions should relate to local government in terms of consumption.

Mr N Mathibela (ANC) suggested that the problem be tackled with respect to the different levels of municipalities, i.e. types A, B and C. He also remarked that the definition was left open in so far as service providers were concerned and asked why this was the case.

Ms Magubane stated that investment was being prescribed to the respective municipalities taking the state of the respective distribution networks into account. She admitted that the lack of capacity at local government level was a serious problem, but assured the Committee that local government did not have to tackle the problem on their own and that service providers can be consulted in this regard.

Mr Aphane stated that the definition should essentially set out ‘jurisdictions’ for electricity reticulation services. He added that the Bill is attempting to ‘set the scene’ on the regulatory side before the structural problems are dealt with. He added that the municipalities would only benefit from the Bill once the problems at structural level have been addressed, and that this would take time.

The Chair thanked the delegation, and said that Section 75 issues were much more straightforward to deal with than Section 76 issues. He added that the pending public hearings would be very useful in gauging general perceptions, and would shape the process. He stated that it is important for the DME and the Committee to continue working together in this regard. He emphasised the central role that municipalities played, and stated that it was pivotal that electricity reticulation provisions adhered to the Constitution.

The meeting was adjourned.


 

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