National Energy Bill: public hearings

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Mineral Resources and Energy

30 July 2008
Chairperson: Mr O Monareng (ANC)
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Meeting Summary

The National Energy Regulator of South Africa supported the National Energy Bill in principle but did have some suggested amendments. In particular they were concerned about the proliferation of agencies which might result. This might hamper the efficiency of the regulatory sector. The possibility of criminal prosecution rather than administrative penalties might be difficult to pursue due to the complex nature of the legislation.

The Paraffin Safety Association presented statistics on injuries caused by various energy sources. The majority came from paraffin usage either through children drinking it or from burns. However, electricity also produced a large number of injuries. Many poor people were reliant on paraffin as a fuel and the Association addressed the need to promote safety around its usage. Members felt that the Association was promoting the use of paraffin. Government was busy with an electrification programme, but conceded that there had to be a safety programme for paraffin while it was still a major factor in the country’s energy provision.

Eskom made a submission that planning should be over a longer cycle than the proposal of the Minister in drawing up an annual plan. The life cycle of a power station could be up to sixty years. It was still important to conserve electricity in order to prevent load-shedding. Provision was needed to combat losses due to illegal connections and meter tampering. Members asked why mothballed power stations could not be refurbished as a short term measure. Eskom’s planning would have to be aligned to government’s plans.

The Wildlife and Environmental Society of South Africa felt that there was a need for civil society to be involved in energy management. Planning should be flexible enough to embrace new technologies. In general not enough emphasis was being placed on renewable energy sources. Members felt that environmental issues were important but placed an extra cost on development. At the same time, the country could use the opportunity to become a leader in renewable energy technology.

The Renewable Energy Work Group advised the Committee that the cost of renewable energy was reducing and would match the cost of fossil fuel energy in the near future. Although they welcomed the Bill, they felt that some of the wording was confusing and that some aspects should be open to broader interpretation and review. While development was important, the environment was also important. Access to information was critical. For example, there was an opinion that the pebble bed modulator reactor technology did not work. Information was power.

In the afternoon, the Committee was addressed by the University of Cape Town, The Chamber of Mines of South Africa, SANERI and PetroSA. Some of the concerns were that the Bill focused on supply and underplayed the importance of demand side considerations. There appeared to be some risk of fragmenting responsibility for climate change mitigation unless more carefully defined. SANERI had a clear research focus, SANEDI did not. There was possible duplication in the Bill, as there might be an overlap between the Institute and NERSA. The mandate of the National Liquid Fuels Strategic Reserve Stocks Capability overlapped with the mandate of the Strategic Fuel Fund. Policy formulation and planning without stakeholder input would result in flawed outcomes so there should be an advisory body as envisaged in the 2004 Draft Bill.

Meeting report

National Energy Regulator of South Africa submission
Ms Masesi Koto represented the National Energy Regulator of South Africa (NERSA). She apologised for the absence of the Board members as they were attending a strategic planning session. NERSA was a regulator and had a mandate to perform this function. It had been established by an Act of Parliament. It regulated the electricity, piped gas and petroleum pipeline industries.

She said that NERSA had some challenges in the way that the Bill was drafted. It would create a proliferation of public entities, some of which had identical functions. There was no framework for a working relationship involving NERSA and the proposed entities. There was a concurrent overlap of jurisdiction. The legislation would lead to gaps. Authority had to be assigned. Elements of the Bill, especially relating to the powers granted to the Minister, were too prescriptive.

Ms Koto said that NERSA wished to propose specific amendments to the Bill. One of the implications of the Bill would be an overlap in jurisdiction between the current and proposed entities. This would lead to additional expenditure both in terms of human and financial capital. NERSA felt that the new entities were not strictly necessary. There was also a scarcity of skilled labour especially in the regulatory sector. The new entities would exacerbate the situation. Where there were grey areas there were no clear lines. The Bill also encroached on the Access to Information Act.

She said that the powers which would be conferred on the proposed entities were not total powers but would be shared with the Minister. This was not good for impartiality. These were too prescriptive. The Bill had been drafted before the establishment of NERSA. There had been insufficient public participation. The status quo was not considered.

Ms Koto said that the Bill touched on several existing pieces of legislation. This included areas such as data, modelling and planning. These functions were currently done by NERSA. The penalty provisions were a concern. Even the regulator would have to did some kind of reporting. It would be difficult for the police to handle regulatory offences. Offenders were subject to prosecution under criminal law, and convictions were needed to impose penalties. She wondered if the Police would understand the complicated aspects of the Bill. In fact, there might be a situation where an accused entity had to help the court to understand the law. Entities should be limited to compliance monitoring. Enforcement should be at another level. There were already enough criminal offences.

She said that NERSA had submitted their proposed amendments. There was no interface with the entities, which were created separately. There would have to be cooperative governance. NERSA would advise the Minister as well as the entities, as there was a possibility of confusion. Powers would be exercised by the organisations themselves, not by the Minister. The Minister must create a division to change the structure. Appropriate legislation was needed.

Ms Koto highlighted the area of a Chief Executive Officer (CEO) vacating his or her office. There was no provision for this in the legislation, or no guidance as to how the CEO’s of the new entities would be appointed. In addition, the decisions of the current Board were not covered. A new organisation could overturn such previous decision. Even when NERSA had assumed the role previously fulfilled by the National Electricity Regulator it had inherited the decisions made by that body.

Adv H Schmidt (DA) understood the points made about criminal penalties. There was a lot of validity to this approach compared to administrative penalties. NERSA was empowered to impose administrative penalties. They had exercised these powers where necessary. Eskom did not understand the impact that the Bill would have on NERSA. They should remain independent.

Ms Koto was asked what position she held and she answered that she was the Acting Executive Manager for Corporate Affairs.

Mr Ngcobo commented that there were a number of striking concerns, but that NERSA was not opposed to the Bill. He asked if NERSA was scared that they might be victimised. There were some intrusive measures. Some of their proposals made good sense especially with regard to interference with other legislation. He asked if there was wider consultation with NERSA when the Bill was drafted. He asked what the relevance of the National Energy Modelling and Information Agency (NEMIA) would be. This agency would function in the presence of NERSA and others, and he wondered if it would be relevant.

Ms Koto noted that the Chairperson was passionate about delegation, and would answer the questions in conjunction with the rest of her team.

Mr M Mutathi (Head of Department (HoD), Legal, NERSA) remarked that this was a Bill relating to all forms of energy, not just electricity specifically. NERSA was advanced in its planning and modelling roles towards future development. In terms of the Electricity Regulation Act, NERSA had a role to gather information. The same applied to the legislation regarding gas and petroleum pipelines. It was a question of how to share responsibility with future entities. This was a grey area.

Mr C Hlebela (HoD, CSM, NERSA) noted the comment about NERSA being scared of victimisation. They agreed with the Bill in principle. NERSA was responsible for three industries. The Bill catered for the wider industry. Certain of the developments expounded by the Bill might see regulatory authority resting with the proposed agencies acting as a referee. They might not be able to provide the required information due to the lack of a framework. There was a memorandum of understanding. This constrained NERSA. An agency may report offences to the police. There was a restraint on the current entities. Selective reporting took place. The directors were responsible and would be held liable for offences. It was a question of whose interests must be protected. The regulators had a watchdog role, and this applied to the nuclear regulator as well. The Bill would bring in an information reporting role as well.

Ms Koto said that the Bill had been published in 2003. At that stage the National Electricity Regulator (NER) was still in place. There had been wide consultation at the time. Nothing in this Bill had been discussed with NERSA.

The Chairperson said that the Department of Minerals and Energy (DME) had alluded to consultations with NER. These were not the same people.

Mr Ngcobo said that if an agency was created it might feel that it fell outside the provisions of the Public Service Act (PSA). If so, then NERSA fell entirely within the PSA. Government agencies could not be controlled by private sector enterprises.

Ms Koto said that some of NERSA’s staff had been with NER before. NER had only regulated electricity. The NER founding Act had been repealed. NERSA now regulated in terms of the Electricity Regulation, Petroleum Pipeline and Gas Acts. Their mandates had changed. There was an impression that consultation did not apply.

Mr Hlebela said that there was some linkage to NEMIA. NERSA had developed a regulatory reporting manual which was applicable to all three industries with which it was involved. It had already developed a methodology in consultation with National Treasury. This was primarily for data collection and information handling. He could see the relevance of NEMIA, but felt that the wording should be different.

Mr Ngcobo said that public hearings were needed to clarify these issues. He did not understand why NERSA was saying what it was. Their current functions were being expanded. The NERSA Act would be amended to include information collection. They were saying that the Bill proposed to create too many bodies when NERSA was already an independent public entity. It might be simpler to amend the NERSA Act rather than to create new entities. The establishment of the agencies might lead to competition with private sector industry. These industries did have to be regulated. This did affect the establishment of the agencies within the context of the Act.

Mr Hlebela said that the DME was the policy maker while NERSA implemented the policy. They did not wish to push an agenda which could be interpreted as them protecting their own turf. The agency was limited to the three industries already mentioned. Other industries had different mechanisms. The Bill sought to create a proliferation of agencies. Specific skills were needed. Agencies would have the same functions but different responsibilities. This might encourage job-hopping which could lead to a compromise of effectiveness.

The Chairperson remarked that the DME had made a presentation on this the previous day.

Paraffin Safety Association (PSA) submission
Mr Dehran Swart (Senior Project Manager: PSA) said that the PSA submission was based on research conducted mainly in low-income housing areas. The PSA was a non-profit organisation which aimed to ensure safety in the use of paraffin.

He said that the PSA supported the Bill. The focus was on safety. The country needed household energy security and safety. All energy carriers should achieve equal attention. The Bill touched on and could impact on their mandate. Clarity was needed on the role of government. A principle of public participation was needed. The role of the State had to be specified. The role of other Departments should be considered as well as that of local government. The enforcement of standards should be attended to.

Mr Swart said that it was necessary to collect information on safety. The main problems with paraffin stemmed from children drinking it and burns. Other energy sources such as electricity and candles were also responsible for burn injuries. Attention had to be paid to behaviour patterns, the safety of appliances and packaging. All of these factors were related to poverty and a lack of policy.

He said that the PSA had conducted a surveillance project to collect information. The project was conducted at twelve health care facilities. The purpose was to establish a link between energy usage and injuries. The results showed that paraffin was not the only culprit, as many injuries were due to electricity. The patterns at the various facilities were identical, with injuries due to hot water and ingestion of paraffin being prominent. Children bore the brunt of the injuries, with most occurring in the age group of one to two. There was another peak in the 25 to 34 year age group. Specifically in terms of paraffin, there was a peak in the one to two year old group, which accounted for 70% of the injuries. Most of these were due to children drinking paraffin.

Mr Swart said that a major concern was the massive destruction which could result from fires started by paraffin fuelled appliances. Community based research was needed. A householders’ energy summit had been held in various areas. Users and victims of energy related injuries had attended. Those attending had agreed on a declaration. The PSA had been tasked to take their demands forward. There had not yet been a satisfactory response from the DME despite a petition being compiled with 24 000 signatures. The people needed sustainable energy at affordable prices. There was a declaration on poverty alleviation. Energy options were limited, and safety was a concern.

He said that paraffin was the chief source of energy for many people. There was a link between this decision and poverty. There had been disproportionate price increases of paraffin, amounting to 54%  while petrol and diesel had increased by only 34%.

Mr Swart then presented some suggested amendments. In Chapter 1 Clause 2, it should be noted that more use was being made of paraffin to ensure an uninterrupted supply of energy. Clause 5 (g) mentioned the need to consider affordability. Urgent government action was needed as the price of paraffin was becoming exorbitant. Regulations were needed for the use and storage of the liquid. Clause 2 (j) dealt with facilitating the quality of life. There was a high level of incidents involving paraffin. These included fires, ingestion of the liquid and high pollution levels in houses which could even reach lethal levels. Emotional and financial effects had to be considered. There was a lack of care for survivors. Counselling was often needed.

He said that Clause 2 (h) dealt with the supply and storage of fuels. There was a lack of regulation regarding the distribution, storage and burning of paraffin. There was also a lack of proper packaging. He urged government to regulate the vendors. Returning to Clause 2 (j), he advocated the start of a compensation fund. He called for regulations on counselling and support of victims.

Mr Swart moved on to Chapter 2 which related in part to the provision of data. The PSA supported all the sections of Clause 3. Closer cooperation was needed with the Department of Health (DoH) as data had to be current and accessible. This was covered in the Bill and was commendable. He asked what the rationale was in creating NEMIA and how the South African National Energy Development Institute (SANEDI) was defined. There was a need for feedback which should be in user friendly language.

He said that an integrated energy plan had to include the role of civil society. There was a risk of overlap and conflict. It was not clear what the difference would be between the existing South African National Energy Research Institute (SANERI) and SANEDI. The PSA was represented on the Board of SANERI. There needed to be more focus on household policy. PSA was willing to collaborate further with government.

Mr M Matlala (ANC) said that the presentation was not very clear. It would have been better served if it had been presented outside of the public hearings as the Members would have had a better chance to interrogate it. The PSA was promoting the use of paraffin. There were areas where government was unable to supply electricity. The PSA had spoken about safety. It quoted a figure of 21 million people who were using paraffin. He asked if this was individuals or families. He asked if this was the truth, as there were about 21 million registered voters in the country. About 70% of homes now had access to electricity.

Mr J Combrinck (ANC) said that the PSA was supported by all the oil companies but not by PetroSA. He asked if this relationship with the oil companies was a question of social responsibility or if there were other issues. He asked if PSA was promoting the use of paraffin or in fact discouraging it due to the dangers involved.

Ms N Mathibela (ANC) referred to the compensation fund proposed by the PSA. She asked from where the money would come. There could perhaps be a contribution from paraffin purchases.

Mr L Greyling (ID) said that the market for ethanol gel was small at present. It was being produced by a small company but was a safer product than paraffin. He asked if this was affordable. It should be investigated. The PSA ran an annual competition for the best design for stoves and storage. The winner was told to market his design, and this was part of the problem. A nozzle had been designed which would make it impossible for children to drink the paraffin, but this was not yet on the market.

The Chairperson asked for clarity on the informal settlements. In terms of low cost housing, the government embraced a totality of issues including electricity. Government was busy with a national electrification programme. Informal settlements were by their nature not properly designed. Houses were congested which posed added danger of fire. He asked what futuristic intervention the PSA would propose in terms of the Bill. He asked what message they wished to convey. They were promoting the use of paraffin but government was expected to take measures to ensure safety.

Mr Swart replied that the PSA did not promote the use of paraffin. It was a reality that this fuel was being used and someone had to promote its safety. Many people used paraffin as one of several energy options. Even in low income areas, people used electricity for some appliances and paraffin for others. Half the population used paraffin on a daily basis.

Mr Glenn Truram (General Manager, PSA) said that the Committee was perhaps thinking about the smell of burnt paraffin. That used to be the case until the present. The systems should be as safe as electricity. There was a risk of fire and fume inhalation. If this risk was eliminated, many more people would be interested in using paraffin for an energy source. He said that in countries such as Japan and France extensive use was made of paraffin. In Japan a million and a half paraffin heaters were sold annually. These were so designed that the burning occurred outside the house.

He said that if a million homes changed their energy for cooking from electricity to paraffin, at a cost of R1 000 each, this would amount to R8 billion. It would cost R25 billion to build a power station to generate the same amount of energy. This was the same as the cost of solar water heating. All fuels should be considered but all should be safe.

Mr Truram said that the main injury research had been in Umlazi. If one discounted the ingestion of paraffin, then there were more injuries caused by electricity than paraffin. Another comparison was the diesel used to power the gas turbine generators at some power stations. An equivalent amount of fuel was used, but the power generated was subject to losses on the transmission lines. There was a need to look at the use of paraffin. People were suffering due to ignorance. He said that the PSA did not benefit at all from paraffin sales. Their function was to promote the safe use of the product. They would love to make a more detailed presentation to the Committee.

Ms Mathibela was getting confused. There was a debate about the people using paraffin as opposed to those using electricity. Electricity was safer, and could be used for all appliances. Paraffin and candles were dangerous. Electricity was much safer. She thought that the PSA would have urged government to intensify its electrification programme. Paraffin was more expensive than other fuels, but was of necessity the choice of the poorest of the poor.

Mr Ngcobo said they must not lose sight of the fact that this was a hearing on the Energy Bill. He had also expected the submission to press for a change to electricity. He proposed that the use of paraffin should be eliminated because of the danger. This was what he had expected. In terms of the energy mix, he expected there to be a plan on how to eliminate paraffin and candles. The PSA was associated with all the oil companies but not with PetroSA. They were promoting paraffin.

Mr C Kekana (ANC) said that government had adopted an electrification plan. All citizens must have access to electricity. It was an appropriate policy. He had grown up in a paraffin- fuelled household. Coal stoves were also in general usage. Government was busy with a process of electrification, but people were still using paraffin. Even in houses which were electrified many people still chose to have paraffin-burning appliances at hand as an alternate power source during periods of load-shedding.

The Chairperson commented on the proposed remuneration of burn victims. Household safety had to be promoted. A public awareness campaign was needed. The law did not always apply in informal settlements. They were not designed as townships and there were many issues resulting from this. He asked how government could compensate victims of paraffin related injuries. There was not enough housing to eliminate squatter camps. The problem would be resolved in the long run.

Mr Patrick Kulati (Managing Director, PSA) said he had also grown up using paraffin. The PSA did not promote the use of paraffin. However, whilst it was still there, then it had to be used safely. This had to be done now, and the research was informing this statement. They had met with PetroSA and they were waiting for a response after consultation. PetroSA had agreed to become a member and they were also going to operate in the paraffin market. There should be a focus on household energy safety systems. It was clear that there were other energy related dangers.

The Chairperson said that they would make a decision on the safe use of paraffin. There were concrete recommendations on the table. While there was still enormous usage of paraffin, measures were needed to ensure its safety. There was some doubt over the statistic of 21 million users. The PSA had conducted research and this figure might be correct. It was not only the poor community that used paraffin.

Eskom submission
Mr Willie du Plessis (General Manager: Legal, Eskom) said that a full submission had been made. There was an interaction with various documents including the White Paper on energy policy and the Energy Security Master Plan. Eskom had also devised a response plan to the recent phase of load-shedding. Some of the issues had been covered in the recent Cabinet Lekgotla. NERSA had said much of what Eskom wished to present especially regarding the duplication of roles of the proposed entities. It was a question of what should be placed where. On the collation of information, various role players had been identified. Another look was needed at the drafting of this section. There were many provisions which Eskom felt were too prescriptive, such as several places where the word “must” was used.

He said that Clause 16 (6) dealt with an integrated energy plan. This should be cleaned up. An institute should be created through legislation. The same powers should be conferred on the Board and CEO of SANEDI in Clause 17. The Bill provided for reports and plans and an Integrated Energy Management Plan (IEMP). This comprised various aspects and described different sources and how to use them. The Minister was given certain powers. Mr du Plessis said that there should be a plan for independent energy suppliers or else a stalemate situation might arise. The Minister was required to publish a plan annually. This would take a while to compile. He suggested that there be a different time reference, or that it should rather be left to some regular review. A possible horizon was one of 25 years. Some of the energy infrastructure would remain in place for between forty and sixty years. The plan would be of a peremptory nature. When the legislation was prescriptive than all elements had to be addressed.

He said that security of supply issues were addressed in Chapter 6 of the Bill. Energy minerals were mentioned in the long title but were not addressed in the text. There was no reference to coal. The Chamber of Mines would talk about stock levels. There should be a base mineral stockpile of coal and gas.

Mr du Plessis said that a recovery programme had been drawn up after the recent load-shedding. There had been a stabilising phase. Rationing had been introduced. A schedule had been published in February which made load-shedding more predictable for consumers. Conservation of energy was needed. Current savings were between 4 and 6%. More was needed or else there would be future consequences. There was some reference to this in the Bill. Eskom wanted to see a sustainable reduction in energy consumption which would make allowance for growth. Baseline consumption had to be determined. Government could then strive to achieve a savings level. There was scope for both a carrot and a stick approach at times. Eskom might be forced to take steps to reduce consumption and might refuse to supply certain areas. This was under discussion. Eskom would welcome the opportunity to use this Bill.

He said that Eskom would support the Electricity Regulator Act. They would help to strengthen NERSA. There was always a problem with interpretation. He asked what could be done about non-technical losses. These resulted from theft due to illegal connections and meter tampering. These should be addressed in the Bill. The old Electricity Act had made provision to counter such activities but these had gone missing when the Act was amended. Various illegal activities were therefore no longer statutory criminal offences. The DME had promised to amend the Act but this had not happened. The courts had decided that these activities were not common-law offences. This needed to be addressed. Eskom estimated that their losses alone were about R1.2 billion. Local authorities were losing money on their own distribution networks as well.

The Chairperson was glad that there was no repetition from the previous presentations. The measures to combat meter tampering had been flagged. In many cases meter readers made incorrect readings which led to unrealistic estimates.

Ms Mathibela suggested that the 25 year horizon period was too long. Action had to be taken to combat meter tampering. In clauses where the Minister “must” perform certain actions the Act could not be too discreet. The use of “must” was correct.

Adv Schmidt said that there was a lack of energy efficiency. This was addressed in Clauses 28 and 29, but seemed to be of subservient importance. The Minister had to establish an entity to deal with this. When the responsibility lay with Eskom it was downscaled. Eskom’s purpose was to sell electricity at a profit. The lifespan of a coal-fired power station was between forty and fifty years. A 25 year plan was not enough in this context. He asked if a different approach was needed.

Mr Combrinck was worried because NERSA and Eskom were agreeing on something. He wondered if this was because they both realised that there would be oversight soon. The purpose of the Bill was to bring all parties together. The problem with NERSA was that they only spoke up when there was a problem.  All entities were doing their job but were not talking to each other. He asked if Eskom was afraid of being whipped.

Mr Ngcobo said that Eskom was the creator of their own issues. No cost benefit analysis had been done on any of their projects. This was a serious gap at the energy summit. There was a problem with inter-governmental relations. Future projects would be undertaken in consultation with the authors of the Bill. Illegal connections happened because people felt that they were being forced into a corner. They were the product of poor management. The meter readers acted as if they had too much authority. This could not be accepted. The public must be protected.

Mr du Plessis said that Eskom would not deny that there were some problems with meter readers. They were their own employees on a contract basis. It was a problem which had to be dealt with at times. He mused that if people tampered with meters it might lead to an incorrect reading. Illegal connections and re-connections were a problem. 

He said that in connection with the 25 year cycle, the Act provided for a 25 year integrated plan. The Members were correct to say that power stations were long term projects. They were trying to extend the life of old stations, while the new stations should have a useful life of up to sixty years. Mines were also built on such long-term schedules. He asked if the Bill should be prescriptive over the actual period. It might be better to let the Minister determine an applicable review period. Power stations could not be built in three years. There were other issues. In some cases the use of the word “must” might be appropriate. The Minister could not be forced into a box at times. A balancing act was needed.

Mr Corrie Visagie (GM, Demand Growth, Eskom) said that when a long-term project was planned, the cost benefit analysis was very important. There was a rigorous procedure in place.

Mr du Plessis said that Eskom would not have a problem with the establishment of an energy efficiency organisation. He asked if all the instruments proposed in the Bill were needed or if existing structures could be strengthened. Synergies could be created. There had been many debates with NERSA, both formally and informally. In South Africa there had been no court actions against the regulator. Eskom was not scared of oversight agencies. The situation was becoming more complicated.

Mr Kekana said that the issue of efficiency had been raised regarding old power stations, which operated on a 35 year cycle. These could be revitalised. The country was running short of electricity and emergency measures were needed. This would also help to increase the reserve margins. If the country had to wait for the new stations to be built, the result could be a major crisis. South Africans had been shattered by load-shedding. Specific plans were needed.

Mr Greyling said that the Bill wanted to model different scenarios. It would serve as an investment guide. Eskom had certain building plans. He asked how the Bill would guide Eskom. He asked if Eskom would be influenced by the DME’s model. If not, it would be an exercise in futility. He asked if there would be an influence on future investments.

Mr Visagie said that Eskom was relying on its power conservation programme. Any other short term programme would help. They had looked at the old power stations. There was a challenge of bridging the gap. The power conservation programme was a signal to consumers to reduce their consumption in a cost-effective manner. There would be no need for load-shedding if power consumption was reduced by all by 10 to 15%. The control over this lay in the hands of the consumer. Planning was an interactive process. Eskom would be guided by the Bill.

Mr du Plessis said that transitional measures were needed. Eskom had always planned ahead and had interacted with NERSA and other authorities. Certain power stations would be taken out of mothballs. There would also be interaction with local authorities that owned their own power stations such as the one in Soweto.

Mr Ngcobo said that a grey point had been highlighted. Eskom had a building programme. The Bill was a very important part of the master plan. If the plan was approved by the Board, it would be a question of how this could be incorporated into the master plan laid out in the Bill.

Mr du Plessis acknowledged this. All were players in the game of energy provision. There had been something before this plan. At certain levels it had been cleared by the shareholders and policy department. The licensing programme had to start. These had to be issued in accordance with environmental regulations. Eskom would be a role player, and all would have to follow up. The Eskom plan would have to conform to that of government.

Wildlife and Environment Association of South Africa (WESSA) submission
Mr Andy Gubb (Senior Nature Conservationist, WESSA) said that Clause 18(2) of the Bill dealt with the composition of the Board of SANEDI. Civil society should be represented on the Board. This would bring strength to this type of institute. Clause 27(1)(f) dealt with the certification of persons involved with renewable energy. It was important not to suppress private initiatives. One must take care not to arrive at an in advertent outcome. Communities should make efforts to produce their own energy. The efforts of many small players could make a meaningful contribution.

Mr Gubb said that Clause 37(2) made provision for different dates to be set for the different provisions of the Bill. WESSA was concerned with the complete open-endedness of this provision. This could result in the eventual Act being implemented in an unequal manner. Alternate technologies could be ignored. All provisions should be incorporated within two years. New technologies should be prioritised.

He said that WESSA had indicated some wording changes in its submission. Civil society liked to see the Minister being boxed in while others wanted to have an escape route.

He wished to raise some wider issues. There were twelve pieces of legislation involved. He liked the principle of an umbrella act such as the National Environmental Management Act (NEMA). He recognised the need for energy security, but the Act should do more than just that. All issues should be combined, as had been done by the Department of Environmental Affairs and Tourism (DEAT).

Mr Gubb said that there was little emphasis on renewable energy. More nuclear and coal-fired power stations were being planned. South Africa would remain locked into greenhouse gases for many years as a result. An environmental deadline of 2025 had been set. International political statements said that developing countries should be more responsible for the environment. The DME said that there was a common responsibility for future generations. The DEAT was putting a plan together. He asked if the DME had the same focus on renewable energy.

Mr Kekana said that the developed countries had the responsibility to address environmental issues. The developed countries had been industrialised for many years while the Third World was trying to catch up. South Africa would be locked into coal for at least sixty years. The environment did need to be protected, but it made development more expensive. Development in the First World was cheaper. There was now a cost attached. South Africa now had to deal with the issue of the mine dumps which had not been an issue before. New mining developments were required to rehabilitate the environment. South Africans needed electricity and coal was the cheapest source.

Mr Greyling said that the Committee did think about these issues. The country must be able to take advantage of new technology. There would be differences to the model. Renewable energy was the fastest growing sector although it was still small. The question was how to integrate renewable energy in the next five to fifteen years. Environmental issues should not be seen as a burden but as an opportunity. South Africa had the opportunity to become a world leader in this field. The majority of energy would come from renewable sources in a hundred years’ time. It was a question of how long it would take to reach this state. If all the energy resources continued to be fossil fuels and nuclear energy then South Africa might not be able to take advantage of renewable energy.

Ms Mathibela said that her only concern about WESSA was that it was a lilywhite organisation. The management showed only one Black person.

Mr Ngcobo said that there was one important reason to raise useful future issues. Mr Greyling had made some valuable points, but renewable energy was not the only option. The approach had to be versatile. There were social, economic and technical pressures. Various issues had been advocated by the Group of Eight countries. Many people had advocated renewable energy as the only resource for the future. They were missing the point. People were developing new technology for the cleaner use of fossil fuels. In the United States of America a technology was being developed to use non-radioactive isotopes.

Mr Gubb thought that he was presenting as a member of the public. WESSA had between fifty and sixty Black members. There were 160 staff members. The membership was mostly White and English speaking. It was the oldest Non Governmental Organisation (NGO). He would like to see the membership being more reflective of the population but this was not easy. This was the case with most of the membership-based environmental associations.

Mr Gubb said that there were developmental needs for South Africa. The country was caught between the delivery of jobs and poverty. Economic growth was not the only way to achieve this, according to the captains of industry. The country did have masses of coal, but care was needed in controlling emissions and water damage. The rivers were highly polluted. He questioned what was being done in South Africa in the name of economic growth and rapid energy supply. Some balance was needed.

The Chairperson said that as much consultation as possible was needed. One project should not be elevated over another.

Renewable Energy Working Group (REWG) submission
Ms Liz McDaid (Convenor, REWG) said that the Bill was a welcome step. In 1998 the Energy White Paper had been produced. This was a broad plan. She said there was an issue about production costs of renewable energy in the face of nuclear and other investments. At that time, the total amount of wind energy being produced worldwide was 7200MW. By 2008 this had increased to 100 000MW. Solar PV energy had doubled in capacity every year for the last ten years. Everybody in the sector was looking ahead. South Africa had the opportunity now to take advantage of renewable energy. Different role players were participating in the sector. Renewable energy could be affordable. There was also a moral aspect in the legacy that was being left for future generations. The current generation held the Earth in trust.

Ms McDaid compared the production costs of different forms of energy. The costs for fossil fuel based energy were increasing while the costs for renewable energy were decreasing. There might be new developments with new technologies. By 2012 it was estimated that offshore wind energy would be cheaper than the fossil fuel variety.

She said that civil society needed simple laws which could be interpreted without the aid of a lawyer. Definitions of energy security and energy efficiency were complicated. Sustainable development was not defined in the Bill. A definition was needed of what was meant by sustainable development. A definition was needed of the access to information. She suggested the definition used in NEMA, about which information should be made public. It was important to look at the wording. She pointed out some examples in Clause 2, where the wording of the objectives of the Bill could be improved. Some of the original wording was confusing.

Ms McDaid emphasised that the REWG really welcomed the Bill. However, she felt that more information should be in the public domain. On issues of safety, health and the environment, no mention was made of provision for consultation with the Minister of Health. She suggested a fuller description of how negative effects of energy carriers should be described. Clause 4 (g) and (h) covered the same thing. The word “suitability” in Clause 5(2)(a) should perhaps be “sustainability”. In Chapter 3 provision was made for outsourcing of information gathering and energy modelling. She asked if this was because the DME feared the entities might be short of capacity.

She said that Clause 8(1)(b) and (c) were duplications. Clause 8 (2) was a list of functions for NEMIA. Something was missing. External costs of environmental and health studies were crucial. Advice on consumption patterns was not listed. Generally, she felt that when lists were produced something was always left out. She felt that the wording could perhaps be more general. A lot of the wording might already be covered in other legislation, especially regarding administration and the definition of market related remuneration.

Ms McDaid said that Clause 9 (9) needed more substance. The body must have expertise, particularly in financial and industrial modelling. She detected a sense of paranoia. Information should be objective and impartial. These qualities could not be legislated. NEMIA would have to rely on the integrity of their members. The answer was to subject information and plans to peer review. The provision of Clause 10 was covered by other legislation. Clause 11 restricted the data for energy modelling to published government policy. This would discount the wider range of international and wider policies. An operating principle of NEMIA should be peer review and robust debate. The Statistics Act pronounced on information gathering. Some of its sections should be included in this Bill. She felt that issues regarding personnel were already covered by other Acts. She wondered if there was a need to legislate against undue influence. The Agency would produce important information. It should perhaps report to Parliament as well as to the Minister. Other legislation made this a requirement. The funding sources quoted in Clause 14 were also in a list form.

She said that Chapter 4 dealt with integrated planning. As the Bill was worded, some people would have to spend their lives reviewing the plan. This was unrealistic. Energy planning should perhaps be integrated with other government planning. In Chapter 5, some of the proposed bodies were only defined later in the Bill. If the Board was to be representative, then there should also be representation for civil society, labour groups and the DoH. The Statistics Act did have a list of all applicable stakeholders. The definitions should be included in this chapter. The feed-in tariff was a key measure and should be prioritised. There was a lot of duplication. She asked about the issue of private intellectual property rights related to publicly funded research. For example, she asked if a wind atlas, which was a public document, could be used by other bodies. Generally more clarity was needed.

The Chairperson said that the proposed amendments would involve a lot of drafting. The State Law Advisor (SLA) was present and would assist with this.

The SLA noted that there were some concerns with the drafting of the Bill. In particular the point about the definitions was taken.

Mr Ngcobo agreed that peer review could be useful.

Mr Combrinck asked that a copy of the presentation be made available.

Mr Kekana remarked that the NEWG presentation had concentrated on correcting technicalities. He wanted to follow up on some environmental issues. WESSA had been formed in 1926 and was not presenting new issues. The damage had already been done to the environment but was only becoming an issue now. The process of industrialisation had been running for some centuries now, but now that the Third World was starting to develop, everybody was up in arms over environmental issues.

Mr Greyling said that it was a question of the DME showing more direction. According to the Bill, modelling would only be done using published government policies. This was worrying. All possibilities and developments should be considered. The NEWG made a good point regarding feed-in tariffs. There should be a debate on reasonably known technology as opposed to near-proven technology. There was an issue regarding parameters. The cost of decommissioning a nuclear power station was unknown, but could be modelled.

Ms McDaid said that the suggestion of peer review was a more general point. Certain assumptions were used in research while other research would produce different results. The entities proposed in the Bill would not necessarily have the required expertise. They would be able to learn from outside sources by peer review or expert consultation. High quality information would lead to good decisions.

Mr Ngcobo asked what concerns had led to peer review not being included in the Bill.

Ms McDaid had not seen that. There were a lot of references to objective information. There were also references to market-related salaries which implied that people were looking for money. The public sector would have to compete for good people at times.

The Chairperson said that the issue of salaries had been raised. Market-related salaries were more associated with the private sector. Government salaries were decided on a different basis.

Ms McDaid said there were implications if the agencies were part of the private or government sector. The European Union practiced protectionism. Environmental standards were imposed on imported fruit and vegetables, and were used to discriminate against imported products. There was a debate on carbon trading. Northern countries were still polluting the atmosphere but were paying countries in the south to cut back on their emissions. This provided a good opportunity for South Africa to utilise more environmentally friendly energy generation. It was not possible to divorce the environment from development. Plans must be made accordingly. This might lead to more expense, but the country had to learn from lessons such as the health consequences which had resulted from asbestos mining. This knowledge should be utilised to avoid future mistakes. Agreements should be used to the benefit of the country.

She said that feed-in tariffs would have prevented the current energy crisis if they had been introduced five years previously. Eskom had no knowledge of renewable energy, and had to get outside people to advise them. A review should have been held in April but had been delayed until 2009. She did not understand why. What appeared the best choice at present would not be so in twenty years time, which was why the master plan had to be reviewed regularly. The majority of resources should be put into the best known technology. It was short-sighted to limit the use of renewable energy.

Mr Ngcobo said that before the 1980s, the decommissioning programme for a nuclear power station was eight years. The then European Economic Community had conducted research, and this period had now been reduced to five years. He had seen this was a facility in Manchester in the United Kingdom. Technologies changed. There were many factors involved which would bring both solutions and problems.

Ms McDaid said that access to information was critical. The Committee might not have seen it, but there was an opinion that the pebble bed modulator reactor technology did not work. Information was power.

The Chairperson said that the country could not afford to have a scenario based on poor information. Future scenarios had to be considered. Eskom had been advised ten years before that it could run short of generating capacity but nothing had been done.

Afternoon session
University of Cape Town - Energy Research Centre (ERC) submission
Dr A Marquard, ERC senior researcher, presented, assisted by his colleagues Stephen Davis, Ajay Trikon and Eugene Visagie. The submission gave their overall concerns on bill, which were that the Bill could have significant implications for the implementation of international climate agreements, national mitigation plans, energy research, modelling and planning, renewables, efficiency and other matters. The Bill aimed to establish a "National Energy Modelling and Information Agency" which was clearly needed and should be welcomed. However, the Bill focused on supply and underplayed the importance of demand side considerations

. Demand side solutions would continue to play an important role in energy efficiency, South Africa’s climate response, the competitiveness of the economy, response to energy supply shortages and should receive greater attention in the bill. There appeared to be some risk of fragmenting responsibility for climate change mitigation unless more carefully defined. It was not clear how the DME mitigation plans would relate to those developed by DEAT. The Bill seems to suggest that the DME Minister only needed to consult colleagues on implementing "energy-related international obligations". The Bill established SANEDI, which replaced SANERI, but was not clear what the merits of moving SANERI into a new institution were. SANERI had a clear research focus, SANEDI did not. In SANEDI, research was a small subsidiary component in a division and it was very unclear in SANEDI what funds would be available for research. The second part of the submission consisted of suggestions on specific clauses: clauses 3; 3(3); 5.2; 6(1); 8(1); 8(2); 11; 11(1)(b),(c),(d); 11(3); 16(1), 16(2); 16(3)(d); 16(5);18(2) and 27.

Mr J Combrinck (ANC) asked if they did not have another solution to solve the problem, such as taking their licence away.

Dr Marqaurd answered that withdrawing licences might have a significant impact in some instances; in other instances such as electricity he believed that the regulator did not really have a choice when it came to a large entity like Eskom. It would be really difficult to withdraw Eskom’s licence - and also irresponsible. He was not sure of other solutions but looking at the choice between a licence and non-compliance, the policy makers simply had to choose which of the options they preferred. There was not a lot of harm that came to large companies - as parting with data did not involve an immediate economic loss.

Adv H Schmidt (DA) asked if they were to ensure that there was public availability of all information presented to the Department, would that not have a negative impact on the willingness of companies to provide their information to the public - some of which might be seen as being in competition with similar companies. He referred to clause 14(b) and asked if they had any opinion on what kind of levies should be imposed and the kind of levies they would consider to be relevant.

Dr Marqaurd answered that in the case of energy data, if it was commercially sensitive, then their suggestion would be to accommodate for this. Particular providers could appeal, and there was a number of different ways in which commercial competitiveness could be protected. He believed that it would be in the public interest to turn it around. Given that it would be a mandatory requirement for them to provide information, he did not think that it would deter them from doing so because they would be obliged to. It would be in the public interest to strengthen that clause. In 1988 the government had set up the national energy council which did impose a levy in order to obtain money for research and planning. It was imposed equally on all energy carriers. That would be a very successful way of doing this although there was an issue around dedicated levies. The current policy was not to have dedicated levies so it would have to be negotiated with Treasury.

The Chairperson asked why SANERI was being placed in SANEDI.

Dr Marquard replied that first of all they agreed that it should be moved out of the Central Energy Fund (CEF) as there was no reason why they should be in CEF in particular. The concerns that they had were first of all to do with funding. At the moment SANERI’s funding came from DST and it was funded in terms of science and technology policy rather than in terms of energy. It was important to maintain the same level of funding for energy research. If the same level of funding for energy research could be guaranteed within SANEDI, that would resolve one of their objections.

Mr Stephen Davis, ERC researcher, commented that they see the energy efficiency division and the renewable energy division as implementers and not specifically as doing research, so as a development agency it would be implementing efficiency and renewable energy but research was a completely different aspect and they were not sure whether it belonged under the same umbrella or if it should exists as an organization on its own, whether it be part of CEF or not.

Dr Marquard said that they disagreed with the point on the effectiveness of SANERI. SANERI had only been established for a very short time. It had been very important in funding energy research and setting up chairs in tertiary institutions, and building capacity in energy and that they had done very successfully so far. Their main concern was that the success that it had had, must not be disrupted by the institutional shift.

He said that the real objection to the twenty five years was not to the figure per se or the objection to having a defined period for planning integrated energy plans, but simply to put it into the legislation. There should be flexibility around that and this could be defined much better by the Minister. They felt putting it into the legislation was inappropriate and that there should be flexibility in defining that period.

Chambers of Mines of South Africa Submission
Mr D Kruger (Assistant Adviser: Techno-Economics) briefed the Committee on the submission, The Bill was welcomed, however, the Chamber of Mines felt that policy formulation and planning without stakeholder input would result in flawed outcomes. They recommended that the Committee consider providing for an advisory body as envisaged in the 2004 Draft Bill that had been discontinued. The main objective was to ensure the security of the energy supply. The Chamber also supported the establishment of the National Energy Development Institute. The Minister was empowered to set targets for renewable energy and minimum levels of energy efficiency but the Chamber of Mines recommended that there had to be a provision for prior consultation.

Adv Schmidt referred to clause 35(2). He said that they seemed to indicate that there should be stakeholder participation before even the proclamations were made to the public and asked if that was their point.

Mr Kruger replied that consultation was a more involved process. It involved talking to one another and coming to some sort of agreement. They did not believe that that clause would solve the concerns that they had. It was a very complex issue and they could not merely cover it by commenting on regulations.

The Chairperson asked how they saw these institutions relate to each other and how did they see the interaction happening between SANERI, SANEDI, NEMIA and NERSA. How did they see these institutions harmonise into playing a mutual role in energy security?

Mr Kruger stated that this would be his personal view since they had not discussed it in depth in the Chamber of Mines. The two executive functions were the promotion of energy efficiency by the one body and the promotion of renewable energy and those were the fields where they were moving into new directions all the time. The capacity for energy research would underpin those two functions and complement them. In a similar way he believed that if it had to be the inclusion of the energy modelling agency also under SANEDI, this would also complement it because to promote it, one must know what was going to happen or what was likely to happen and that was what modelling gave one. If those four institutions were placed together under one umbrella he thought that the synergies could be very good. NERSA was currently preparing an energy demand forecast, on electricity mostly, they called it the National Integrated Resource Plan, the Department of Environment Affairs was doing the long term mitigation strategy, which was very much an energy plan, the DME was working on an integrated energy plan and Eskom had their own electricity strategic integrated plan. These were four plans but they did not talk to each other and might therefore not go into the same direction.

South African National Energy Research Institute (SANERI) submission
Mr K Nassiep (CEO of SANERI) presented. He clarified the origins of SANERI and the CEF group structure was illustrated. SANERI’s role included
assisting in the coordination of South African participation in, and membership of, various international bodies involved in energy research & development (R&D). SANERI was concerned with infrastructure optimisation. Its key deliverables included clean energy systems, advanced fossil fuel use and energy policy and planning.

The formation of SANEDI had positive elements and was parallel in that it similarly promoted long term security of supply through identification of cleaner, safer and more affordable alternatives and then developed a framework for commercial deployment. The aspects that should be considered were that responsibilities of the various divisions were too prescriptive and needed flexibility in changing the political, environmental and economic climate. Moving the entity from CEF (Pty) Ltd would result in greater overheads for the entity and hamper commercialisation. A provision should be considered in the Bill that allowed SANEDI only to be operationalised once the Monies Bill was promulgated.

The formation of NEMIA included positive elements such as the fact that it provided for enhanced indigenous modelling and planning capacity in the country and rigorous data collection methodologies to be put in place. An aspect to be considered was that it required a peer review of methodology used in planning framework and this could be done by other entities active in the area as well working with the DEAT on a long term climate change position in South Africa. 

Mr Kekana said that as the research institution they should be doing a global investigation and should be saying what's going on and that certain things were heard from other institutions and countries. He also said that they were not up to the mark and asked why they don’t know about certain issues.

Mr Nassiep answered that SANERI had been around for two years and in that time there had been a lot of activity. He provided several examples such as the super-thin solar panel work at the University of Johannesburg under Prof Albert which technology was sold in part to a German consortium. Other examples were solar energy traffic lights, faster charging batteries for electrical vehicle usage, solar water pumping applications, developing the ability to produce the right grade of silicon for an ever growing international demand, and developing a wave energy test facility. SANEDI would be very involved in advising government on whether new technologies did work. The level of funding that they had was R45 million per year; they had very set activities.

Adv Schmidt said that the word ’planning’ was lacking and asked if that was the function of the Department of Minerals and Energy or should there be an additional function awarded to SANEDI the other institution or agency.

Mr Nassiep answered that in the case of SANERI at present, the board assisted in developing the strategy that then went to the Departments of Minerals and Energy and Science and Technology in the form of a shareholder compact and was then approved annually by the two ministers. As a company, SANERI set up strategic planning involving stakeholders from government, the private sector and academia which then helped to shape the research agenda which was then largely approved by government at the end of the day.

The Chairperson asked why SANERI was first called NERI and why it then became SANERI. He also asked when the CEF was aligned as a research entity.

Mr Nassiep answered that the only reason why the name changed from NERI to SANERI was because the name NERI had already been taken – it was registered to the New Zealand energy institute which was called NERI. They had to then localise it and call it SANERI and for no other reason.

Adv Schmidt commented that Mr Nassiep had mentioned that its functions did not include nuclear and that complicated the issue since it was assumed that it was an overall structure. He asked for clarity.

Mr Nassiep answered that DME played the lead in that role and ultimately had to decide where it wanted the nuclear strategy to go. DME had a master plan around nuclear energy and they would fit into that if necessary but SANERI was given the specific instruction not to participate in that area.

PetroSA submission
Mr O Tobias (General Counsel for PetroSA) presented. Due to time constraints he was not given much time to go through the submission in detail.  He did however mention chapter 6 in the bill that seeks to establish the National Liquid Fuels Strategic Stocks Capability. He also looked at the definitions such as energy, energy Master Plan, energy data and energy security.  PetroSA acknowledged the national interest and strategic importance of the objects as stated in the Bill, but there were a number of concerns from a legal and governance perspective. The mandate of the National Liquid Fuels Strategic Reserve Stocks Capability as contemplated by Chapter 6 of the Bill overlapped with the mandate of the Strategic Fuel Fund (SFF) as stated in its founding documents. The SFF was established in terms of the Central Energy Fund Act and its primary aim was to manage South Africa's strategic inventory of crude oil on behalf of the State. In 2003, SFF appointed PetroSA to control and manage the 'Strategic assets' and the 'Strategic stocks' then under SFF's control. Since 2003 PetroSA had fulfilled this function and developed a competency in respect of managing strategic assets on behalf of SFF. It was common knowledge that SFF was not functional anymore. Therefore, a clear decision had to be made with regard to where the strategic stocks would be held on behalf of the government even if it were not expressly stated in the Bill. There might also be an overlap between the functions of the Institute and those of NERSA in that NERSA and the Institute were both tasked with promoting the optimal use of available gas and electricity infrastructure. Section 4 of the Bill gave powers to the Minister to prescribe standards and specifications, not elsewhere legislated. The submission also included general comments on each chapter of the Bill and suggested amendments.

Adv Schmidt asked to what the capability referred.

Mr O Tobias, General Counsel for PetroSA, answered that they needed a responsible entity that would deal with this. It would be much more prudent for them to identify the entity ultimately responsible, whether that be PetroSA or not, so that the liquid fuels industry players could have a clear understanding of how that was going to be regulated. There were purported provisions that require 30% of crude be imported or managed by a government owned institution or an institution of a similar nature. This was a very important issue as crude was very important in terms of import parity and the fuel price.

Dr Rabinowitz (IFP) was interested in the point previously made: that they did not want tough standards in relation to liquid fuels and products produced under the Energy Bill. She asked if tough standards were not the only way that the Minister would be able to tighten up on polluting products. She asked for clarification on this matter.

Mr Tobias stated that PetroSA supported standards, but that they needed to understand from where the standards came, particularly with reference to legislation regarding hazardous substances. The Hazardous Substances Act was very clear but there might be a problem from the enforceability point of view. The Act had pieces of legislation for every specific detailed circumstance. It was not necessary to saddle the National Energy Bill with considerations of hazardous waste.

She also wondered about a possible overlap where the Department of Health (DoH) also looked into hazardous products.

The meeting adjourned due to time constraints.

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