MEMORANDUM TO THE PARLIAMENTARY PORTFOLIO COMMITTEE ON MINERALS AND ENERGY ON THE ESTABLISHMENT OF A SINGLE ENERGY REGULATOR
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INTRODUCTION
Regulatory authorities will be established in terms of the Gas and Petroleum Pipelines Acts and the current National Electricity Regulator will be transformed in terms of the Electricity Regulation Act. It is expected that the single energy regulator will over the longer term also deal regulatory measures pertaining to liquid fuels.
In order to pursue a common regulatory approach and administrative efficiencies Cabinet approved the Department’s proposal to implement a single energy regulator. To give effect to Cabinet’s decision and the Minister of Minerals and Energy’s directives in this regard, the Department has devised and is awaiting approval of a process for the implementation of a single energy regulator. The concept underlying the proposals is that the energy regulator will consist of five full time (4-year contracts) regulators, supported by a secretariat. These five posts will be career positions similar to judges or some members of the Competition Tribunal. It is expected that such persons will require intensive preparation and orientation to execute their functions.
IMPLEMENTATION PROGRAMME
The Sasol gas project to bring gas from Mozambique to South Africa is in an advanced stage and a Gas Regulator is urgently required to administer the Gas Act and the Sasol/ Government Regulatory Agreement referred in section 36 of the Gas Act. The need to establish the Gas Regulator before the importation of gas from Mozambique is therefore driving the process. The Gas Act and the Gas Regulator Levies Act come into operation on a date determined by the President by proclamation in the Government Gazette.
It is proposed that the programme to operationalise a single energy Regulator be implemented in a phased process through which the same five full-time persons are appointed to each of the three regulators as an interim measure pending the amalgamation of the three Acts into a single piece of energy regulation legislation.
This phased approach is also dictated by the expiry of the National Electricity Regulator’s (NER) term of office in June 2004. It is intended that the five Regulators will take over responsibility for the NER from June 2004.
The Appointment of Regulators:
Subject to approval of the programme, the first phase would consist of the following actions:
Advertisement calling for nominations for candidates.
Establish a selection committee
Initial screening and candidate interviews.
Selection Committee recommendations to Minister.
Appointment of Regulator The second phase is scheduled to start at beginning September 2003 and completed by the end of December 2003:
Successful candidates be notified and appointed.
Regulators to undergo an orientation programme for a period of two months.
Gas Regulator Operationalisation:
The third phase consists only of the first day of the existence of the Gas Regulator presumably on a date during January 2004 and requires the following:
Gas Act and the gas Regulator Levies Act brought into operation by the President through proclamation in the Gazette.
Minister appoints regulators as in terms of the Gas Act
Gas Regulator formally adopts a business plan (as modified).
Gas Regulator takes responsibility for a bridging CEF loan and is funded by the loan until levies are imposed.
Gas Regulator publishes levy notice in the Gazette.
Gas Regulator formally consulted on regulations to allow publication of the regulations for public comment.
The Gas Regulator is financed by a levy on gas according to the Gas Regulator Levies Act (Act No 75 of 2002). Before the levy in terms of the Gas Regulator Levies Act can be imposed, the levy proposal must be published for public representations. The Gas Regulator must consider the representations and then give the Minister notice of the proposed levy. The Minister (with the concurrence of the Minister of Finance) must approve or disapprove the proposal within 60 days.
Separate Gas Regulator: The fourth phase covers the period from the establishment of the Gas Regulator (beginning January 2004) until the contracts of the current NER board members expires on 1 June 2004:
Regulator assumes full duties regarding gas matters such as the administration of the Sasol/Government Agreement and consideration of gas licence applications.
Regulator appoints technical staff and finalizes contracts for NER supply of logistical, technical and secretarial support.
Gas levy brought into operation and repayment of CEF loan commences.
NER regulations amended by the Minister in terms of section 28 (1) (j) of the Electricity Act 41 of 1987 (procedure at meetings), for Regulators appointed in terms of the Gas Act to attend NER board and committee meetings and to speak, but not to vote (unless they are concurrently members of the present NER board).
Petroleum Pipelines Regulator
The same Regulators will be appointed as Petroleum Pipeline Regulators when the Petroleum Pipelines Act is brought into operation.
National Electricity Regulator
At the expiry of the terms of office of the current incumbents the five Regulators will be appointed to the NER. At that time these same five Regulators will occupy the boards of all three regulatory bodies.
Single Energy Regulator:
The fifth phase begins with the promulgation of a new piece of legislation, the Energy Regulation Act. This Act will combine the three separate Acts covering gas, petroleum pipelines and electricity into a single Act with a single Regulator.
REGULATOR REMUNERATION
The Regulators will be administering relevant legislation and government policy for electricity, gas and petroleum pipelines and, in doing so, will be taking decisions of national importance. They will be in a similar position to judges in that they will be required to hold public hearings, weigh evidence, give written decisions with reasoned arguments and the decisions would be subject to appeal. In addition they are entitled to sit as a tribunal in terms of section 33 (3) of the Constitution and impose fines of up to R2 million per day. It follows that such Regulators be of high calibre. Current salary levels allowed by National Treasury will probably not attract persons of the right calibre and these will need to be changed or adjusted to attract the right candidates, especially considering that the period of tenure is limited to a 4-year term.