World Class Minerals and Energy sectors for the benefit of all Overview of the Electricity Regulation Bill

World Class Minerals and Energy sectors for the benefit of all

Overview of the Electricity Regulation Bill


Contents• BACKGROUND

• Why Electricity Regulation (ER) Bill• Industries regulated by ER Bill• Dual regulation – Electricity Reticulation

• ELECTRICITY REGULATION BILL IN DETAIL• Functions of the regulator• Licences and registration• Contravention of a licence and order by court• Resolution of disputes• Inquiries and investigations • general provisions• Exemptions• National Assembly adoption


Background• The energy sector is growing and that resulted to enactment of the

following legislations:• Gas Act; and • Petroleum Pipe Lines Act.

• Cabinet made decision consolidate energy under one regulator resulting in Energy Regulator Act.

• The Energy Regulator Act establishes the National Energy Regulator (NERSA) which will be in operation as from April 2006. NERSA will regulate:• Electricity, Gas ; and• Petroleum Pipe Lines.


National Energy Regulator of South Africa

Gas Regulator

Gas Act

Petroleum Regulator

Petroleum Pipelines Act

Electricity Regulator

Electricity Act

Energy Regulator Act

Regulator repealed

Regulator repealed

Regulator repealed


Why Electricity Regulation Bill• The Electricity Act needs to be repealed:

• because is not in line with the Constitution;• to facilitate restructuring in the electricity industry; and• to align its provisions with the National Energy Regulator Act.

• Electricity Regulation Bill (ER Bill)• repeals Electricity Act except for section 5(b) that deals with

funding of the regulator • provides for separate legislation for funding regulator • Money Bill will then repeal section 5(b) of the Electricity Act


Industries Regulated by the ER Bill

Electricity Regulation Bill

Generation

Eskom

IPP

Munics

Transmission Distribution

Eskom Eskom

Munics

(reticulation)

NERSA


Sections not covered by the ER Bill

• The Electricity Regulation Bill does not cover regulation of electricity reticulation.

• The ER Bill will be amended to cover regulation of electricity reticulation (will revert to NCOP soon).

• Electricity reticulation will then have dual regulation• regulation by municipalities (Municipal Systems Act)• the national energy regulator (Electricity Regulation Bill)


Dual Regulation – Electricity Reticulation

Service Delivery Agreement

NE

RS

A

Municipality

license

Happy balance between SDA and licence provisions

Service provider

Regulation


Electricity Regulation Bill in detail


Functions of the RegulatorChapter 2

• The regulator is empowered to:

– issue licences for transmission, generation, distribution, import and export of electricity and trading in electricity;

– impose penalties for non-compliance;

– act as a mediator in settlement of disputes; and

– register unlicensed generators in the ESI.•


Licences and registrationChapter 3 {section 7 to 10}

• outlines activities to be carried out under licence such as import or export, trading, generation, transmission and distribution functions.

• Section 9 gives the Minister power to exempt any of the activities from holding licences under the advise of the regulator.

• provides for payment of licence and registration fees by applicants

• Minister can determine activity that requires licensing and registration.


Licences and registration (cont..) Chapter 3 {section 11 to 18}

• Regulator also empowered to deal with transparency of licence applications and procedures. An applicant for a licence is required to make a notice of application in a newspaper.

• Regulator approves tariffs for generation, transmission and distribution (excluding reticulation).

• Section 15 of the bill outlines licence conditions relating to generation, transmission and distribution


Licences and registration (cont..)

• The regulator may suspend, remove certain conditions or amend licence conditions (section 17)

• The regulator may revoke a licence on application if the licensed activity is no longer needed (section 18)


Contravention of licence, order by courtChapter 3 { section 19 and 27}

• Regulator sitting as a tribunal may

- impose a penalty of the higher of R2m per day, or 10% of annual turnover, if failed to adhere to licence conditions (section 19(4))

- revoke a licence through an application to the High Court.

• The High Court may grant or refuse the application.


Resolution of disputes (Chapter4)

• The regulator can be requested by the parties in a dispute to be a mediator.

• The regulator shall not be obliged to settle disputes but if requested to do so, its decision shall be binding on any party concerned

• The regulator may appoint suitable person(s) to mediate in settling disputes on its behalf.


Resolution of disputes (cont)

• Regulator shall prescribe the procedure to be followed in mediation and the settlement of disputes including fees to be paid in terms of section 42 (3)


Inquiries and investigations (Chapter 5)

• Regulator shall on receipt of complaint related to electricity supply, appoint a person to make inquiries and report to the regulator, section 44.

• After receipt of the report, the regulator may institute a formal investigation.

• The regulator may refer the outcome of the investigation to the Attorney-General of the area for his or her consideration.


General provisions (Chapter 6)

• Any agreement in contravention of this Act or Constitution may be declared to be unenforceable between the parties by a court of law.

• The regulator may after consultation with affected parties, make guidelines, codes of conduct and practice or make rules by notice in the gazette relating to the licensee and the customers.


General provisions (cont..)• In section 45, the Minister may by notice in the Gazette, make

regulations regarding licences, registrations, the form and the manner of applying for licences, the publishing of advertisements by licensee and etc.

• Before promulgating regulations contemplated above, the Minister shall consult with the regulator and invite public comments on such regulations.

• The Minister is also empowered to procure New Generation Capacity


General provisions

• Repeal of laws and savings

– The NER contemplated in section 2 of the Electricity Act 1987, is repealed.

– Licences issued by the NER in terms of the provision of the Electricity Act, shall continue in force as if they were issued in terms of the provisions of this Act.

– This Bill repeals and replaces the Electricity Act (Act 41 of 1987)


Schedule 2: exempted from obligation to apply for and hold a licence

• Any generation plant built for demonstration only is exempted from holding a licence.

• Any generation plant constructed and operated for own use.

• Non-grid connected supply of electricity except for commercial use


Schedule 1: Repeal and Amendment of laws

• The bill repeal the following Acts;

- whole Electricity Act, 1987 (Act No. 41 of 1987) except section 5B

- amendment of schedule 3 of Kwa Zulu and Natal Joint Services Act, 1990 (Act No. 84 of 1990)


National Assembly adoption• “consumers” was replaced with “end users” • Rules of administrative nature allocated to the regulator.• Regulator obliged to form “end user forums” and

licensees and end users allowed to participate• Minister empowered to draft regulations for

- norms and standards relating to quality of supply (blackouts)

- Renewable energy• Bill adopted by National Assembly in November 2005


Section 76 (Constitution) issues

• Electricity reticulation matters removed from original version of Bill, in line with Parliamentary procedure

– Definition of reticulation– Norms and standards for reticulation– Procedure in the event of non-compliance– Framework for tariff setting by municipalities

• NCOP to be approached to deliberate over same

Documents

World Class Minerals and Energy sectors for the benefit of all Overview of the Electricity Regulation Bill