Electricity Regulation Second Amendment Bill: Government Gazette 34870 (Notice 905 of 2011)

A circular distributed to AMEU Members on 9 January 2012 advised that the Department of Energy had published Government Gazette 34870 (Notice 905 of 2011) on 19 December 2011 in which it had invited comment on the Electricity Regulation Second Amendment Bill. A copy of the Bill is available here.

The bill proposes amendments to the Electricity Regulation Act 4 of 2006:

• To establish a national regulatory framework for the electricity supply industry; to make the National Energy Regulator of South Africa the custodian and enforcer of the national electricity regulatory framework; to provide for licences and registration as the manner in which generation, transmission, distribution, dispatch, reticulation, trading and the import and export of electricity are regulated; to regulate the reticulation of electricity by municipalities; and to provide for matters connected therewith.

Written comments were required by 27 January 2012. A copy of the AMEU submission is available here.

Regulations on tax allowances for energy efficiency savings

An article in the September 2011 edition of this Bulletin advised that the Department of Energy (DoE) had released proposed `Regulations on the Allowance for Energy Efficiency Savings’ for public comment. They were published in Government Gazette No. 34596 on 16 September 2011 with a deadline date for comment of 15 November 2011.

A press release commissioned by Eskom, SANAS, SANEDI and the CMVPSA in order to clarify the many questions which relate to the release of these energy efficiency tax incentives, was distributed by SAEE (the South African Association for Energy Efficiency) on 5 October 2011. Copies of the press release and an article published in the Vector e-News (Issue 52, Nov / Dec 2011) on the topic are available here.

For more information on the regulation of energy efficiency tax incentives contact the stakeholders through the websites at www.cmvpsa.org.za, www.saneri.org.za, www.sanas.co.za, www.saee.org.za.

Postponement of the Energy Regulator public hearings: Review of IBT and MYPD methodology

AMEU Members were advised via a circular of a notice issued by the Energy Regulator on 24 January 2012 in which it is advised that  `…..the public hearings on the review of the Inclining Block Tariffs (IBTs) and the Multi-Year Price Determination (MYPD) methodology which was (sic) scheduled to take place on 02 and 03 February 2012 at the NERSA offices in Pretoria has (sic) been postponed until the finalisation of the review of ‘The South African Electricity Supply Industry: Electricity Pricing Policy GN 1398 of 19 December 2008’ (EPP)’.

The notice states that ‘The hearings have been postponed because the MYPD is broadly informed by the Electricity Pricing Policy. It would therefore be premature to finalise the MYPD while the Electricity Pricing Policy is under review’ and that `Members of the public will be notified of the new dates for the public hearings through the NERSA website and newspaper publications’.

A copy of the NERSA notice is available here as well as the NERSA website at http://www.nersa.org.za/

NERSA Consultation Paper: Municipal tariff guideline, benchmarks and proposed timelines for the municipal tariff approval process for the 2012/13 financial year

The closing date for written comments for this consultation paper was 14 November 2011 followed by the public hearing on Friday 18 November 2011. The paper states on page 5 that:

• Nov/Dec 11 – NERSA approval – municipal guideline and benchmarks
• Nov/Dec 11 – Communicate indicative guideline increase to municipalities and put the draft decision on NERSA website

Following an attempt to establish why the decision had not been posted to the NERSA website as at 12 January 2012, the AMEU was advised that `........due to some unforeseen delays, the Energy Regulator will make its decision on the guideline at the end of January 2012.’

NERSA Reasons for Decision (RFD): Small Scale Embedded Generation within Municipal Boundaries

The attention of AMEU members is drawn to the existence of a document “Standard Conditions for Small Scale (less than 100kW) Embedded Generation within Municipal Boundaries” recently made available (prior to 2 December 2011) on the NERSA website http://www.nersa.org.za/ (select REGULATOR DECISIONS > Electricity). The document is undated but refers to a decision of the Energy Regulator dated 22 September 2011.

In terms of the decision, municipalities are required to register and maintain a database of all small scale (<100kW) embedded generation within their areas and report to the Energy Regulator on an annual basis on a number of statistics related to this generation. It also states that `....these conditions are guidelines currently but the intention is to include them in the Licence conditions of the municipalities when they are renewed.’

NERSA explains in the reasons for decision that `The sheer number of installations would pose significant problems for NERSA in terms of the ability to handle the applications that would be received for license or registration. And is it questionable if it was the intention of those who drafted the Electricity Regulation Act for this kind of generation to be licensed or registered by the Energy Regulator’. In NERSA’s opinion `It seems most appropriate that this should be done at municipal level because the municipalities are the most impacted party.’

In conclusion, NERSA announces that ‘These requirements will facilitate the orderly and sustainable development of the industry and should not add excessively to the regulatory burden as the information required is required (sic) for the good management of these facilities by the licensees.’

While the existence of some control over this growing market is welcomed, a number of queries were directed to NERSA:

• Section 22 of the document (page 7) states that `the decision has been considered in terms of the (National) Energy Regulator Act, 2004 (Act No.40 of 2004). Please will you confirm which section of this Act relates to this decision and how it is linked to the Electricity Regulation Act, 2006 (Act No.4 of 2006) or the Electricity Regulation Amendment Act, 2007 (Act No.28 of 2007)?
• Please will you advise what consultation has taken place [Section 10 (1)(d) of the abovementioned Energy Regulator Act] with licensed municipalities, other than the reported approach by the City of Cape Town and Nelson Mandela Bay (Municipality)?
• Please will you advise if the licensed municipalities have been formally advised by NERSA that they must comply with these standard conditions as part of their licensed conditions of supply?
• Will a similar database be established by Eskom in its licensed areas?

To date, no response has been received by NERSA.

A copy of the RFD document is available on the NERSA website as well as on the AMEU website, here.

Eskom’s interim 2011/12 financial results

Articles published by both ESI Africa and Engineering News Online on 24 November 2011 reported on the interim 2011/12 financial results for Eskom Holdings which had reported an interim profit of R12.8 billion, compared to R9.5 billion previously, and revenue from sales was up more than R1billion to R63.9 billion for the six months to end-September 2011.

While almost 60% of the revenue rise had been due to the roll-out of its tariff increases, electricity sales had increased by only 0.9% to 114,043 GWh in the six months to end-September. This factor reflected muted economic growth, labour unrest in sectors such as metals and mining, and the impact of higher tariffs.

Eskom CEO Brian Dames is reported to have said that the group's earnings were seasonal and the revenue and profit performance would thus not be repeated in the second half, when the utility would seek to break even. He also said that Eskom had received no information related to possible changes to the pricing policy or the methodology used by NERSA following the Department of Energy having indicated earlier in the year that it was reviewing the electricity pricing policy (EPP), as well as the regulatory model, in a bid to ensure that power price rises where brought under control.

This proposal by the Department of Energy (DoE) to amend the EPP was reaffirmed by Energy Minister Dipuo Peters who was reported in an Engineering News Online published on 9 December 2011 to have said that the DoE `… is considering changes to the electricity pricing policy (EPP), which could affect the methodology used by the regulator to determine power utility Eskom’s tariffs.’ Peters said in a response to a Parliamentary question, that the DoE was considering an approach that delayed the tariff increases.

The move was welcomed by the Energy Intensive Users Group (EIUG) of Southern Africa, which represents Eskom’s largest industrial customers, in an article distributed on 12 December 2012. It said "It is heartening that the minister has appreciated the risks that rapidly rising electricity prices (pose for) economic growth and job creation."

In a confusing statement however, a member of the National Energy Regulator of South Africa (Nersa) responsible for electricity, Thembani Bukula, is reported to have said that the regulator was not aware of the proposed changes in the electricity pricing policy. "But if there are changes in the policy, we will implement them," Mr Bukula said.

Eskom was, thus, preparing its next tariff application on the basis of the current methodology. However, there was a process under way to refine the rules to be used and Eskom would submit its application (MYPD3) for the period 2013/14 to 2015/16 during the course of 2012.

In a hard hitting article published on 30 November 2011 by the EIUG titled `Electricity prices: The NDP is missing the point’ a commentator suggested that `We would argue that Eskom’s prices are now high enough to cover its full costs. Further increases should be no more than in line with inflation. And municipalities should not be allowed to use their electricity monopolies as local cash cows that cause the industrial milk to dry up. A competitive SA economy, with scope for more beneficiation demands, requires a financially and economically sensible approach to Eskom finances. This is one that gives priority to finding the right price for electricity for its consumers and the economy; rather than one that follows economically damaging and misleading views about the right shape of the Eskom balance sheet. The same goes for many other publicly owned enterprises including the airports and roads  – that have driven pricing policies in recent years.’

Copies of the ESI Africa, Engineering News Online and EIUG articles mentioned in this report are available here.

Municipal Infrastructure Support Agency (MISA)

Cooperative Governance and Traditional Affairs Minister Richard Baloyi announced during the last week of November 2011 that a new Municipal Infrastructure Support Agency (Misa) would be established next month (December 2011) to accelerate service delivery and enhance capacity among municipalities.

This was according to a report by Engineering News Online published on 26 November 2011. It also advises that `Through Misa, the department expects to be able to accelerate service delivery through five programmes, comprising: municipal infrastructure assessment and diagnosis of the challenges, to find solutions that are viable and sustainable; provision of municipal infrastructure capacity support; municipal infrastructure implementation support; sector capacity development, including internships for unemployed graduates within municipalities; and effective monitoring and evaluation.’

Baloyi is reported to have told delegates attending a conference on accelerating infrastructure delivery and capacity enhancement for municipalities that `Misa would seek to coordinate all initiatives and support provided by government through a range of interventions, which include Project Consolidate, Siyenza Manje and other initiatives.’ He also said that he would launch a campaign working with universities, professionals and the private sector to build capacity among municipalities to accelerate service delivery.

A copy of the article is available here.

Press Releases from the Department of Higher Education And Training [DHET]

The Department of Higher Education and Training has issued two press releases over the past two months in which it addresses matters that may be of interest to members. They are:

• Alignment of Setas: A press release issued by DHET on 29 November 2011 reported that the Minister for DHET, Dr Blade Nzimande, had said at a meeting with all the chairpersons of the country's 21 SETAs that `The most urgent task facing the country's Sector Education and Training Authorities (SETAs) at the moment is the finalisation of Service Level Agreements (SLAs) with the Department of Higher Education and Training (DHET) for the 2012/2013 financial year so they may effectively address the critical developmental challenges facing South Africa.’
  
  It goes on to say that Minister Nzimande said that "These SLAs should have very concrete and measurable objectives and goals, as part of the realization of the goals of the National Skills Development Strategy (NSDS) III."
  
  The Minister further emphasised the issue of governance in the SETAs, calling on the Chairpersons to also focus their energies on changing the generally negative perceptions the public had of the SETAs. "Improving governance, accountability and accessibility will go a long way towards addressing these negative perceptions," he said.

• Public Comment On National Qualifications Sub-Frameworks: A second press release issued by DHET on 29 December 2011 reports that Minister for Higher Education and Training, Dr Blade Nzimande, has called on members of the public, including affected institutions of higher education and training, to submit comments on the three recently released draft qualifications sub-frameworks for South Africa's national system of qualifications.
  
  The three sub-frameworks were published in Government Gazette number 34883, under general notice (notice number 913 of 2011), on 23 December 2011.
  The National Qualifications Framework (NQF) is a system for bringing order and coherence into the complex arena of education and training, assisting learners and workers to progress in their educational and career paths, and ensuring that South African qualifications are both relevant and of high quality. The proposed sub-frameworks reflect the qualification types that will be available in general and in further education and training, higher education and occupational education and training respectively. They are meant to articulate or link with one another so that learners are able to make easy transitions from one learning programme to another. Together the sub-frameworks make up the National Qualifications Framework (NQF).

Copies of the full press release documents as well as Government Gazette 34883 (23 December 2011) are available here.

IPP Procurement Programme – Preferred renewables bidders

The results of the first phase (or window) of the Department of Energy’s (DoE) call for qualification and proposals for `new generation capacity under the IPP Procurement Programme (“The Project”)’ has been announced.

An Engineering News Online article published on 1 December 2011 revealed that `The 53 renewable energy independent power producer (IPP) project bids received by South Africa's Department of Energy (DoE) on November 4 – representing potential capacity of 2 127 MW and potential investment of R64-billion – have been evaluated by the transaction advisers appointed to the programme and the results have been passed on to the DoE for adjudication’. It also reported that `DoE deputy director-general Ompi Aphane indicated separately to Engineering News Online that the process was on track and that government was still keen to announce the qualifying bidders during the course of next week {while COP17 was still in session}.’

A second Engineering News Online article published on 8 December 2011 reported that `South Africa’s Energy Minister Dipuo Peters has officially disclosed the names of the first 28 renewable energy independent power producer (IPP) preferred bidders, which now have until June 2012 to take their projects to financial closure.’ The preferred bidders named included 18 solar photovoltaic (PV) projects, eight onshore wind projects and two concentrated solar power (CSP) projects.

The PV projects named range in size from 5 MW to 75 MW with a combined capacity of 631.53 MW while the two CSP projects will have a capacity of 150 MW. The wind projects listed represent 633.99 MW of capacity.

A further two windows were planned for 2012, and two more for 2013, as part of a programme to procure 3 725 MW of renewables capacity from IPPs before 2016. The next bid window would close in the first quarter of 2012, with more than 2 309 MW, or more than 60% of the capacity, yet to be allocated. A simplified bid document, together with a term sheet, for small-scale renewable projects of between 1 MW and 5 MW would be released during the first quarter of 2012.

Copies of the Engineering News Online articles dated 1 and 8 December 2011 are available here.

Electricity Supply Situation

Despite all the warnings from Eskom during 2011 that the summer period will be extremely tight for the generation system, it appears that the country may be headed for load shedding. As at 10 January 2012 Eskom was apparently utilizing some of its emergency supplies and exercising interruptibility options with smelters due to system constraints.

An Engineering News Online article published on 10 January 2011 reports that `Eskom has warned of a "very high" risk of rolling blackouts around the country, but was doing everything it could to avert it’. It quotes Eskom spokeswoman Hilary Joffe as saying that "We are working very closely with our large customers to see if they can reduce their load... but the risk is very high. We are doing our utmost to avoid it," and that "We are experiencing quite a lot of unplanned maintenance. We are not getting performance from our generating plants. There are also quite a lot of technical problems which are cutting supply further.”

AMEU members are reminded of previous suggestions in this Bulletin and individual circulars to become familiar with recommended preparation activities such as possible implementation of of the NRS 048-9 Code of Practice and the Energy Conservation Scheme (ECS) in order to prevent the implementation of planned load shedding. The Eskom `Generation Medium Term Adequacy Reports’ can be accessed on the Eskom website at http://www.eskom.co.za/c/59/supply-status/ and also via a link on the AMEU home page, here.

Mike Rossouw, chairperson of the Energy Intensive User Group (EIUG), is reported to have told Engineering News Online (article on 11 January 2012) that EIUG members were “keenly aware” that total blackouts would be to the detriment of all South Africans, adding that these companies were willing to cooperate with Eskom to reduce their electricity demand.

Engineering News Online reported on 17 January 2011 on the second Eskom weekly ‘state of the power system’ bulletin. Eskom claims to have `…continued to make progress with its maintenance programme, and that the performance of its power stations had improved since last week.’ It also however said that said that the system remained tight and again urged consumers to cut electricity use by 10%. The weekly bulletin is in line with Eskom’s commitment `to transparent and regular communication on the power system, which is expected to be constrained for at least the next two years.’  

Copies of the Engineering News Online articles are available here.