To my genuine surprise the Energy Regulation Amendment Bill has been hustled through the National Council of Provinces and awaits the president’s politically adroit pen.
Business Day was the first to shine light on the mysterious administrative problem that held the bill up for six months last year, and at the time it seemed unlikely it would pass during this administration. When we wondered whether this was by design, it attracted the ire of the minister of mineral resources & energy, who accused us of running a “smear campaign”.
What I should have said is that there is no way for it to pass in a constitutionally watertight manner, and indeed I don’t think it has. The Western Cape voted against the bill in the NCOP because, it said, it had not been able to complete the required public consultation in time.
With the weight of the presidency and organised business behind it, it has been chased through the NCOP like a cellphone thief caught red-handed in the mall. Such vigour is to be admired, but it does mean the bill is worth reading carefully.
The haste creates a vulnerability to legal review, but the question is, who would want to challenge the bill, and why? After all, there is so much here that is so good — the belated unbundling of Eskom into generation, transmission and distribution and the establishment of an independent and competitive energy market, creating space for independent power producers and the wheeling of energy across markets, and killing off the dreaded Eskom monopoly.
All of this should not only fix our energy crisis, but also reduce prices, removing a millstone from around the neck of our beleaguered economy and creating hope for the one-in-three South Africans who cannot find work. Before we look at the details, let’s not forget how profoundly important this is.
The devil is in the detail, though, and the detail is best found in the amendments made to the bill in the portfolio committee and sent to the NCOP, compared to the bill that was originally tabled. They are different in important ways, and in the interests of space I will look at only a few issues.
First, the bill hands significant powers to whoever the minister of minerals & energy happens to be (now Gwede Mantashe). It gives the minister five years to establish a national transmission company, by which time in theory the departments of public enterprises and of electricity will be gone, but makes no provision for what should happen if there is a delay.
Open to abuse
The amendments favour the minister in interesting ways. In a case of “the failure of a market, or in the event of an emergency, or for the purposes of ensuring security of energy supply in the national interest”, for example, new sources of electricity may be needed. None of the above conditions are defined and are entirely open to abuse.
In fixing these issues, the tabled bill reads that required new generation capacity must “be established through a tendering procedure that is fair, equitable, transparent, competitive and cost-effective”, and “provide for private sector participation”. That wording was all removed in the committee, and I cannot see any reason for this that is not bad.
In the same section, the minister was to make determinations on the basis of ensuring “uninterrupted supply”. But in the committee, “uninterrupted” was replaced with “optimal”, which again remains undefined. Optimal for whom?
The amended bill dispenses with transparency in various unacceptable ways. It explicitly reads that in the case of “national interest” the minister need not adhere to the Integrated Resource Plan (IRP) and that he need not gazette his decisions for public comment. Applications for licences can be kept secret: “the applicant may request the confidential treatment of commercially sensitive information contained in an application for a licence and, subject to the concurrence of the regulator, such information may be withheld from publicly available copies of the licence application.”
Once again, this was added in the committee stage and was not in the tabled bill.
New generation need not be sold to the new Central Purchasing Authority (as part of the National Transmission Company) and the minister can determine who the buyer of new generation power might be. The bill is careful to make it explicitly clear that these rules and powers specifically apply to the building of new gas-powered generation facilities, which should set alarm bells off for environmentalists and anyone who has read our lead story today on the Reserve Bank’s note on our exposure to carbon taxes overseas.
When it comes to the issuing of generation licences, the bill creates risks for private investors. The amended bill now reads that the regulator (Nersa) “may, at any time during the licence period, amend, vary or add any licence”. On the say-so of the minister alone, applications for licences need not adhere to the IRP. That’s open to abuse, to say the least.
Lastly, and rather strangely, the bill as amended in the committee redefines the meaning of reticulation, which used to mean the distribution and trading of electricity below 11kVA — municipal supply to people’s houses and businesses. The upshot of the new definition is that the bill seems to remove Nersa’s oversight of prices and tariffs at municipal level. Now, it may be that Nersa is far from perfect, but without regulator oversight there is a real concern that municipal customers will, under the new bill if assented by the president, no longer fall under Nersa’s protection.
All of this sounds worrying. Now, no bill is perfect and certainly not a bill that has been the subject of a tug-of-war quite as much as this one has. It has become a point of pressure for organised business and the presidency and some large corporate egos are tied up in the passing of this law, despite its rather evident flaws.
This is not how we should run things, really, and the question to my mind is whether the bad stuff added to the bill in the committee outweighs the transformative nature of what the bill was tabled to do.
I guess the scale of the risk will reveal itself over time in the cost of finance. Until then, it is over to the president to apply his mind, and possibly even his pen.
• Parker is Business Day editor-in-chief.
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