Department of Minerals and Energy Energy Regulator Bill Presentation to NCOP Select Committee by Department of Minerals and Energy 16 September 2004

National Energy Regulator Bill Contents of Presentation Background Relationship Between National Energy Regulator Bill and Electricity Act Gas Act Petroleum Pipelines Act Structure of Bill Section by Section Description Proposed Schedule for establishment Stakeholder Comments & PPC Changes

Main Events April 2002: Cabinet Approved a Multi-Sector Regulator Electricity Gas Petroleum Pipelines DME Undertook Study to Ascertain How Best to Give Effect to Cabinet’s Decision December 2003 Cabinet Approved Energy Regulator Bill be Submitted Directly to Parliament for Consideration Not sent for public comment as merely an amalgamation of other Acts

Why? Concern over proliferation of state entities Synergies and efficiencies Competing energy carriers need even treatment e.g. gas and electricity Cost savings Staff shared Regulators shared Shortage of regulatory skills

Submission to Parliament February 2004: Submitted to Parliament Re-Submitted after General Election Zulu Translation Currently being Updated

Petroleum Pipelines Act THE PRESENT SITUATION Electricity Act Petroleum Pipelines Act Gas Act

THE PRESENT SITUATION National Electricity Regulator Gas Regulator Petroleum Pipelines Authority Electricity Act Petroleum Pipelines Act Gas Act

Petroleum Pipelines Act THE CONCEPT National Energy Regulator Electricity Act Petroleum Pipelines Act Gas Act

Petroleum Pipelines Act THE CONCEPT 2 National Energy Regulator Administers Electricity Act Petroleum Pipelines Act Gas Act

National Energy Regulator Energy Regulator Bill National Energy Regulator Electricity Act No 41 of 1987 Gas Act No 48 of 2001 Petroleum Pipelines Act No 60 of 2003 Regulator Establishment Regulator Establishment Authority Establishment Matters Pertaining to Licenses etc Matters Pertaining To Licenses etc Matters Pertaining To Licenses etc

Structure of Bill Chapter I: Definitions and Object Chapter II: National Energy Regulator Establishment & Functions Composition & Vacation of Office Meetings & Duties Decisions Personnel Funds, Accounting & Reporting Chapter III: General Provisions Repeal of Sections of Electricity, Gas & Petroleum Pipelines Acts Transition Measures Schedule

Definitions and Object As per existing Acts Object of Act “The object of this Act is to establish a National Energy Regulator for the regulation of the electricity, piped gas and petroleum pipelines industries.”

Establishment & Functions Energy Regulator established as juristic person §4 Functions: Undertake the functions of Gas Regulator & Petroleum Pipelines Regulatory Authority from 1 April 2005 Undertake the functions of National Electricity Regulator from 1 June 2005

Composition §5 Composition: Three full time & five part time regulators

Composition Of the three full-time Term of office 4 years 1 electricity 1 gas 1 petroleum pipelines Term of office 4 years Remuneration set by Ministers of Minerals and Energy and Finance

Regulators: Requirements &Vacation of Office §6 Membership Requirements: Requirements SA citizen Collectively representative Impartial objective Terminate conflicts of interest Disqualifications Insolvent Convictions Appointment process Gazette call for nominations §7 Vacation of Office Compulsory; unsound mind, misses > 2 meetings Resignation

Meetings & Duties §8 Meetings of Regulator §9 Duties Frequency, times and places Quorum: majority or 4, whichever is greater Attendance Records §9 Duties Justifiable & transparent Independency

Decisions §10 Decisions: In writing In public interest Within powers Reasons given Public (except when confidential) Review by High Court

Personnel §11 Personnel: Regulator appoints CEO CEO appoints employees Minister may instruct use of personnel from another regulator or licensing authority Personnel actions to be professional

Funds §12 Funds Appropriated by Parliament Levies under other Legislation: Gas Regulator Levies Act Electricity Act Petroleum Pipelines money Bill License fees Charges

Accounting & Reporting Public Finance Management Act Separation of Accounts Costs shared in proportion to costs incurred Auditing by Auditor General §14 Reporting: PFMA applies Include: Licenses Regulations and Directives Strategies & commercial developments Safety, Health & Environment

Repeals & Transitional Measures Refer to Schedule (corresponding sections of three acts) §16 Transitional Provisions: CEO of National Electricity Regulator is CEO of National Energy Regulator Staff of National Electricity Regulator are staff of National Energy Regulator Assets & Liabilities of National Electricity Regulator

Schedule Repeals: Amends: Repeals regulator/authority established by: Electricity Act (No 41 of 1987) Gas Act (No 48 of 2001) Petroleum Pipelines Act (No 60 of 2003) Amends: Definitions of regulator/authority refer to the Energy Regulator established by the National Energy Regulator Bill in the following: Gas Regulator Levies Act (No 75 of 2002) “Gas Operator” to “National Energy Regulator” in the Gas Act.

Stakeholder Comments & PPC changes Observations Governance issues Minor improvements

Observations A regulator is not a company The King Commission must not be slavishly applied The NER is what we know - not necessarily an ideal model Very few if any presenters have experience of gas or petroleum pipeline regulation

Governance CONCERN RESPONSE CEO/No. of full time regulators CEO votes. 4 full time + 5 part time = 9 Appointment Minister Gender “broadly representative including gender and race” Designation CEO+gas, electricity & pipelines, “primarily responsible” 3 full time not reporting to CEO To Regulator, not to CEO

Governance contd. Day to day management CEO responsibility CONCERN RESPONSE Day to day management CEO responsibility Resources (personnel and/or other for full-time members) CEO recommends Regulator determines from time to time Quorum 4 or half whichever is greater Chair not present Deputy Appointed – non-exec Chair appoints non-exec, if deputy not available

Governance contd. CONCERN RESPONSE Quorum for extended sessions? (e.g. hearings, tribunal) Appoint sub committees, delegate duties and functions BUT Provisions of Act apply (transparency, guidance) Accountability remains with Regulator Dual review/appeal routes Review by High Court, repeal Section 21 of Electricity Act

Governance contd. Eligibility part-timers: Preclude public servants? CONCERN RESPONSE Eligibility part-timers: Preclude public servants? Minister appoints board Continuity/Term of office Elec Act – no period ICASA - Chair 5 yrs, councillors 4 yrs Competition Tribunal members – 5 years. Proposal: 4 yrs part time, 5 yrs full time

Further improvements (1) Energy Regulator becomes “National Energy Regulator” “Other agreements” – deleted “unsound mind” – courts in SA understands this term Offences “dishonesty” – Exempt “10 years” prior to appointment conviction Offence involving dishonesty Sentence of imprisonment without the option of a fine for any other offence served Removed if Ditto

Further improvements (2) What happens to fines? Section 213(1) of Constitution into National Revenue Fund Specify safety responsibility? Not necessary Commencement: “at a date determined by the Minister on or after 1 June 2005”

Further improvements (3) Notifying public of meetings/agenda: Regulator must make rules Act in interests of? “duty to balance the interests of all South Africans “ Present views at “own expense” - Removed

Further improvements (4) What other services? “in terms of this Act” Allocation of money: money appropriated by Parliament allocated to 3 accounts in proportion to costs unless otherwise determined by Parliament Money received from an industry paid into that industry account

Further improvements (5) Annual report requirements: “access to network infrastructure or summaries thereof where appropriate; tariffs or tariff structures set or approved or summaries thereof where appropriate”; access to network infrastructure or summaries; tariffs or tariff structures set or approved or summaries NER decisions in force: carried over

Further improvements (6) Access to sensitive information protected in terms of Promotion of Access to Information Act, 2000 (Act No. 2 of 2000) Sub-committees of Regulators established – Act applies to them Judicial review of administrative actions At the High Court In accordance with Promotion of Administrative Justice Act, 2000 (Act No. 3 of 2000) Appeals to High Court - decision of the Energy Regulator sitting as a tribunal

Energy Regulator Implementation Plan

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