NEDLAC REPORT TO THE NATIONAL ASSEMBLY PORTFOLIO COMMITTEE ON ENERGY 22 MAY 2012 NEDLAC REPORT TO THE NATIONAL ASSEMBLY PORTFOLIO COMMITTEE ON ENERGY ON THE INDEPENDENT SYSTEM MARKET OPERATOR (ISMO) BILL

Presentation Overview Presentation Outline Presentation Overview Nedlac Overview Background The Nedlac Process Nedlac Input on the ISMO Bill The Process: Parts I & II Areas of Agreement Areas of Disagreement

Nedlac: Background The National Economic and Development Labour Council (Nedlac) is the seat of national social dialogue in South Africa. It was set up through the National Economic Development and Labour Council Act, Act 35 of 1994. The Council is a representative and a consensus-seeking body where the parties to the Council seek to reach agreement on policy matters through negotiation and discussion based on mandates.

The Nedlac Process The Nedlac constituencies – Government, Labour, Business and Community – table and consider policies and legislation in line with the Nedlac protocol. Issues are tabled at least three months before sign-off but exceptions can be made in line with the protocol. Once the process of engagement on the policy has been finalised, a Nedlac report is prepared for Nedlac’s Executive Council to ratify. Next, the Nedlac report is sent to the relevant Minister to table in Parliament. Parties are bound not to re-open discussion in Parliament on any area where agreement was reached in Nedlac. 4

NEDLAC INPUT ON THE ISMO BILL

The Process: Part I The Task Team finalised the first report and the Management Committee signed off on it on 26 January 2012. A copy was sent to the Executive Authorities and the Portfolio Committee on Energy . The Task Team met on 15 November 2011 and 29 November 2011. Nedlac set up a Task Team to consider the Bill. It comprised representatives from Business, Labour and Government. The Department of Energy tabled the ISMO Bill at Nedlac on 04 August 2011. This report is attached to the presentation as Annexure A.

The Process: Part II The Task Team finalised a supplementary report. Nedlac convened a Task Team to consider the bill. It met on 7 May 2012. Task Team was reconvened to consider the amended Bill and a supplementary report was prepared. The Department of Energy tabled the Bill at Nedlac on 7 May 2012. Government submitted a revised ISMO Bill to Parliament. The Portfolio Committee on Energy requested Nedlac’s views on the Bill before Parliament. Nedlac agreed. The supplementary report is attached to the presentation as Annexure B.

Areas of Agreement Constituencies agreed that the implementation of the Bill should be phased through regulations to ensure a seamless transfer of functions to the new entity . The “effective date” definition should therefore be reviewed along with a review of sections 40 and 41. The reference to international best practice should be removed from the section stating ISMO should coordinate with generation licensees to plan maintenance in accordance with the Grid Code. Need for some definitions to be aligned with the Electricity Regulation Act. Need to define “Procure” and “Procurer” Need to define “Generation licensee” Revise section calling for ISMO to perform contingency studies because of questions around reference to using “live data from the control system state estimator”. Agreement that wording in previous draft of Bill is better.

Areas of Agreement The clause on the Memorandum of Understanding should be reviewed and agreement that wording in previous draft is better. Agreement on the need for a seamless transition between the status quo and when ISMO comes into effect so as not to disrupt security of supply. Amendment of section 41 (2) in order to give effect to the phased manner to the transfer of functions. Before the transfer of the functions to ISMO, the following must be undertaken: An assessment of the impact of such transfer is required on the electricity tariff; Eskom’s balance sheet and jobs; and, Comprehensive engagement with workers.

Areas of Agreement Agreed with the removal of Section 6 on subsidiaries and accountability. Timeframes needed for filling vacancies on the Board. Appointment of staff and conditions of service as well as transfer of Eskom staff to ISMO should accord with applicable labour laws. Implementation of powers of entry and inspection should be dealt with by Notice in the Gazette. Revision of section 38 on offences and penalties to clarify that reference is to third parties and not employees. Public consultation when developing regulations needed. Section 40 should be amended so that the Bill does not restate sections of the Labour Relations Act in a more rigid form.

Areas of Disagreement Section 4: Functions of ISMO Business and Labour are of the view that reference to “as far as is reasonably possible”, be removed from the text as safety is a fundamental right; furthermore the securing of power was a function that ISMO must undertake fully without any caveats. Government disagreed as it may not guarantee the delivery of power in a secure and safe manner all the time. There are many parties involved in the value chain hence ISMO may not take such undertaking. The transmission lines for instance, will be maintained by Eskom transmission whilst the power plants will be operated by the relevant operators and ISMO will have no role in the safety of such operations.

AREAS OF DISAGREEMENT Section 3: Establishment of ISMO No agreement reached in relation to fees being payable by ISMO.

Conclusion The full text of the Nedlac Reports are attached to the printed version of this presentation. The initial report is Annexure A and the supplementary report is Annexure B. “Nedlac- A catalyst for Social and Economic Development”

Thank You.