1. ISMO Bill Submission
May 2012

2. Content Background, the energy crisis: How serious? Causes?
Short-term solutions?
Sustainable solutions?
ISMO Bill
DoE policy
The Bill
Recommendations

3. Background Energy crisis, how serious? Cost includes: Economic
Developmental
Social
Psychological (subjective)
Environmental
Political

4. Background Energy crisis, how serious? R120bn in a single year
Compounded forever (x2 in 10yrs, x4 in 20yrs, x8 in 30yrs)
Does not include:
Lost investment: jobs, growth, wealth
Wasted resources: cutbacks, diesel, etc
Dubious decisions; lack of expertise
eg Duvha accident (uninvestigated)

5. Background Energy crisis, how serious? Over-runs – cost and completion
Medupi – R46bn  R78bn  R146bn???
Mossel bay diesel OCGT plant baseload – running 24/7; x20 cost; imported fuel
‘Lights on’ now policy means deeper crisis later
Absolute cap on growth, jobs, etc
ie NGP, NDP, etc, impossible!

6. Background Implications: 15% of budget
Housing for all (entire backlog; x2 RDP houses built since 1994)
Clothing for all
Entire road backlog and maintenance
25 mines (SA missed minerals boom; again?)
500,000 cars
Schools, hospitals, investment, jobs …

7. Background Cause – policy failure; vacillation; ideology
Solution – viable policy:
Not more of the cause
Demand predicted 1997
1998 White Paper – need for IPPs 
DoE 2002, etc – Eskom can’t finance need, IPPs essential
Contacts only in 2006
DoE & NDP – ISMO essential
Global trends – unbundling, IPPs, competition

8. ISMO Bill Solution Could have been at no cost to government / society
Long-term policy
ISMO is essential first step
Global scan – emulate winners:
Developing: India, China, Brazil, Mauritius
Developed: USA, EU, Australia
Proper analysis eg California, India

9. ISMO Bill
14 years unresolved, why? Eskom resistance? Political will? Failed ideology?
Solution:
ISMO – single most important issue
ISMO Bill welcomed, historic reform
Pro-transformation, development, BEE
Which model? (error means more failure).

10. ISMO Bill Solution: IPPs (viable, sustainable, diverse, substantial)
Proven ISMO model (world’s experience)
True independence (essential)
Impossible without ownership
Like roads, airports, harbours, etc
Government or private? Not critical (sale would fund government and Eskom build)
Electricity Act envisages competition and consumer choice

11. ISMO Bill Solution (most are constitutionally mandated):
ISMO Bill needs Principles of Good Law
Objective rules, criteria, certainty
Genuinely independent grid (ownership essential)
Free competition, level playing field, wheeling (Single buyer? Objectivity and transparency?)
Regulate standards not market
Rule of Law: No pseudo-court or discretionary power

12. ISMO Bill Solution Proper regulation: Create NERSA independence
Clarify NERSA functions
Possibility of political interference creates needless pressure and distortion (eg California blackout)
ISMO to be regulated by NERSA Commission

13. End