1. ASSOCIATION OF MUNICIPAL ELECTRICITY UNDERTAKINGS (Southern Africa) - GALLAGHER ESTATE, MIDRAND ASSOCIATION OF MUNICIPAL ELECTRICITY UNDERTAKINGS (Southern Africa) - GALLAGHER ESTATE, MIDRAND Friday, May 01, 2015 PRESENTATION BY: Name: Mr. Matthews Bantsijang Director: Electricity Policy Analysis and Regulation Contact Number: 012 – 317 8524 E-mail Address: matthews.bantsijang@dme.gov.za NEW ELECTRICITY REGULATION IN SOUTH AFRICA

2. OVERVEIW OF THE PRESENTATION Background on Electricity Regulation in RSA Background on Electricity Regulation in RSA Electricity Act Electricity Act Overview of the Energy Regulator Act Overview of Dual Electricity Regulation in RSA Overview of Dual Electricity Regulation in RSA Licensing Licensing Section 76 (Constitution) issues Conclusion

3. Background The establishment of the regulator refers: he Electricity Control Board referred to in section 22 of the Electricity Act, 1987 as the "National Electricity Regulator". South Africa’s National Electricity Regulator (NER) handles licensing of electricity generators, transmitters, and distributors in the country, licensed Eskom as the national distributor. NER was overseeing the regulation of the industry (ESI) in accordance with existing legislation and the 1998 RSA Energy Policy White Paper.National Electricity RegulatorWhite Paper The National Electricity Regulator (NER) is required by S4 (1) (b) of the Electricity Act of 1987 as amended (94, 95), to “determine prices and conditions on which electricity may be supplied by a licensee”. RSA Constitution of 1996 refers to “electricity reticulation”.

4. Introduction of the Energy Regulation The energy sector is growing and that resulted to enactment of the following legislations: Gas Act; and Petroleum Pipe Lines Act. Cabinet made decision consolidate energy under one regulator resulting in Energy Regulator Act. The Energy Regulator Act establishes the National Energy Regulator (NERSA) which will be in operation as from April 2006. NERSA will regulate: Electricity, Gas ; and Petroleum Pipe Lines.

5. Overview of the Energy Regulator Act (in brief) The purpose of the Act is to: establish a single energy regulator to regulate, electricity, gas and the petroleum pipelines, and Repeal the sections of the above Acts that provide for the establishment of different separate energy regulators e.g. electricity regulator. Definitions (not covered in the Act). Constitution of the energy regulator 4 full time and 5 part time regulators appointed by the Minister, the Minister may determine their remuneration and allowances with the concurrence of the Minister of Finance.

6. Overview of the Energy Regulator Act (in brief ) Disqualification and requirements regarding appointment of the energy regulators Vacation of office and termination of appointment Meetings of the Energy Regulator Duties of the Energy Regulator Decision of the Energy Regulator must be inline with the Electricity Act, Gas Act and Petroleum Pipelines Act, Personnel of the Energy Regulator, Funds of the Energy Regulator.

7. Overview of the Electricity Regulation Act (no 4 of 2006, operatinalised on the 01/08/06 ) INTRODUCTION Why Electricity Regulation (ER) Act Industries regulated by ER Act Dual regulation – Electricity Reticulation ELECTRICITY REGULATION ACT IN DETAIL Functions of the regulator Licences and registration Contravention of a licence and order by court Resolution of disputes Inquiries and investigations General provisions Exemptions National Assembly adoption

8. National Energy Regulator of South Africa (NERSA ) National Energy Regulator of South Africa Gas Regulator Gas Act Petroleum Regulator Petroleum Pipelines Act Electricity Regulator Electricity Regulation Act Energy Regulator Act Regulator repealed

9. Overview of the Electricity Regulation Act Why Electricity Regulation Act Why Electricity Regulation Act The Electricity Act needs to be repealed: because is not in line with the Constitution; to facilitate restructuring in the electricity industry; and to align its provisions with the National Energy Regulator Act. Electricity Regulation Act (ER Act) repeals Electricity Act except for section 5(b) that deals with funding of the regulator; provides for separate legislation for funding regulator; Money Bill will then repeal section 5(b) of the Electricity Act.

10. Overview of the Electricity Regulation Act Industries Regulated by the ER Act Electricity Regulation Act Generation Secom IPP Munics Transmi ssion Distribu tion Eskom Munic s ( reticul ation ) NERSANERSA

11. Overview of the Electricity Regulation Act Sections not covered by the ER Act Sections not covered by the ER Act The Electricity Regulation Act does not cover regulation of electricity reticulation. The ER Act will be amended to cover regulation of electricity reticulation. Electricity reticulation will then have dual regulation regulation by municipalities (Municipal Systems Act). the national energy regulator (Electricity Regulation Act).

12. Overview of the Electricity Regulation Act Dual Regulation – Electricity Reticulation Service Delivery Agreement Municipality License Happy balance between SDA and license provisions Service provider NERSANERSA

13. Overview of the Electricity Regulation Act Functions of the Regulator Chapter 2 The regulator is empowered to: issue licences for transmission, generation, distribution, import and export of electricity and trading in electricity; impose penalties for non-compliance; act as a mediator in settlement of disputes; and register unlicensed generators in the ESI.

14. Overview of the Electricity Regulation Act Licences and registration Chapter 3 {section 7 to 10} outlines activities to be carried out under licence such as import or export, trading, generation, transmission and distribution functions. Section 9 gives the Minister power to exempt any of the activities from holding licences under the advise of the regulator. provides for payment of licence and registration fees by applicants Minister can determine activity that requires licensing and registration.

15. Overview of the Electricity Regulation Act Licences and registration Chapter 3 {section 11 to 18} Regulator also empowered to deal with transparency of licence applications and procedures. An applicant for a licence is required to make a notice of application in a newspaper. Regulator approves tariffs for generation, transmission and distribution (excluding reticulation). Section 15 of the Act outlines licence conditions relating to generation, transmission and distribution

16. Overview of the Electricity Regulation Act Licences and registration {Cont….} The regulator may suspend, remove certain conditions or amend licence conditions (section 17). The regulator may revoke a licence on application if the licensed activity is no longer needed (section 18). Contravention of licence, order by court Chapter 3 { section 19 and 27} Regulator sitting as a tribunal may impose a penalty of the higher of R2m per day, or 10% of annual turnover, if failed to adhere to licence conditions (section 19(4)) revoke a licence through an application to the High Court. The High Court may grant or refuse the application.

17. Overview of the Electricity Regulation Act Inquiries and investigations (Chapter 5) Regulator shall on receipt of complaint related to electricity supply, appoint a person to make inquiries and report to the regulator, section 44. After receipt of the report, the regulator may institute a formal investigation. The regulator may refer the outcome of the investigation to the Attorney-General of the area for his or her consideration.)

18. Overview of the Electricity Regulation Act General provisions (Chapter 6) Any agreement in contravention of this Act or Constitution may be declared to be unenforceable between the parties by a court of law. The regulator may after consultation with affected parties, make guidelines, codes of conduct and practice or make rules by notice in the gazette relating to the licensee and the customers. In section 45, the Minister may by notice in the Gazette, make regulations regarding licences, registrations, the form and the manner of applying for licences, the publishing of advertisements by licensee and etc. Before promulgating regulations contemplated above, the Minister shall consult with the regulator and invite public comments on such regulations. The Minister is also empowered to procure New Generation Capacity

19. Overview of the Electricity Regulation Act General provisions (Chapter 6) Repeal of laws and savings The NERSA contemplated in section 2 of the Electricity Act 1987, is repealed. Licences issued by the NERSA in terms of the provision of the Electricity Act, shall continue in force as if they were issued in terms of the provisions of this Act. This Act repeals and replaces the Electricity Act (Act 41 of 1987).

20. Overview of the Electricity Regulation Act Schedule 2: Exempted from obligation to apply for and hold a licence Any generation plant built for demonstration only is exempted from holding a licence. Any generation plant constructed and operated for own use. Non-grid connected supply of electricity except for commercial use.

21. Overview of the Electricity Regulation Act National Assembly adoption “consumers” was replaced with “end users” Rules of administrative nature allocated to the regulator. Regulator obliged to form “end user forums” and licensees and end users allowed to participate. Minister empowered to draft regulations for norms and standards relating to quality of supply (blackouts). Renewable energy. Act adopted by National Assembly in November 2005.

22. Overview of the Electricity Regulation Act Section 76 (Constitution) issues Electricity reticulation matters removed from original version of Act, in line with Parliamentary procedure Definition of reticulation Norms and standards for reticulation Procedure in the event of non-compliance Framework for tariff setting by municipalities NCOP to be approached to deliberate over same

23. Conclusion In line with the Constitution, “… the National Government can regulate the reticulation…” Also in line with the Constitution, DME respect that “...every municipality has the executive authority over and the duty to administer the reticulation of electricity within its area of jurisdiction. A municipality must exercise its executive authority and perform its duty…”. A municipality must then acquire and own licensing or registration on their jurisdictional area. Presently the Cabinet has stopped the issuing of EDI licenses by NERSA till the EDI restructuring process is complete. “If you have ten thousand regulations you destroy all respect for the law (Constitution).”If you have ten thousand regulations you destroy all respect for the law (Constitution). - Winston Churchill quotes (British Orator, Author and Prime Minister during World War II. 1874-1965)Winston Churchill quotesBritishOratorAuthorPrime Minister18741965

24. THANK YOU! Matthews Bantsijang Department of Minerals and Energy Electricity Policy Analysis and Regulation Private Bag X 59, Pretoria, 0001 Corner Visagie and Andries Street, PTA Tel: 012 317 8037 Fax: 012 317 8539 E-mail Address: matthews.bantsijang@dme.gov.za