NERSA CONSULTATION PAPER PROCESS Moefi Moroeng Specialist: Wholesale Electricity Trading 1
AGENDA Energy Regulator Overview Regulation of the Electricity Supply Industry Current Structure of the Electricity Supply Industry Regulation of Electricity Prices Licensing Renewable energy issues 2
LEGISLATIVE EVIRONMENT POLICY LAW REGULATIONS RULES PARLIAMENT/ GOVERNMENT DEPARTMENT OF ENERGY NERSA GOVERNANCE 3
4 The Regulatory Cycle in South Africa Elemental parts: Make In South Africa this is predominantly in the Sphere of National Government Operate administering and enforcing regulation which is predominantly in the realm of the Energy Regulator (NERSA) Review assessing regulation and making any adjustments required.
National Energy Regulator Act, Act No 40 of 2004; Independent Regulator: 4 full time and 5 part time members Responsible for the regulation of three energy industries: electricity; piped gas; petroleum pipelines Decisions based on reasons, facts and evidence Public meetings/hearings Industry legislation Electricity Regulation Act, 2006 (Act No. 4 of 2006) as amended in 2007 Gas Act, 2001 (Act No. 48 of 2001); Petroleum Pipelines Act, 2003 (Act No. 60 of 2003); Electricity Regulations Legislative Context Electricity Pricing Policy (EPP) GN1398 19 December 2008 Electricity Regulations on New Generation Capacity GN 399 4 May 2011 5
Objects of the ERA To achieve efficient, effective, sustainable & orderly development of the ESI in SA. To safeguard & meet the interests & requirements of present and future electricity customers & end users. To facilitate investments & universal access to electricity. To promote the use of diverse energy sources, energy efficiency, competitiveness & customer choice. To facilitate a fair balance between the interests of customers, licensees, investors & the public. 6
Regulatory Principles Regulatory principles guide the Regulator s conduct and service delivery: Rule of Law: Law applies to everybody and provides a clear framework for everyone to operate. Review and appeal by high court Transparency: Reason for decisions and consultative processes; Neutrality: Neutral to all market players without favouring one or other groups (non-discrimination) Consistency: Explained decisions enabling stakeholders to take informed decisions no surprises; predictability Independence: Independence from stakeholders and politicians; within legal framework and published Government policy) Accountability: Internal accountability Regulator takes responsibility for actions and decisions. In addition, NERSA binds itself to carry out its business efficiently, economically and effectively, as required by legislation. 7
Functions of Energy Regulator The functions of the Energy Regulator is defined in the respective industry legislation. It comprises: Licensing: Construction, operations; trading; Setting of tariffs and price structures; Setting of licence conditions and standards; Monitoring compliance with licence conditions separate accounting provisions; third party access and interconnection provisions; Non-discrimination; Safety, environment, health and security standards Handling of non-compliance setting penalties and fines for non-compliance; Investigate complaints; Mediate or arbitrate in disputes; Gather and store industry information; 8
Electricity Regulation March 2015 9
Industry Structure It is dominated by the vertically integrated incumbent Eskom Eskom is responsible for the generation of 96% (~26 Power stations) of electricity in the RSA and 60% of Distribution There are 188 licensed distributors, including Eskom Distribution IPPs will sell to Eskom and not compete directly Total licensees = 188 including Eskom : 174 Municipalities 13 Private Distributor 1 Eskom Eskom Dx - distributes 60 % to end user customers Municipalities and some private distributors distribute 40 % to end user customers 10
REGULATION OF ELECTRICITY PRICES Electricity Regulation Act, 2006 (Act No. 4 of 2006) Section 4(a)(ii) says that the regulator must regulate prices and tariffs. Section 15 (1) (a) says:- must enable an efficient licensee to recover the full cost of its licensed activities, including a reasonable margin or return;. Section 15 (1) (c) says:- must give end users proper information regarding the costs that their consumption imposes on the licensee's business; Section 15(1) (c) and (d) says:- must avoid undue discrimination between customer categories and may permit the cross-subsidy of tariffs to certain classes of customers NERSA also has to comply with the Principles in the Electricity Pricing Policy document because Section 4 (a) (iv) says:- issue rules designed to implement the national government's electricity policy framework, the integrated resource plan and this Act; 11
Licensing and Compliance Monitoring The Act requires that anyone who is involved in Generation (Gx), Transmission (Tx), Distribution (Dx), Import/Exports and Trading should be licensed by NERSA With each and every licence granted NERSA imposes licence conditions which should be complied with. The ERA stipulates that the licensing process should not exceed 120 days After a licence has been issued NERSA has to monitor for compliance more than 200 licensees. The Electricity Licensing and Compliance Department is responsible for these functions within NERSA. 12
Legal Issues with the unleashing of Solar PV 1 7 Activities requiring licensing (1) No person may, without a licence issued by the Regulator in accordance with this Act- (a) operate any generation, transmission or distribution facility; (b) import or export any electricity; or (c) be involved in trading. (2) Notwithstanding subsection (1), a person involved in an activity specified in Schedule II need not apply for or hold a licence issued by the Regulator. Schedule 2 EXEMPTION FROM OBLIGATION TO APPLY FOR AND HOLD A LICENCE 1 Any generation plant constructed and operated for demonstration purposes only and not connected to an inter connected power supply 2 Any generation plant constructed and operated for own use 3 Non-grid connected supply of electricity except for commercial use 13
Legal Issues with the unleashing of Solar PV 2 (3) The Regulator, in issuing a generation licence- (a) is bound by any determination made by the Minister in terms of subsection (1); (b) may facilitate the conclusion of an agreement to buy and sell power between a generator and a purchaser of that electricity. ]9 Registration (1) The Minister may, in consultation with the Regulator, determine by notice in the Gazette that any person involved in an activity relating to trading or the generation, transmission or distribution of electricity that does not require licensing in terms of section 7 read with section 8 must register with the Regulator. 14
Legal Issues with the unleashing of Solar PV 3 Policy makers to develop policy around the introduction of SSREG Own use precludes feeding back onto to the grid Licensing is a time consuming and expensive process NERSA does not have the capacity to license thousands of roof top solar installations There is the option for the minister to require registration 15
What the Regulator needs to balance Allow Domestic, Commercial and industrial companies interested in generating power to connect to the grid. This should be done in such a way that it does not negatively impact customers (tariff wise), who do not have the capacity to install such systems/generators Protect the utilities allowing SSREG Programme 16
THANK YOU 17