ELECTRICITY REGULATION AMENDMENT BILL

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ELECTRICITY REGULATION AMENDMENT BILL
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Outline

• BACKGROUND
• Industry structure
• Electricity value chain
• Consequences of unregulated reticulation
• History in brief on the Bill
• The Bill as presented to PPC
• STAKEHOLDER INPUTS
• What stakeholders have said
• Divergent views on reticulation
• CURRENT VERSION OF THE BILL
• The Bill as amended
• Purpose of the Bill

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Industry structure

• Current EDI structure is highly inefficient owing
  to fragmentation
• Absence of economies of scale in respect of
  investing in assets, sharing of facilities,
  services, people development, etc.
• Insufficient investment by municipalities in
  maintenance, system strengthening and skilled
  professionals and managers. The root cause of
  this underinvestment is poor municipal governance

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ELECTRICITY VALUE CHAIN
GENERATION
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Consequences of unregulated reticulation

• There is a proliferation of different tariffs
  (approx 2000).This results in unequal treatment
  of domestic end users.
• Municipalities do not invest .
• NERSA has limited powers to enforce regulatory
  framework over municipalities under the above
  circumstances.

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History in brief on the Bill

• The Electricity Regulation Amendment Bill was
  initially presented to Parliament as chapter 4 of
  the Electricity Regulation Bill which was then
  removed for later consideration as section 76
  Bill as per Parliaments request.
• After the removal of chapter 4, the Electricity
  Regulation Bill was adopted by Parliament as
  section 75 Bill and later assented as an Act in
  July 2006.
• The Electricity Regulation Amendment Bill was
  reintroduced to Parliament during the last
  quarter of 2006, amending the Electricity
  Regulation Act with the intention of inserting
  the removed chapter regulating electricity
  reticulation services.

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The Bill as presented to the PPC

• The original version of the Bill before taking
  into account stakeholders inputs emanated from
  the PPC public hearings provided for
• The separation of electricity reticulation from
  distribution by defining reticulation as
  consumption under 500MWh per annum per customer
• Not to license electricity reticulation but to
  regulate it through norms and standards set by
  the Minister
• Discarding the existing licensing framework for
  electricity reticulation and providing for
  service a delivery agreement where the
  municipality is not a service provider
• Exempting certain customers from being
  reticulation customers such as water pumping
  schemes and traction, irrespective of the
  consumption level.

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STAKEHOLDER INPUTS
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What stakeholders have said

• There are diverse views in relation to the needs
  of the stakeholders.
• Examples
• Reticulation means entire distribution value
  chain.
• Reticulation is 380 volt distribution only
• NERSA believes the entire industry needs to be
  licensed in a similar manner.
• Licensing the reticulation part of industry
  impedes municipalities in the execution of their
  constitutional mandate
• Some stakeholders are averse to the regulators
  intervention in the case of non-compliance and
  only s139 is applicable as a means to intervene
• Intervention by s139 is not appropriate for
  reticulation
• The detailed stakeholder responses are available

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Divergent views on reticulation
Scenario Implication for regulation and REDs formation
Reticulation is tantamount to distribution and cannot be licensed R35 billion industry suffers weak regulation and 10 million end-users interests compromised. Industry consolidation difficult. Tariffs remain fragmented Some municipalities, especially non-Metros, cannot execute mandates
Reticulation is 380V supply No municipal buy-in into REDS Risk of Constitutional challenge Persistent regulatory uncertainty as to enforcement
Define reticulation by separating wires from retail business No municipal buy-in into REDS Risk of Constitutional challenge Persistent regulatory uncertainty as to enforcement
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Current version of the Bill with stakeholder
inputs accepted by PPC
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The Bill as amended

• After taking into account the stakeholder inputs
  presented before the PPC, the following
  amendments were made
• The definition of reticulation was amended to
  mean distribution
• There is no separation of customers in terms of
  consumption
• All distributors including municipalities must
  hold a licence issued by the regulator to
  strengthen regulatory environment
• Provisions of the Service Delivery Agreement
  must coincide with the licence conditions to
  harmonize dual regulatory framework and
• Norms and standards will form part of the licence
  condition for all distributors.

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Purpose of the Bill

• The Bill seeks to do the following
• Facilitate the economic regulation of the whole
  electricity value chain including municipalities
• Regulate reticulation services in a manner which
  recognizes the role of municipalities.
• Provide for the regulation of service providers
  by municipalities (SDA) and to harmonize this
  with the licensing framework
• Provide uniformity in the treatment of end-users
  by licensing them
• Lays a foundation towards the formation of REDs

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• Thank you