Tag Archive | ERA

ISMO Bill: Eskom to keep the transmission grid

When asked by MPs what assets in the proposed Independent System Market Operator (ISMO) Bill were to be transferred to the operator’s name during the restructuring of South Africa’s energy system, Ompi Aphane, deputy director general of the department of energy (DOE), confirmed that the Bill was not referring to a transfer of South Africa’s transmission grid system but to minor office assets.   He said any such thoughts of splitting Eskom as the major electricity generator from its national supply grid were not being countenanced at this stage and any such moves “were a long way off”.

Aphane, in presenting DOE’s responses to the various submissions made in parliamentary public hearings on the Bill,  said that there had been a change of mind at DOE as a result of the submissions when it came to staff transfers.   These were now to be carried out strictly in terms of the Labour Relations Act.

The DDG summarized by saying that inputs on the Bill “had been very useful” and they would no doubt improve the quality of the Bill itself but he drew attention to the fact that a good deal of the hearings had been devoted erroneously to discussion on a finally re-organised energy supply system, “which was clearly not defined by the Bill nor its intention.”

However, Aphane said that in general terms the responsibilities of “keeping the lights on” was being taken away from Eskom given to ISMO with considerable numbers of staff transfers and transfer of expertise taking place as part of this process.

He said, “We have a very tight energy supply position in South Africa and in taking any direction with energy supply it is essential that we do not compromise this country’s supply/demand relationship which badly needs a balanced electricity supply system based upon carefully handled and integrated established base load plants and peak generation plants.”

In a survey of world situations, Aphane said that DOE had established that in some countries some very bad mistakes had been made in similar situations, including the United Kingdom, which had, as a result of poor handling, suffered greatly from little in the way of new infrastructure energy investment. It was critical, he said, that South Africa does not emulate such mistakes.

DOE said it had looked at ISMO structures established Norway, USA and in developing countries such as China, Turkey, Thailand and Brazil and it was interesting to note, he said, that Norway was generally regarded as having one of the best electricity market models – although very different from South Africa.

Nevertheless, Aphane said, there were certain parallels which South Africa could copy but he warned that any planning coming after the abortive REDs situation had been in a period when there was a high reserve margin. Now, with completely different and very tight restraints, it was to be realized that DOE would proceed into the area of free market operations with great caution. There was a different financial call upon Eskom and on government.

Aphane said it remained essential now to have control over pricing to the consumer especially in the light of Inter-Ministerial Committee report following the blackouts and massively increased electricity tariff structures; the call for energy efficiencies and new factors on climate change. The world was a different place to that when the REDs plan was mooted.

He commented that it had to be recognised that South Africa currently remained dominated by coal fired stations and such were difficult to introduce into a free market situation. Also, he said that the issues of cross-subsidies would probably always remain in some form or another.   He concluded that the “big ticket items” in DOE’s view that had emerged from the public hearings on the ISMO Bill were the perceived need  for independent transmission lines; that the concept of willing buyer-willing seller need to be addressed in the concept of the ISMO, as it was elsewhere in South African legislation, and the call for stakeholder representation on the ISMO board.

On the last point, DOE believed that the state must retain the prerogative of appointing board members in the light of the fact that it was the state that was exposed financially.

MP Lance Greyling, shadow minister of energy, called for a lot more planning and strategy on energy to rest with the ISMO board urgently. He disagreed that such a considerable number of the regulatory matters should remain to be sorted out under the ERA and would be preferably defined under the ISMO Bill at the soonest. Too much was being left to amendments to the ERA to come, way down the line, leaving a current vacuum, he said.

Posted in Electricity, Energy, Finance, economic, Mining, beneficiation, Public utilities, Trade & Industry, Uncategorized0 Comments

Hearings completed, debate starts on new ISMO Bill

With hearings over 4 days, the portfolio committee  of energy under Sisa Njikelana heard submissions on the Independent System and Market Operator (ISMO) Bill, legislation that brings to South Africa for the first time a regulatory system for the trading of electricity at a wholesale level and for integration of privately produced power into the national grid.

In addition, the department of energy has reported back to Parliament with its views on these submissions. This will be summated on this website shortly, after circulation of ParlyReport to private clients.

Department of Energy (DOE),  in their own submission during the hearings said that South Africa urgently needed new generation capacity but there had to be “rules of engagement and a level playing field” if the private sector was to be introduced. Consequently government had to ensure that the public still had the benefit of “minimalisation of inevitable tariff increases”.

The purpose of the ISMO Bill was to establish a centralised electricity buying department to separate such a process from Eskom who controlled 90% of the electricity output in SA, thus providing a form of independence from Eskom for independent power producers, DOE said in their introduction.

ISMO would be responsible for an “aggregated wholesale price”, leaving generation licences and allocation of megawatts supplied in terms of the integrated resources plan to be addressed under the Electricity Regulation Act.

In general, all submissions welcomed the introduction of such a Bill, the Energy Intensive User Group expressing concern in their comments as to who exactly was the ultimate owner of the national grid system and the fact that municipalities were included as distributors under ISMO jurisdiction.   The Bill was silent on ISMO rights, they noted, and how potential customers would be shared between Eskom and ISMO and is was important in their view that the Electricity Regulation Act be amended to reflect this since the new ISMO legislation would be rendered inoperable in many respects.

NERSA, the electricity regulator, had a number of critical comments to make, Richard Chauke of that organisation stating that “despatch”, or passing on of power generated is not provided for in the Bill as a licenced activity in terms of the Electricity Regulation Act (ERA), meaning that NERSA would have to commence trading activities on a temporary basis which was not a good plan.

Also, they stated, Eskom’s licence as an operator needed to be amended and separated to allow for independent power producers (IPPs).

NERSA responded to queries as to why the ERA had to be changed, stating in their reply that the ERA was the anchor legislation for the entire process and that matters should follow such a regime where major subjects such as this dealt should be dealt with in an over-arching industry act, particularly not the ISMO which was relevant to IPP supply.

NERSA again emphasised that as it was important in order to ensure equitable and fair despatch of IPP power; that considerable expertise within NERSA would have to be built up in NERSA in the coming months to ensure transparency and this might be achieved by hiring suitably qualified additional staff.

Posted in Electricity, Energy, Finance, economic, Fuel,oil,renewables, Mining, beneficiation, Public utilities, Trade & Industry0 Comments


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