Tag Archive | Independent System Market Operator

Parliament gives birth to ISMO system

ISMO  to get Eskom’s transmission assets…

In practical terms, the transfer of electricity transmission assets (as distinct from the grid itself) from Eskom into the body of a new government utility known as the Independent System Market Operator (ISMO) has begun in theory.

This follows the agreement of the portfolio committee of energy to process the ISMO Bill in phases in the light of the fact that in practice whilst the exercise has only just commenced “on the ground”, nevertheless, a regulatory environment in which to transfer Eskom transmission assets in the course of time is needed.

Eskom at helm of exercise

The committee acknowledged such a transfer is in fact a lengthy and highly technical process, on the whole completely supervised and finally staffed by Eskom staff, they themselves being transferred to the new entity.

The state law advisors (SLA) present at a recent meeting of parliament’s energy portfolio committee agreed that such a “phased in” approach to the Bill was possible but with careful drafting of a time frame or “framework” to accompany the process.

SLA needs certainty on process of writing changes

This was providing each clause of the Bill before Parliament, said SLA, had the both the agreement and political sanction of the committee beforehand, enabling the SLA to re-write the Bill with certainty.

The purpose of moving in such direction was to provide an enabling environment to the initial phases of creating such a statutory body as an ISMO and at the same time providing clear intent and certainty in the marketplace that such a process was due to take place.

Some reservations were expressed in opposition circles that an operating environment would be particularly difficult for industry and commerce to go forward in with only a partially completed legal and regulatory environment present. Independent power producers (IPPs) were finding it difficukt to strategise without the playing field being defined. It was stated also that agreement on all aspects of the establishment of an independent transmission operator had not yet been agreed to by all parties.

However, the consensus was, with the agreement of SLA, that movement forward could be established in terms of a timing framework being written into or accompanying the Bill as far as the implementation of the portions of the Bill were concerned.

Meeting presidential requirement stated in SONA

Thus Parliament could meet the presidential requirement stated by President Zuma in the state of nation address (SONA) that the ISMO Bill be created as soon as possible and whilst it was appreciated that much of the creation of such a state utility as an entity could happen much of the detail such as the transfer of assets and the question of operational ability would be a much slower and detailed process.

Meetings have now taken place over the next few weeks re-drafting the Bill on this basis and a “B” draft version of the Bill produced clearly defining a portion for a timing framework and one for the usual definitions and establishment provisions.

Posted in Electricity, Energy, Public utilities, Trade & Industry0 Comments

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.

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