Tag Archive | NMPP

NERSA reports on an anxious year in energy

Unlicensed pipeline operations a problem….

Phindile NzimandeCommenting that the petroleum and gas industry did not seem to take licensing particularly seriously but the electricity industry did, Phindile Nzimande, CEO of the National Energy Regulator (NERSA), gave a characteristically outspoken report to the parliamentary committee on energy on NERSA’s strategic and plan until 2016.

She noted that  NERSA had investigated sixty seven suspected unlicensed activities in petroleum pipeline activity, only four of which were found to not require a licence. Thirteen petroleum storage licences were revoked.

NERSA not changing plans

Nzimande said that NERSA found no reason to alter their five-year plan as originally submitted in 2012 and NERSA would continue with its mandate of transparency, neutrality, predictability and independence. It has been a busy year, she said, not the least of which was the extraordinary amount of work generated by Eskom tariff application, the national hearings process and the time involved in decision making.

In the area of electricity generally, 183 municipal and private distributor tariffs were given approval and 47 energy generation licences granted. 9 distribution licences for connection facilities between Eskom and an independent power producer (IPP) were also granted.

Sasol back to listed tariff next year

In piped gas, Nzimande told parliamentarians that the maximum prices for such were dealt with in regard to Sasol, this being the last year of the “maximum price” arrangement. In petroleum pipelines, the Transnet annual increase was set at 8.53%, again with much controversy, and decisions were made on 60 storage and loading facilities.

There was still a major lack of credible gas anchor clients in piped gas, Nzimande said, nor was there an established and regular supply chain and serious competition, resulting in high prices for the poor. NERSA had much work to do in this area, she said, as far as compliance monitoring and enforcement was concerned.

Costly multi-product line

In the area of petroleum pipelines, Nzimande said the “prudency” investigation into the cost of the multi product Durban/Gauteng pipeline was a major undertaking and NERSA was also involved with Transnet on the issue of high port charges which had become a national issue.
The security of supply of petroleum to inland areas was also a matter of deep concern, Nzimande said, and NERSA was “working with stakeholders”. When asked how NERSA was monitoring this she said the matter was very much up to the investors concerned but she was aware that department of energy “was grappling with the issue” and NERSA was closely following the matter which had to be taken in to consideration on pricing matters.

Local government problems

On tariffs generally, Nzimande said a major issue facing NERSA was the legal issue of regulatory relationships with municipalities and their powers in respect of enforcing licensing and pricing structures. This was to be resolved shortly.

When asked if Eskom would be allowed to re-visit the issue of their tariff structure finally allowed and appeal, Nzimande said that she eskom logocould not say that that such a move could be excluded as a legal part of the multi-year price determination process. The chair excused her for answering questions on the Alstrom and Hitachi legal wrangle on the Medupi power plant currently under construction by Eskom but she acknowledged that NERSA was aware of Eskom’s problems and financing issues.


When asked why NERSA and the structures of nuclear regulatory matters were not combined into one regulatory body, Nzimande replied that international agreements and the structure of the nuclear global industry was specific on this issue and required specific nuclear regulators with specific mandates for their own countries to be established. The work and relationships of a nuclear regulatory authority were very different, she said.

She agreed with complaints regarding difficulties in the petroleum storage area and confirmed that the regulations may have to be re-written in this regard. She was specific that NERSA would look into the issue of tariffs for storage, since one member complained that the current high cost structures could well be acting as a disincentive to investment.

Associated articles archived

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

Durban/Gauteng pipeline still three years behind

NERSA to review Transnet’s progress…

engineering news

engineering news

In commenting on NERSA’s decision not to allow Transnet’s application for a 22.6% increase but instead hold this back to 8.5%, Dr Rob Crompton as pipeline regulator was starting a “prudency” review of the Durban/Gauteng fuel pipeline project in view of the fact that it was three years behind.

It was unlikely to catch up and costs had escalated from an original R9.5bn in 2005 (at the last count in 2010) to R23.4bn.  The the overrun was now into unknown realms, he said.

Whilst Transnet has a network of 32 pipelines over 3,800km, the current new multi-product pipeline, or NMPP, has been giving headaches for some considerable time mainly due to its multifaceted product pumping nature.    NERSA said that they were using the word “prudent” because they did not wish to jump to conclusions or make any assessments themselves until the project was complete. The minister of public enterprises has called for an investigation into the escalating costs, meanwhile.

Pipeline volumes declining

It was notable NERSA,  as a whole, has to bear in mind that in the case of the Transnet application for a tariff increase the application was for one year only not multi-year. The worrying factor to NERSA, Rob Crompton said, was that volumes carried on the pipeline were declining – a lot of which was due to the fact that whilst some six grades of petrol, two diesel and also biofuels were carried, there also came a major complication with high and low sulphur content diesel where special tanks and road haulage had to be used.

As an outsider, Dr Crompton said that NERSA could see that Transnet had been asked to quadruple its assets but there had been no injection of capital with the result that Transnet seemed to be building on a “pay as you go “ principle, raising capital where necessary. This was far from satisfactory, he said.

Dr Crompton noted that no further help had been mentioned in the 2013 Budget speech

Fuel price structure complicated

NERSA said that of the nearly thirty items that went to make up the petrol price structure in South Africa, from road accident funding to wholesale margins, only about 16% of the price came in “administered prices” and NERSA, in establishing their views, had only studied one element of this.

He said that in studying Transnet’s application and finally setting a much lower figure, a balance had to be found between the principle adopted of “user pays”, in other words the motorist, and Transnet being able to “claw back” unspent sums or altering over-charged budgets.

Storage nearly finished

nmpp tanksIt was noted, however, that Transnet forecast a 4.6% increase in volumes in 2013/14 and that the tank storage projects at either end of the line should be finished shortly.

NERSA said it was trying to work with the department of energy to get consistent regulations on the whole, or at least a lot more parts, of the entire cost structure but it was unlikely as things stood whether pipeline tariffs would become “multi-year” to assist in longer term planning from what could be seen.

Parliamentarians were complimentary to the NERSA staff on their diligence and producing a result which had helped the consumer in difficult times.

Associated articles archived

Posted in Energy, Finance, economic, Fuel,oil,renewables, Labour, Public utilities, Trade & Industry0 Comments

NERSA worries on limited oversight on new oil pipeline

In a presentation before the select committee on economic affairs, the national electricity regulator (NERSA) presented an overall view of its performance for the last year, stating one of its biggest challenges lay in the petroleum pipelines area because of different authority in various aspects of the supply chain which compromised regulatory oversight. The cost of the pipeline was most recently estimated at R23.4bn.

Ms Esther Viljoen of the strategic planning and monitoring division, NERSA, said the security of supply of petroleum to the inland areas was difficult at times as a result of too many non-state players in the structure.    Another problem, she said, was that some of the revenue from tariffs was being deployed in some state-owned entities for capital expansion.

In the electricity regulatory area, Viljoen said 177 municipal tariffs were approved and, as all knew, a revised tariff increase for Eskom of 16% instead of the originally approved tariff of 25.9% was approved for 2012/13.   A determination was also made on the procurement renewable energy.

NERSA also granted five electricity generation licences, granting one distribution licence and revoking another.

In piped-gas industry regulation, Viljoen said a methodology had been set up for maximum prices for piped gas and stakeholder workshops held to explain the new calculations.    Five licences for the construction of gas transmission facilities; two licences for the construction of gas distribution facilities; two operation licences; and one trading licence were granted.

In the petroleum pipelines industry regulation, NERSA approved, she said, an increase of 31.58% in allowable revenue for Transnet for 2012/13 and approved storage facility tariffs for nine licensees.     It further approved three construction licences and one operational licence, while revoking eight licences from Chevron.

Viljoen said NERSA still faced difficulties promoting access to petroleum storage facilities for BEE designated South African wholesalers.

Challenges in the piped-gas industry regulation were certain piped-gas activities not in the Gas Act; Sasol’s non-compliance in certain areas of supply and, thirdly, off-take agreements in the private sector had been a problem.  Viljoen also mentioned the failure to act decisively over fracking in the Karoo, with cabinet deciding to suspend exploration resulting in Sasol going overseas to Canada and Shell still awaiting results on its prospecting ability.

NERSA said it was aware of the escalations in costs and the delays in the construction of the new pipeline  infrastructure and would monitor this and facilitate the entry of BEE entrepreneurs into the exercise

In response to a question from chairperson Freddie Adams who said that he understood that foreign refineries were superior to South African refineries and that pricing was putting South African refineries outside of the market, Thembani Bukula of NERSA replied that NERSA did not regulate the pricing or the refineries in that it only regulated the pipeline that moved petroleum from the coast inland and to the storage facilities.  To improve regulation of the petroleum industry, Bukula said the state would have to provide NERSA with full regulatory powers on the entire value chain.

In response to the questions regarding the industry’s monopolistic environment, Mbulelo Ncetezo, NERSA’s electricity regulation manager, said that Eskom’s current monopoly arose from the market structure that the government policy had set up.  As such, this issue must be decided by the government, and was nothing NERSA could do to address the core issue of the market structure.

Thabo Ramanamane, NERSA head of petroleum licensing, said on petroleum products the problem was one of dominance by the major petroleum companies in a situation where South Africa imported around 40-50% of its petroleum and the new pipeline was connected to a storage owned by the private sector.

Whilst therefore the pipeline was a common carrier, which accommodated everybody’s needs with access proportionate amounts, storage facilities on availability under the control of others, presented a challenge for regulatory purposes.

At this point an argument developed with MPs on the future of supplies from shale gas changing the entire picture but Ramanamane said NERSA had not pronounced itself for or against Shell gas exploration in the Karoo, Viljoen adding that the consequences that flowed from the associated regulatory uncertainty had produced strategic planning difficulties.

Mr Ramanamane said the new infrastructure plan in hand would benefit the petroleum side by decreasing transportation by road and switching to pipeline or rail transportation from road.

Posted in Energy, Finance, economic, Fuel,oil,renewables, Public utilities, Trade & Industry, Transport0 Comments

This website is Archival

If you want your publications as they come from Parliament please contact ParlyReportSA directly. All information on this site is posted two weeks after client alert reports sent out.

Upcoming Articles

  1. Jeremy Cronin back on land expropriation issue
  2. Integrated Energy Plan reflects cleaned-up thinking
  3. Changes to Companies Act headed for Parliament
  4. State Bank a strong possibility with certain provisos
  5. No more Competition Commission yellow card warnings
  6. Business to meet transformation targets by law

Earlier Editorials

Earlier Stories

  • AARTO licence demerit system studied  …. In what has been a legislative marathon, the update of the Administrative Adjudication of Road Traffic Offences Act (AARTO) has now reached a stage […]

  • SARS role at border posts being clarified …. In adopting the Border Management Authority (BMA) Bill, Parliament’s Portfolio Committee on Home Affairs agreed with a wording that at all future one-stop border […]

  • Modernising SAPO a culture change ….. sent to clients 27 February…. Stage by stage, Mark Barnes, Group Chief Executive Officer of South African Post Office (SAPO), appears to be reforming cultures and […]

  • OECD money task force waiting for SA   ….sent to clients Feb 7…. Chairperson of the Standing Committee on Finance, Yunus Carrim, made it quite clear in terms of parliamentary rules that […]

  • President Zuma vs Parliament on FICA Bill …..editorial……The convoluted thinking that is taking place in South Africa to avoid the consequences of the law has once again become evident in […]