There is no logic in the proposition that the Regulator must be involved in the setting of tariffs in instances where there is no disagreement between a licensee and customer. This is analogous to having a marriage councillor confirm that all is well in a marriage in which neither partner has any complaints. It is, however, fully understood and accepted that customers require protection against unreasonable actions by licensees. This protection is granted to customers by our proposed amendments to sections 4(g), 21(1) (n) and 31(1) set out below. One needs to guard against unnecessary and excessive state interference and should seek to find balance between such interference on the on hand, and freedom of contract on the other. There are no cogent reasons why provisions similar to those in the competition act, and which we have attempted to capture by the proposed amendments, will not afford sufficient protection to customers and why consideration should rather be had to excessive licensing powers. By reason of the proposed amendments the powers to be granted to the Minister in terms of section 34(1) (s) become unnecessary and this section must accordingly be deleted.

31 (1) The Gas Regulator must conduct investigations into—

1. complaints by customers relating to the supply of gas; and
2. complaints by customers relating to unreasonable or excessive tariffs imposed by a licensee; and

These statements ignore the reality of dealing with a monopoly supplier. The principle world-wide is that competition is better than price regulation but that price regulation is necessary where there is insufficient competition. The "rule by exception" proposal is heavily weighted in favour of the supplier who has far greater access to information and legal capacity than individual customers.

Immediate occupation is envisaged once the appropriate procedures have been followed to ensure that the safeguards have been observed.

32. (1) In pursuit of the objects of this Act, the Gas Regulator may expropriate land, or any right in, over or in respect of land on behalf of a licensee for gas liquefaction, re-gasification, transmission, storage or distribution facilities in accordance with section 25 of the Constitution.

(3) The Gas Regulator may exercise the powers contemplated in subsection (1) only if it is satisfied that—

(a) a licensee is unable to acquire land or a right in, over or in respect of such land by agreement with the owner; and

(b) the land or any right in, over or in respect of such land is reasonably required by a licensee for gas liquefaction, re-gasification, transmission, storage or distribution facilities which will enhance the Republic’s gas infrastructure.

Accept the proposal.

Clause 33 makes provision for the rights of the licensee to construct and maintain, but does not specifically provide for the well established and well-tried practice of applying for and obtaining way-leaves. Such applications are submitted to the authorities responsible for the utilities, which may be affected, and are accompanied by sketch plans. The authority returns the application with the necessary consent and the conditions, which such consent is given. Emergencies are dealt with accordingly. It is recommended that the way-leave system as at present practised be specifically provided for in the Bill, together with the obligation on the licensee to meet the cost of re-instatement special measures and making good works damaged by the gas undertaking, and the costs of alterations to existing services and utilities.

No action required.

Clause 33(3)(a) refers to "street" but does not define it. It is considered that Clause 1 should include such a definition to make it clear that the Clause will also apply to roads outside the built-up urban area. It is suggested that the following definition included in the National Building Regulations be considered for inclusion

"street" means any street, road, thoroughfare, lane, footpath, sidewalk, subway or bridge which

1. is tested in the local authority or
2. the public has the right to use or

Duplicating definitions specific to other legislation can lead to confusion, especially if the original definition is later amended. If there were to be a dispute reference would be made to existing legal definitions.

N.B. The local authorities are responsible for the conditions for working in a road reserve e.g. Greater Johannesburg issues a "Code of Practice for Work in a Road Reserve". The purpose of section 33 is to give licensees the right of crossing roads but this must be under the supervision of the local authority. Obviously it would be impractical to make regulations under the Gas Act setting rules for the gas pipes while other services (electricity, water etc.) in the same road reserve fall under a different set of rules made by the local authority.

It is not necessary to define "street" as it is already defined in the National Building Regulations.

Care must be taken not to trespass on the jurisdiction of the local authority or duplicate local authority rules.

(3) (a) Subject to sub-sections 3(b), (4) (5) and (6) a licensee may within the licensed area of supply.

1. lay and construct pipelines for the distribution of gas along and across and over any street and any other land, and from time to time repair alter or remove any pipes so laid and constructed.

Cross over or under any other services or utilities in any such street or other land.

The existing 33(3) (a):

(3) (a) Subject to subsections (4) and (5), a licensee may break up any street within its licenced area of supply and may lay and construct pipes for the distribution of gas under or over any such street, and may from time to time repair, alter or remove any pipes so laid or constructed.

The following wording is proposed:

There is no Clause 27 (3). This remark apparently refers to section 33 (3) (a) and a recommendation was made above to suitably amend this section.

• 33.(3) (a) Transmission pipelines are, in fact, included in this clause.
• 33.(5) (b) The purpose of local authority supervision is to ensure that other services such as telephones, electricity, water and sewerage are not inadvertently damaged.
• Conditions of servitudes will be part of the expropriation process.

The Minister may, by notice in the gazette, make regulations regarding—

Consumer protection where there is inadequate competition is essential and the Minister’s powers to make regulations (rather than the Regulator) is an essential element to achieve this.

Note: this would require the following change to the Gas Bill:

34. Regulations

(1) The Minister may, by notice in the Gazette, make regulations regarding—

(k) the determination of gas specifications;

Scope for Ministerial intervention seems too broad (sections 20 and 34) – raises political risk faced by investors

The Minister has wider powers than usual but this is a reflection of the fact that public regulation is not well developed in the RSA and independent regulators have still to gain public acceptance.

34. (1) The Minister may, after consultation with the Portfolio Committee, by notice in the Gazette, make regulations regarding—

(h) the qualifying thresholds and other requirements that must be met by a person in order to qualify as an eligible customer and the conditions under which such eligible customer may purchase gas from a supplier or trader

(i) the publishing of information relating to uncommitted capacity by the holders of liquefaction, re-gasification, transmission or storage licences and the publishing of tariffs for gas supplied to customers other than eligible customers by the holders of distribution licences;

(j) the rehabilitation of land used in connection with the liquefaction, re-gasification, transmission, storage or distribution of gas or the trading therein, the provision of security for rehabilitation purposes and the composition and amount of such security;

This blurs the distinction between legislation and administration.

Accepted in principle.

"liquefaction, re-gasification" inserted. No objections.

"liquefaction, re-gasification" inserted. No objections.

Reject the proposal.

Substitute "supplier of gas" for "producer".

Accept the proposal.

With regard to the issues upon which the Minister may make regulations, as set out in section 34, it is respectfully submitted that these issues are matters that the Regulator itself should be allowed to address and develop. The Minister’s power to make regulations on issues such as:

• procedures to be followed at meetings of the Gas Regulator;
• the form and manner, and contents of licence applications;
• the form in which registration must be lodged, etc.

removes a number of regulatory responsibilities away from the Regulator to the Minister. In addition, this may result in the compromising of the independence of the Regulator.

It is the norm that the Government makes the policy and the Regulator makes the necessary regulations to carry out the policy. However, at this stage of development of the system of independent regulators in South Africa existing and prospective gas suppliers are lobbying for less discretion for the Regulator. The DME has tried to balance these opposing recommendations by allowing the Minister to make the regulations but only after consulting with the Regulator.

Various parts of the Act can be brought into force at different times.

See section 37 – the entire Act will only come into force once the Gas Regulator is ready.

Our comments are confined to Section 36 captioned "Mozambique Gas Pipeline Agreement". We respectfully submit that this section has no place in the Bill for inter alia the following reasons:

• Section 21 empowers the Gas regulator to impose licence conditions within a certain framework of requirements and limitations which include a requirement that third parties must have access to pipelines in particular circumstances;

The section wholly undermines the objects of the Bill/Act and the purpose of appointing a Gas Regulator. It creates a dangerous precedent for the future in eliminating open competition and will cause potential investors in the industry to look elsewhere for more certainty as to their rights as third parties.

It is our view that the whole of Section 36 be struck from the Bill in the National Interest.

This agreement is a trade-off between getting the industry going and the concessions required to do this. A line had to be drawn somewhere and this was done by the Ministers in the Basis of Agreement. It is an open question as to whether or not the line has been drawn in the right place but somebody had to make the decision.

Sasol has , as I understand it, a 10 year exclusivity on the gas pipeline from Mozambique. They would appear to be writing off all expenses incurred into that 10 year period which I understand will put the price of the gas to the consumer (end user) at more or less the same price as electricity. This is hardly likely to encourage households etc to switch to gas as the capital costs in changing would make it too expensive. My question is "has the gas price been thoroughly examined to the end user?"

A final comment is that more competition is desirable -not less. Monopolies should not be the road ahead and some other mechanism should be available to Sasol to recover its costs or even share those costs with an open access (to the pipeline) policy.

The need to include this specific agreement in the Gas Act is not understood. If the purpose is to provide protection to the parties in terms of Clause 35.(2)(a)(1.) would then be fair to include all other existing gas pipelines together with their relevant contracts or transmission/transport agreements, tariffs, etc.

See comments above

Is the Mozambique Pipeline Agreement in accordance with the regulatory principles of the Act?

Shell recognises that certain exceptional provisions may be necessary to promote investment in pioneering energy projects and to preserve existing - freely negotiated - commercial agreements, provided that the provisions in no way compromise the evolution to mature and competitive energy markets due to advantages entrenched in legislation. The merits of obliging the Gas Regulator to issue licenses to entities contemplated in the Mozambique Agreement as proposed in clause 36 of the Bill, and of providing that the agreement binds the Gas Regulator for 10 years after first gas is received from Mozambique, cannot be evaluated without the opportunity to review the contents of the Mozambique Agreement.

Accept section 36

Section 36 of the Bill is a cause for concern. In effect, it seems to contemplate a statutory monopoly on terms and conditions not known to anyone but Sasol, the Gas Regulator and the Executive, being the relevant Ministers.

No other person has any way of ascertaining whether the agreement purports to allow Sasol to "cherry pick" consumers in an existing licensed area; and whether by seeking to entrench that, Section 36 has the potential to encroach into a sphere properly belonging to local government. We cannot see how that dilemma can be addressed without full disclosure of the relevant provisions of the agreement. Access to that information is constitutionally guaranteed and should be part of Parliament’s public deliberations on the Bill.

A provision should be inserted to indicate that the rights in terms of this section are subject to ongoing compliance with licence conditions, failing which the regulator should have the power to act in terms of its powers.

The Bill is silent on Technical and Operating codes or standards. It is our recommendation that the American code ASME B31.8 "Gas Transmission and Distribution Piping Systems" with relevant amendments for local conditions be adopted and stipulated. This is essential to ensure the feasibility of an integrated pipeline network.

This resorts under the Department of Labour and gas pipelines are defined as gas fuel systems in terms of the Vessels Under Pressure Regulations of the Occupational Health and Safety Act, 1993.

The American code ASME B31.8 has already been approved for gas pipelines in terms of these regulations.

The Bill is not explicit on where the transfer of risk and title of gas takes place between the various activities requiring a licence, notwithstanding the definition of "trading". In Shell’s submission to the Department this comment was omitted and represents an oversight not previously considered. It is assumed that transmission companies, whether private or public sector entities, or a combination of both, will only enter into third party contracts for the transportation of gas with producers and/or distribution companies. It is proposed that a transmission company should be responsible for the safe and proper transmission of gas, but that title to the gas should remain with the producer until delivery to a distribution company or an end-user. A new clause should be inserted in this regard. Shell is willing to expand on this proposal should it be requested.

Reject the proposal.

Piped LPG is defined as LPG gas, the source being a bulk storage tank or cylinder. This gas is piped at less than 2 bar and crosses more than 4 erf lines between separate property boundaries.

Add item 4 to Schedule 1

"4. LPG gas supplied from a bulk storage tank or cylinder, piped at less than 2 bar gauge and crossing no more than 4 erf lines between separate property boundaries".

4. Any person engaged in the intermediate transmission, distribution or storage of gas by means of existing privately owned pipelines or storage facilities for –

1. loading or discharging gas at harbours and depots; or
2. loading or discharging gas to and from harbours and depots; where such intermediate activity does not deliver gas to, or store gas at, the ultimate point of consumption.

These is key strategic "change of mode of transport" type infrastructure which should not be unnecessarily duplicated. The complication is that this gas will be in the form of liquefied natural gas at a temperature of minus160 Centigrade. Duplication of such facilities is expensive and may be impractical in congested harbours.

Note: re-gasification of liquefied natural gas is done by heat exchange e.g. vast amounts of sea water, and these environmental and economic considerations are further reasons to avoid duplication. It is recommended that the proposal be rejected.

Petroleum off loading facilities at ports are subject to third party access for similar reasons. The forthcoming Petroleum Pipelines Bill also requires third party access.

It is recommended that the suggestion be rejected.

Finally, Item 3 of Schedule 1, which read with Section 15(2), avoids dual regulation of reticulators/distributors already subject to local government regulation should be re-phrased as follows:

"Reticulation or distribution or trading in a municipal area where those activities are subject to local government regulation".

As distribution forms a central element of the Gas Bill it would be illogical to exclude it in this Schedule to accommodate one company. Reticulation is already excluded.