• Introduction

• Discussion on the extent the Bill facilitates the achievement of the objectives and principles of the Electricity Distribution Industry Restructuring

• Proposed solution on how Regional Electricity Distributors should be regulated

• Recommendations

INTRODUCTION

• This presentation represents the view of EDI Holdings

• EDI Holdings is the organisation that has been created by the National Government to restructure the Electricity Distribution Industry(EDI)

• The presentation will review the Bill against relevant Electricity Restructuring objectives as outlined in the Energy White Paper of 1998 and the EDI Restructuring Blueprint report of 2001

• Consequently, the presentation addresses

• To what degree the Bill facilitates the achievement of objectives of EDI restructuring

• How the Bill impacts the way REDs would be regulated

ELECTRICITY SUPPLY IN SOUTH AFRICA

• Generation:

• Mainly
• 97% control by Eskom

• Transmission

• High voltage transmission network forming an integrated national grid
• 100%' control by Eskom

• Distribution

• Conversion to low voltage and distribution to end users
• End-users normally inter-connected
• 60/40 Split between Eskom & Municipalities

ELECTRICITY SUPPLY IN SOUTH AFRICA

REGULATION

• Substitute for Competition
• Addressing monopoly service providers to avoid:

• Exploitation of customers
• Inefficiencies
• Poor service delivery

• Manage sustainability of suppliers
• How?

• Ensuring open access
• Ensuring service standards
• Ensuring Quality of Supply
• Prices at appropriate levels
• Affordable tariffs

• Rate of Return methodology for Eskom price increase review
• Regulating the prices of about 170 Municipal Distributors through benchmarking
• Power quality directives : NRS 047,048 &082
• Distribution infrastructure: Audits

• Inconsistent and inequitable electricity price

• Ten most expensive Municipalities in South Africa

• Ten Cheapest Municipalities in South Africa

RESTRUCTURING OBJECTIVES AND PRINCIPLES

• Objectives and Principles from the Energy White Paper (1998)

1. The energy white paper instructs a restructuring approach that:

• Is transparent, builds public confidence, seeks to clarify organisational roles, communicates policy effectively and integrates policy processes

2. The key policy drivers to energy restructuring is :

To redress economic and social power imbalances

To recognise and cope with multi-casual linkages in the energy sector

3. Energy restructuring occurs within the cot ':t of a macro-economic framework that:

• Promotes growth
• Promotes redistribution by creating jobs
• Reallocates resources through the budget

Objectives and Principles from Energy White Paper (1998)

4. Electricity as a critical energy form has the following challenges

• Increasing access and affordability to energy services

• Improving governance and delivery

• Stimulating economic development and growth

5. key achievables will include

• A comprehensive electrification programme

• Establishment of a consolidated electricity distribution industry

• Industry conducive to effective regulation

• Creation of an authority to manage the restructuring of the electricity distribution industry

• Creation of viable & sustainable distribution entities (REDs)

• Objectives and Principles from Energy White paper (1998)

6. The multi-casual linkages within the electricity distribution industry sector include

• The Municipal fiscal challenges
• Economic growth impact
• Consumer Price index impacts (including I

7. The intergovernmental challenges for the electricity distribution industry

• Definition of the "electricity service/reticulation

• The revenue generation potential of electricity to local government

• The accessibility and indigency challenge

• Objectives of Restructuring as per the 2001 Blueprint on EDI Restructuring :

• Universal access to electricity for all South Africans

• Acceptable & sustainable levels of supply security &quality

• Achievement of government's electrification programme

• Sustainable electricity supply to low-income consumers, regardless of location, at affordable prices

• Future REDs to operate on a sustained financially viable basis as independent businesses

• Future REDs to provide secure employment to their employees, provide skills development and training consistent with a high technology, modern distribution business

• Planned & managed transition

• Transition to be done within the context of a comprehensive human resources strategy and an agreed social plan

ELECTRICITY REGULATION BILL SALIENT FEATURES

• The Bill introduces TWO regulatory mechanism:

• One for non-licensed distribution activities for reticulation to communities by, or on behalf of municipalities, and

• The other for licensed or registered activities

• Licensed or registered activities will be directly regulated by the NER

• Reticulation activities will be regulated by municipalities adopting a reticulation policy that is to be enforced by the promulgation of bylaws [Section 29(4)

• The reticulation policy must conform to the requirements of the Bill and other legislation, the National Government's Electricity Policy Framework and any national norms and standards prescribed by the [Sections 29(1)(a), (b) & (c) and 31]

• The Bill also lays down the requirements that must be met by the service delivery agreement that needs to be concluded between service providers (REDs) and municipalities [Section 30]

IMPACT OF THE BILL ON RESTRUCTURED ELECTRICITY DISTRIBUTION INDUSTRY

REGULATION OF THE RESTRUC EDI - PROPOSED SOLUTION

• It is proposed that simple and effective regulation is maintained that would:

• Enable the achievement of EDI restructuring, its objectives and benefits, particularly ensuring:

• Acceptable & sustainable levels of supply security and quality

• Sustainable electricity supply to low-income consumers, regardless of location, at affordable prices

• Equitable treatment of customers across the country

• That future REDs operate on a sustained financially viable basis as independent businesses

• Ease operational burden on REDs by ensuring single and simple tariff approval mechanism

RECOMMENDATION

IT IS RECOMMENDED THAT

• The Department of Minerals and Energy (DME) be urged to redraft the Bill to provide for single, simple and effective regulation of the EDI

The Regulation Bill be aligned to the objectives of Electricity Industry restructuring as articulated in the Energy White Paper of 1998 and the EDI Restructuring Blueprint report of 2001, particularly:

• The ability to effect national tariff rebalancing

• Determination of tariffs based on cost reflectivity

• Optimisation of resources

The Regulation Bill to found a consistent premise for the EDI Restructuring Bill