BUSINESS UNIT SOUTH AFRICA (BUSA)
02 October 2006
Draft BUSA
Comments on the Electricity Regulation Amendment Bill (B20-2006)
1. Introduction
The
general tone of the Bill is one of improving the service provided by
municipalities to consumers. This is to be welcomed. However, there is no
reference to large industries that obtain their supply from municipalities –
the emphasis being on domestic users and small commercial and industrial users.
Regrettably there is no mention either of regional electricity distributors
(REDS) to bring about economies of scale. It must be questioned if this will be
a temporary situation pending the establishment of REDS, which is encapsulated
in the national energy policy, and which was the subject of recent debate at
the Parliamentary Portfolio Committee.
The
establishment of Regional Electricity Distributors (REDS) was proposed in the
White Paper on Energy (1998). The reasons for this were, and still are:
·
The fragmented distribution of electricity by ESKOM
and approximately 187 licensed local authorities means that customers are
treated differently and unfairly, as manifested by over 1 000 differentiated
tariffs, with little relation to the cost of providing the service.
·
The poor financial situation of most municipalities means
that they are unable to carry out their constitutional obligation to provide
electricity to all people. This results in poor maintenance of distribution
networks that not only hampers the electrification process, but also increases
the likelihood of outages in existing networks.
·
Historical disparities in skill and expertise between
metropolitan and rural municipalities have resulted in a situation where it is
very difficult to attract the requisite expertise to rural municipalities.
·
The economies of scale are not exploited resulting in
an imbalance in customer types and numbers nationally. This in turn results in
unsustainable electricity distribution.
·
It also means that, due to the various capacities of
municipalities, and in accordance with Government policy, the provision of
services to the indigent is sub optimal.
·
Dual regulation is unworkable – the only workable
option is for the NERSA to regulate the entire industry.
While the
Bill aims to improve service, it is doubtful, given the current financial
problems
that many face, and the lack of resources and skills it will probably not
achieve this aim.
Detailed
comment on the clauses follows.
2.
Section
1 of Act 4 of 2006 – Definitions
Clauses
1(b) and 1(c)
It must be
questioned why domestic users and light industrial and commercial users are
placed into the same category. Clause 9(5) refers to different types and
categories of domestic users and provides for differentiation between these
users. The removal of light industrial and commercial users from this
definition would reduce the number of sub-categories and the result would be
less cumbersome. Perhaps a category based on consumption could be considered
instead. This would also make it easier to identify which end users would
qualify for basic free services as contemplated in Clause 28(1)(f). In addition, the definition of “domestic end
user” is undesirable and will perforce lead to uncertainties – customer
categories should not be at the discretion of the Minister.
Clause
1(e)
The
proposed definition of “reticulation” is unworkable as two suppliers have to
work on the same electrical system.
3.
Section
28 of Act 4 of 2006 – Reticulation
Clause
28(1)(f)
The issue
of providing basic free service, or a minimum cost service within the available
resources of the municipality could result in inequities across municipalities
given that more than 90 local authorities have electricity revenues of less
than R500 000 per annum, and would be unable to provide such services.
Notwithstanding
affordability, a system providing a differentiated pricing structure for
electricity for sub groups of a category can lead to undeserving individuals
benefiting. This requires great vigilance on the part of the supplier to ensure
that only those who truly qualify get access to the concession. Strict
parameters for the application of a differentiated pricing structure will have
to be introduced and probably monitored by the Regulator.
Clause
28(1)(j)
This
clause refers to customers or domestic end users. Surely domestic end users
should be categorized as customers?
Clause
28(6)
This
clause provides for the cessation of services currently being provided by
someone other than the municipality at the time the Act comes into effect,
unless a service agreement has been entered into between the provider and the
municipality. It does not give any time frames. Service agreement negotiations
can be prolonged, and it is suggested that a time frame be included in this
provision.
Section 32 of Act 3 of 2006- key Performance Indicators
Clause
32(2)
Concern
must be expressed at the proposal that key performance indicators can vary from
municipality to municipality. Consistency is important for a number of reasons,
not the least being that energy is a driver for development, and development
will tend to go where the better service and quality is to be found. This would
mean that those municipalities where the key performance indicators are less
stringent than others may loose important investment in their area, the knock
on effect being that poverty alleviation and job creation will become more
challenging.
Clause 38 of Act 4 of 2006 – Request to comply
Clause
38(2).
Should a
municipality fail to comply with the legislation, the Regulator must request
the municipality to do so. However, no provision is made to censure the
municipality if it ignores the request. It is assumed that by informing the
Minister or the relevant MEC of the municipality’s failure, the Regulator has
taken corrective action. However, there must be some obligation on the part of
the Minister or MEC to ensure that the municipality does comply, or to make
alternative arrangements so that consumers are not prejudiced. This is
particularly important in the case of business consumers who suffer negative
consequences when their power supply is erratic and of inferior quality.
In
conclusion BUSA would urge that the restructuring be finalised as a matter of
urgency. BUSA would also like to take
this opportunity to lend its support to the submission made by the Chamber of
Mines, a member of BUSA.
D414a/06