Electricity Regulation Amendment Bill
Electricity Regulation Amendment Bill
ELECTRICITY REGULATION
AMENDMENT BILL
(As introduced in the National Assembly (proposed section 76 Bill); explanatory summary
of Bill and prior notice of its introduction published in Government Gazette No. 48441 of
19 April 2023)
(The English text is the offıcial text of the Bill)
BILL
To amend the Electricity Regulation Act, 2006, so as to delete, amend, and insert
certain definitions; to provide for the application of the Act; to provide for the
National Energy Regulator to consider applications for licences and the issue of
licences; to provide for revocation and deregistration of licences; to provide for
additional electricity, new generation capacity and electricity infrastructure; to
provide for the establishment, duties, powers and functions of the Transmission
System Operator SOC Ltd and transitional measures; to provide for an open
market platform that allows for competitive electricity trading; to assign the
duties, powers and functions of the Transmission System Operator SOC Ltd to the
National Transmission Company South Africa SOC Ltd; to provide for delegation
and assignment; to provide for offences and penalties; and to provide for matters
connected therewith.
(s) by the substitution for the definition of ‘‘tariff’’ of the following definition:
‘‘‘tariff’ means a charge [for electricity] to a customer in respect of a
licensed activity or registered activity, other than a surcharge, tax, levy or
duty imposed by a municipality in terms of section 229 of the
Constitution of the Republic of South Africa, 1996;’’; 5
(t) by the insertion after the definition of ‘‘tariff’’ of the following definition:
‘‘‘trader’ means a person who trades in electricity;’’;
(u) by the substitution for the definition of ‘‘trading’’ of the following definition:
‘‘‘trading’ means the wholesale or retail buying [or] and selling of
electricity [as a commercial activity], and ‘trade’ has a corresponding 10
meaning;’’;
(v) by the insertion after the definition of ‘‘trading’’ of the following definition:
‘‘‘trading platform’ means a platform where power market participants
conduct trade;’’;
(w) by the substitution for the definition of ‘‘transmission’’ of the following 15
definition:
‘‘‘transmission’ means the conveyance of electricity through a trans-
mission power system, excluding system operation and trading, and
‘transmit’ and ‘transmitting’ have corresponding meanings;’’;
(x) by the substitution for the definition of ‘‘transmission power system’’ of the 20
following definition:
‘‘‘transmission power system’ means a [power system that] network
for the conveyance of electricity, which operates above a nominal
voltage of 132kV;’’;
(y) by the insertion after the definition of ‘‘transmission power system’’ of the 25
following definition:
‘‘‘Transmission System Operator SOC Ltd’ means a juristic person
established in terms of section 34A(1);’’;
(z) by the substitution for the definition of ‘‘transmitter’’ and ‘‘this Act’’ of the
following definitions, respectively: 30
‘‘‘transmitter’ means a person who [transmits electricity] manages
and maintains a transmission power system; [and]
‘this Act’ includes any regulation or rule made or issued in terms
thereof[.]; and’’; and
(zA) by the insertion after the definition of ‘‘this Act’’ of the following definitions: 35
‘‘‘vertically integrated licensee’ means a person who holds one or
more of the licences listed in section 4(a)(i), but excludes a person who
only holds licences in terms of section 4(a)(i)(bb) and (cc); and
‘vesting contract’ means a contract between the National Transmission
Company South Africa SOC Ltd and an Eskom generator or a 40
distribution licensee, for the sale of a specified amount of electricity at a
specified price as a mechanism to facilitate the transition to a competitive
market.’’.
3. The following section is hereby inserted in the principal Act after section 2:
‘‘Application of Act
(2) The Act is not applicable to the operation of generation facilities with
or without battery storage—
(a) for the sole purpose of providing standby or back-up electricity;
(b) where the facility, irrespective of capacity (megawatts), does not
have a point of connection to the facility; or 5
(c) with a capacity of not more than 100 kilowatts, which complies with
the code, has a point of connection and is subject to the distributor’s
prescribed conditions relating to the continued use of the point of
connection.
(3) For the purposes of subsection (2), the Regulator shall prescribe 10
the manner in which the distributor shall keep a register of each
facility.’’.
4. The following section is hereby substituted for section 3 of the principal Act:
‘‘Regulator 15
6. Section 6 of the principal Act is hereby amended by the substitution for subsection
(2) of the following subsection:
‘‘(2) The Regulator [must] may require a licensee to establish and fund a
customer or end users forum in the manner set out in the licence held by such a 25
person.’’.
7. Section 7 of the principal Act is hereby amended by the substitution for subsection
(1) of the following subsection: 30
‘‘(1) Subject to sections 8 and 9, [No] no person may, without [a] the appropriate
licence issued by the Regulator in accordance with this Act or, unless authorised in
terms of a licence condition contemplated in section 14(1)(t)—
(a) operate any generation, transmission or distribution facility;
(b) import or export any electricity; [or] 35
(c) be involved in trading[.];
(d) be a market operator; or
(e) engage in system operation.’’.
8. The following section is hereby substituted for section 8 of the principal Act:
12. Section 12 of the principal Act is hereby amended by the substitution for
paragraph (a) of the following paragraph: 55
‘‘(a) must, if objections have been received, within 30 days from the date of expiry
of the period contemplated in section 11(2)(d), furnish the applicant with all
9
16. Section 16 of the principal Act is hereby amended by the substitution for 45
subsection (2) of the following subsection:
‘‘(2) The [Minister] Regulator must prescribe the procedure to be followed in
varying, suspending, removing or adding any licence condition.’’.
17. Section 17 of the principal Act is hereby amended by the substitution for
subsections (2) and (3) of the following subsections, respectively:
‘‘(2) A licensee must, in the circumstances contemplated in subsection
(1)(a) and (b), give the Regulator at least 12 months’ notice in writing of
[his or her] its intention to cease activities, unless the Regulator 55
determines otherwise.
(3) The [Minister] Regulator must prescribe the form and procedure
to be followed in revoking a licence.’’.
11
18. The following section is hereby inserted in the principal Act after section 17:
17A. (1) The Regulator may vary, suspend or remove any registration
on receipt of an application by a registrant or on application by a third 5
party or upon violation of the applicable regulatory requirements.
(2) The Regulator may revoke a registration under the following
circumstances:
(a) On application by a registrant;
(b) where the facility is no longer required; or 10
(c) when the conditions for registration as contemplated in section 9(4)
are not met.
(3) A registrant must, in the circumstances contemplated in subsection
(2)(a), give the Regulator at least six months’ notice, in writing, of its
intention to cease activities, unless the Regulator determines other- 15
wise.’’.
19. The following section is hereby substituted for section 20 of the principal Act:
‘‘Renewal of licence 20
(d) by the substitution in subsection (4) for the words preceding paragraph (a) of
the following words:
‘‘(4) Access in terms of subsection (3) must be provided on the
conditions set out in the licence of such transmitter or distributor, [that]
which may relate to—’’; 5
(e) by the substitution in subsection (4) for paragraph (c) of the following
paragraph:
‘‘(c) the strengthening or upgrading of the transmission or distribution
power system in order to provide for access, including contributions
towards such strengthening or upgrading by the potential users of 10
such systems, if applicable;’’;
(f) by the substitution in subsection (4) for paragraphs (e) and (f) of the following
paragraphs, respectively:
‘‘(e) compliance with any rule[,] or code [or practice made by the
Regulator]; or 15
(f) the [fees] tariffs that may be charged by a licensee for the use of
such power system.’’; and
(g) by the insertion after subsection (4) of the following subsections:
‘‘(4A) Third party access to the transmission and distribution power
system must be based on published tariffs, applicable to all eligible 20
customers, and applied objectively and without discrimination between
the system users.
(4B) A transmission or distribution licensee may refuse access only
where it lacks the necessary capacity, with written reasons given for such
refusal. 25
(4C) Any party requesting information on the network capacity and
measures that would be necessary to reinforce the network, may be
charged a reasonable fee for the costs of providing such information.
(4D) Transmission and distribution licensees shall procure the energy
they use to cover energy losses and reserve capacity in their system 30
according to transparent, non-discriminatory and market-based proce-
dures.
(4E) Rules adopted by the Transmission System Operator SOC Ltd for
balancing the national transmission power system and the interconnected
distribution power systems, including the rules for charging system users 35
of their networks for energy imbalance, shall be objective, transparent
and non-discriminatory.’’.
21. Section 22 of the principal Act is hereby amended by the substitution for 40
subsection (1) of the following subsection:
‘‘(1) Any person authorised, in writing, thereto by a licensee may at all
reasonable times enter any premises to which electricity is or has been supplied by
such licensee, in order to inspect the lines, meters, fittings, works and apparatus
belonging to such licensee, or for the purpose of ascertaining the quantity of 45
electricity consumed, or where a supply is no longer required, or where such
licensee may cut off the supply, for the purpose of removing any lines, meters,
fittings, works and apparatus belonging to such licensee.’’.
23. Section 27 of the principal Act is hereby amended by the substitution for 5
paragraph (g) of the following paragraph:
‘‘(g) regularly reporting and providing information to the Department of [Provin-
cial and Local Government] Cooperative Governance and Traditional
Affairs, the National Treasury, the Regulator and customers;’’.
25. Section 32 of the principal Act is hereby amended by the substitution for
subsection (1) of the following subsection:
‘‘(1) The Regulator must, in applicable circumstances, at its own instance or on
receipt of a complaint [or inquiry] relating to [the] generation, transmission,
distribution, [or] trading, market operation or system operation, investigate 40
complaints and prepare a preliminary report in respect of—
(a) [of] alleged discrimination regarding tariffs or conditions of access; and
(b) if a licensee is involved, [of] an alleged failure to abide by its licensing
conditions[; or].’’.
ture, in which case, subsections (3) and (9) shall, with the necessary
changes, apply to such infrastructure, installations, buildings, structures,
facilities, systems, services or processes.
(13) The Regulator must, in respect of an energy infrastructure project
contemplated in subsection (12), exercise its powers and perform its 5
functions under this Act and any other statute in a coordinated and
integrated manner.
(14) The Minister may, in writing, direct the Regulator to conclude a
memorandum of understanding with any other regulator in order to
facilitate the coordinated establishment of an energy infrastructure 10
project contemplated in subsection (12).
(15) For purposes of this section, ‘electricity transmission infrastruc-
ture’ means transmission facilities or any other electricity infrastructure
designated by the Minister by notice in the Gazette for this purpose,
excluding electricity generation facilities.’’. 15
28. The following section is hereby inserted in the principal Act after section 34:
(c) the market code shall include, but is not limited to, provisions
related to the following:
(i) The different types of markets necessary to ensure effective
and secure operation of the industry including both physical
and financial transactions between power market participants 5
in the appropriate timescales, to enable the market transactions
and regulated transactions;
(ii) the method of operation, as well as development of systems,
processes and procedures for the implementation of these
markets; 10
(iii) provisions for reconciliation in order to identify imbalances
between scheduled and actual production, the consumption of
electricity by power market participants, and the allocation of
costs of remedial action and penalties where applicable;
(iv) the qualifying criteria for power market participants, including 15
financial and prudential requirements;
(v) governance of the market code, including mechanisms for
power market participants and stakeholders to propose
changes to the code; and
(vi) any other aspects necessary for effective and efficient market 20
operation.
(4) A transparent, non-discriminatory trading platform and trading
mechanism for power market participants referred to in subsection (3)(a)
is envisaged to be a competitive multi-market structure, which provides
for market transactions, physical bilateral transactions and regulated 25
transactions.
(5) A central purchasing agency must—
(a) conclude and enter into transaction agreements as may be necessary
for the procurement of electricity, including sufficient capacity and
energy supply; 30
(b) in line with the Republic’s international obligations, agreements
and undertakings—
(i) conclude electricity import agreements that ensure a reliable
and stable supply of electricity for customers within the
Republic; and 35
(ii) conclude electricity export agreements, having regard to the
interests of the Republic over the long term;
(c) in relation to regulated transactions—
(i) be the buyer for existing Independent Power Producer power
purchase agreements, as well as new Independent Power 40
Producer power purchase agreements, as required by Ministe-
rial determination;
(ii) conclude power purchase agreements with each Eskom
generator to cover capacity payments and ancillary services for
the remaining life of power plants; 45
(iii) conclude vesting contracts with Eskom generators and, or,
distribution licensees to manage the transition to a competitive
market; and
(iv) trade all energy purchased under the legacy independent power
producer contracts and act as the balance responsible party on 50
behalf of the legacy independent power producer contracts.’’.
(b) by the substitution in subsection (3) for paragraph (c) of the following
paragraph:
‘‘(c) the security, operation, use and maintenance of transmission and
distribution power systems;’’;
(c) by the substitution in subsection (3) for paragraph (i) of the following 5
paragraph:
‘‘(i) the fees to be paid in respect of mediation, arbitration and the
settlement of disputes;’’;
(d) by the insertion after subsection (3) of the following subsection:
‘‘(3A) The Regulator must, after consultation with the Minister, make 10
rules regarding the content of the transmission development plan,
including rules relating to the inclusion in the plan of an analysis of grid
connection capacity, reasonable timelines for the expansion and
strengthening of the national transmission power system and the
estimated cost of the transmission development, strengthening, upgrad- 15
ing and refurbishment envisaged in the plan.’’; and
(e) by the deletion in subsection (4) of paragraph (n).
30. The following sections are hereby inserted in the principal Act after section 35:
35A. (1) The Minister may, subject to such conditions he or she may
impose, in writing, delegate any power conferred on him or her under
this Act, except a power to make regulations, and may assign any duty so
imposed on him or her, to the Director-General or any other officer in the
Department. 25
(2) The Minister is not divested of any power or exempted from any
duty delegated or assigned in terms of subsection (1).
(3) The Minister may at any time—
(a) amend or withdraw a delegation or assignment made in terms of
subsection (1); or 30
(b) subject to subsection (4), withdraw or amend any decision made by
a person exercising a power or performing a duty delegated or
assigned in terms of subsection (1).
(4) A decision made by a delegatee or assignee may not be withdrawn
in terms of subsection (3)(b) where it confers a right or entitlement on 35
any third party.
Transitional provisions
35C. (1) From the effective date of this Act, until the date that the
Transmission System Operator SOC Limited referred to in section 55
19
34A(1) is established, which period shall not be longer than five years,
the National Transmission Company South Africa SOC Limited—
(a) is for all purposes deemed to be the Transmission System Operator
SOC Ltd;
(b) must perform the duties, powers and functions of the Transmission 5
System Operator SOC Ltd; and
(c) in exercising its duties, must do so in a manner that is independent
and ensures fair and equitable treatment of all system users.
(2) During the period of transition referred to in subsection (1), the
Regulator shall exercise regulatory oversight and facilitate the transition 10
to a competitive market.
(3) Notwithstanding the provisions of subsection (1), the Regulator
must, subject to the conditions determined by the Regulator, upon
application by the National Transmission Company South Africa SOC
Limited and after satisfying itself regarding the appropriateness thereof, 15
issue the relevant licence to the National Transmission Company South
Africa SOC Limited for the performance of the duties, powers and
functions of the Transmission System Operator SOC Ltd as provided for
in section 34A(2).’’.
31. The arrangement of sections after the long title of the principal Act is hereby
amended—
(a) by the insertion after ‘‘2. Objects of Act’’ of the following:
‘‘2A. Application of Act’’;
(b) by the insertion after ‘‘17. Revocation of licence on application’’ of the 25
following:
‘‘17A. Revocation and deregistration’’;
(c) by the substitution for ‘‘24. Rights over streets’’ of the following:
‘‘24. Rights over roads or streets’’;
(d) by the substitution for ‘‘34. New generation capacity’’ of the following: 30
‘‘34. Additional electricity, [New] new generation capacity and electric-
ity transmission infrastructure’’;
(e) by the insertion after ‘‘34. Additional electricity, new generation capacity and
electricity transmission infrastructure’’ of the following:
‘‘34A. Establishment, duties, powers and functions of Transmission 35
System Operator SOC Ltd
34B. Powers and functions of transmitter, system operator, market
operator and central purchasing agency’’; and
(f) by the insertion after ‘‘35. Regulations, rules, guidelines, directives and codes
of conduct and practice’’ of the following: 40
‘‘35A. Delegation and assignment
35B. Offences and penalties
35C. Transitional provisions’’.
32. The following long title is hereby substituted for the long title of the principal Act: 45
‘‘To amend the Electricity Regulation Act, 2006 so as to delete, amend, and
insert certain definitions; to provide for the application of the Act; to provide
for the National Energy Regulator to consider applications for licences and the
issue of licences; to provide for revocation and deregistration of licences; to
provide for additional electricity, new generation capacity and electricity 50
infrastructure; to provide for the establishment, duties, powers and functions
of the Transmission System Operator SOC Ltd and transitional measures; to
provide for an open market platform that allows for competitive electricity
trading; to assign the duties, powers and functions of the Transmission System
Operator SOC Ltd to the National Transmission Company South Africa SOC 55
Ltd; to provide for delegation and assignment; to provide for offences and
penalties; and to provide for matters connected therewith.’’.
20
33. This Act is called the Electricity Regulation Amendment Act, 2023, and comes
into operation on a date determined by the President.
21
1. BACKGROUND
The Electricity Regulation Amendment Bill, 2023 (the ‘‘Bill’’), seeks to amend the
Electricity Regulation Act, 2006 (Act No. 4 of 2006) (the ‘‘Act’’).
The main purpose of the Bill is to effect amendments to the Act in order to improve the
administration of the Act; to provide for additional electricity, new generation capacity
and electricity infrastructure; to provide for the establishment, duties, powers and
functions of the Transmission System Operator SOC Ltd; to provide for an open market
platform that will allow for competitive electricity trading; and to assign the duties,
powers and functions of the Transmission System Operator SOC Ltd to the National
Transmission Company South Africa SOC Ltd.
3.1.1 Clause 1 of the Bill seeks to amend section 1 of the Act, to provide for
the insertions, amendments, and deletion of certain definitions in
section 1 of the Act, in order to assist with the interpretation of the Act.
Clause 2 of the Bill seeks to amend section 2 of the Act, to substitute the words
‘‘South Africa’’ for the word ‘‘Republic’’.
3.3.1 Clause 3 of the Bill seeks to insert the new section 2A into the Act.
Pursuant to the Presidential pronouncement of 25 July 2022 and the
promulgation of the amendment to Schedule 2 of the Electricity
Regulation Act: Licensing Exemption and Registration Notice, 2023,
the licensing threshold to apply for and hold a license for generation
facilities in terms of the provisions of the Act has been removed and
there is now a complete exemption from the obligation to apply, and
hold a licence, for generation facilities. Generation facilities are only
required to register with the National Electricity Regulator of South
Africa (the ‘‘Regulator’’).
3.3.2 The proposed amendments seek to provide clarity and provide the
distinction of when the provisions of the Act are applicable and when
they are not applicable.
Clause 4 of the Bill seeks to amend section 3 of the Act. The proposed
amendments clarify and extend the scope of the powers of the Regulator to
align with the new proposed insertions in the Bill, providing for the Regulator
to issue, amend, withdraw, suspend and revoke licences, and determine the
registration, revocation and deregistration of persons or activities in accor-
dance with the Act.
22
3.5.1 Clause 5 of the Bill seeks to amend section 4 of the Act. Section 4(a)(i)
of the Act provides for the Regulator to consider applications for
licenses, and to issue licences for the operation of generation,
transmission or distribution facilities, the import and export of
electricity and trading.
3.5.3 Section 4(a)(ii) of the Act provides for the Regulator to regulate prices
and tariffs. The practical application of this provision has presented the
Regulator with implementation challenges since it has proven difficult
to regulate prices. The proposed amendments seek to remove the
regulation of prices and provide that the Regulator shall set and
approve tariffs. In the setting and approval of tariffs and the
methodology thereof, the Regulator would provide for the prices as an
integral part of tariff setting.
3.5.4 Section 4(a)(iv) provides for the Regulator to issue rules designed to
implement the national government’s electricity policy framework,
the integrated resource plan and the Act. Consequent to the Regula-
tor’s inability to practically implement this provision, the proposed
amendment to section 4(a)(iv) deletes this provision. The other
proposed amendments to section 4(a) are for clarity purposes.
3.5.5 The Act limited the scope of dispute resolution only to mediation, to
mediate disputes between generators, transmitters, distributors, cus-
tomers or end users.
The proposed amendments to section 4(b) seek to expand the powers
of the Regulator to mediate and arbitrate disputes, and to extend its
scope to cover traders, the transmission system operator and any other
licensee or customer.
Clause 6 of the Bill seeks to amend section 6 of the Act. The proposed
amendment to section 6(2) of the Act seeks to provide the Regulator with a
discretionary power, rather than a mandatory obligation, to require a licensee
to establish and fund a customer or end users forum in the manner set out in
the licence held by such a person.
3.7.1 Clause 7 of the Bill seeks to amend section 7 of the Act. The proposed
amendments to section 7 seek to align with the amendment in section
4 and extend the scope of activities that require a license to include
market operation and system operation.
Clause 8 of the Bill seeks to amend section 8 of the Act. The proposed amendment
seeks to provide a cross reference for clarity purposes.
3.9.1 Clause 9 of the Bill seeks to amend section 9 of the Act. The proposed
amendment to section 9(1) seeks to expand the scope of activities to
include import and export activities.
3.9.3 The proposed insertion of section 9(4)(c), (d) and (e) seeks to close the
resultant gap in the existing legislative provisions, to ensure that
applicants for registration in terms of the provisions of the Act comply
with technical codes, regulatory requirements necessary for the
sustained operation of the national transmission power system and
interconnected distribution power systems, as well as the payment of
fees imposed by licensees for granting registrants access to their
network.
3.10.1 Clause 10 of the Bill seeks to amend section 10 of the Act. The
proposed amendments seek to expand the scope of this section to
include market operation and system operation in section 10(2)(a), to
remove the reference to ‘‘prices’’ in section 10(2)(d) and to substitute
the Minister of Mineral Resources and Energy (the ‘‘Minister’’) with
the ‘‘Regulator’’ in section 10(2)(h).
3.11.1 Clause 11 of the Bill seeks to amend section 11 of the Act. Section 11
of the Act provides that a Regulator may require that an applicant
publish a notice of the application for a license and must consider
objections to the application. This provision, however, is silent on how
the Regulator may require the applicant to publish a notice and does
not provide for timelines within which the Regulator must deal with
objections. This has presented challenges whereby applications have
24
3.12.1 Clause 12 of the Bill seeks to amend section 12 of the Act. Section 12
of the Act requires the Regulator to furnish the applicant with the
objections received and allows the applicant the opportunity to
respond thereto. The Regulator may request additional information, as
may be necessary, before it considers an application for a licence.
However, the existing section 12 does not provide for timelines within
which the Regulator must deal with the above matters. Consequently,
the licensing processes have been retained in the process for
consideration by the Regulator, for unacceptably lengthy periods of
time.
3.13.1 Clause 13 of the Bill seeks to amend section 13 of the Act. The Act
allows for the Regulator a period of 120 days to grant or refuse an
application. This timeline, compounded by a lack of defined timelines
in other areas associated with the application process, has been
considered to be too lengthy and to negatively affect applicants. More
often than not, this timeline has also been exceeded and applications
have taken longer to be considered by the Regulator. This is also
considered to contribute to regulatory uncertainty.
3.13.2 The proposed amendment to section 13(1) shortens the period for the
Regulator to grant or refuse an application and requires the Regulator
to do so within 60 days.
3.14.1 Clause 14 of the Bill seeks to amend section 14 of the Act. The
provisions of section 14(1)(a) of the Act are limited to a licensee and
its end-user. This has led to ‘‘customers’’ not being provided for in
certain provisions of the Act. The definitions provide a distinction
between an ‘‘end-user’’ and a ‘‘customer’’. The proposed amendment
to section 14(1)(a) seeks to expand the scope to include customers,
thereby ensuring that clarity is provided that ‘‘customer’’ and
‘‘end-user’’ may be considered as separate and distinct from each
other.
3.14.2 Section 4(a)(ii), read with section 14(1)(d), of the Act obliges the
Regulator to regulate prices and tariffs. The practical application of
25
3.14.3 The proposed amendments to section 14(1)(f), (l), (m) and (z) seek to
expand the scope of application of these provisions.
3.14.4 With regards to the application of section 7 of the Act, a legal scenario
arose as to whether a person who is, or intends to be, sub-contracted by
a holder of a license is required to also apply for and hold a license for
that sub-contracted portion. The proposed amendment to section
14(1)(t) seeks to clarify that position by introducing an exception to
the effect that a license may contain a license condition allowing the
licensee to sub-contract the performance of the licensed functions,
including allowing for the licensee to sub-contract the maintenance
and operation of the generation, transmission or distribution facilities.
3.15.1 Clause 15 of the Bill seeks to amend section 15 of the Act. Section
15(1) of the Act provides for the license conditions relating to the
setting or approval of prices, charges and the regulation of revenues to
enable an efficient licensee to recover the full cost of the licensed
activities, including a reasonable margin or return. Due to difficulties
experienced by the Regulator in practically implementing this
provision, the proposed amendment to section 14(1)(d) of the Act
seeks to remove the setting or approval of prices. It was identified that
in the Act, the license conditions did not provide for considerations
relating to security of supply.
3.15.2 The proposed amendments to section 15(1) of the Act seek to allow the
Regulator, in setting and approving tariffs, to provide for license
conditions that allow for a reasonable return commensurate with the
risk of the licensed activity and may have regard to the need to ensure
security of supply, the diversity of supply and to promote renewable
energy.
3.15.4 The proposed insertion of section 15(1A) and (1B) into the Act seeks
to provide for factors that need to be taken into account for tariff
determinations, including all planned projects reflected in the inte-
grated resource plan and the transmission development plan, insofar as
these projects may impact on the costs of the licensee, for the period
during which the tariff applies. Further, in the case of vertically
integrated licensees, the Regulator must set or approve separate tariffs
for each of the licensed activities.
3.15.5 The proposed amendment of section 15(2) of the Act seeks to provide
clarity that a licensee may not charge a customer any tariff other than,
the tariff set or approved by the Regulator as, or in accordance with, a
licence condition.
3.15.6 The proposed addition of section 15(4) into the Act seeks to provide
clarity on the charging of prices emanating from a competitive market
26
Clause 16 of the Bill seeks to amend section 16 of the Act. Section 16 of the
Act obliges the Minister to prescribe the procedure to be followed in varying,
suspending, removing or adding any license condition. This is a regulatory
function, which the Regulator is best suited to perform. The proposed
amendment intends to allocate this function to the Regulator instead of the
Minister.
Clause 17 of the Bill seeks to amend section 17 of the Act. The proposed
amendment is a textual amendment and further seeks to allocate the function
to prescribe the form and procedure to be followed in revoking a licence, from
the Minister to the Regulator.
3.18.1 Clause 18 of the Bill seeks to insert section 17A into the Act. The
promulgation of the amendment to Schedule 2 of the Electricity
Regulation Act: Licensing Exemption and Registration Notice, 2023,
created a regulatory gap wherein generation facilities, which were
regulated under license conditions, are now only required to register
with the Regulator, and there are no explicit provisions in the Act
providing for the variation, suspension or removal of registrations.
3.18.2 The proposed insertion of section 17A into the Act seeks to empower
the Regulator to be able to consider the variation, suspension,
deregistration or revocation of registrations, and the amendment
further integrates these provisions from Schedule 2 with the main
provisions of the Act.
3.19.1 Clause 19 of the Bill seeks to amend section 20 of the Act. The
provision of the Act provides for a prohibition on the transfer of
licenses. This is contrary to similar provisions contained in other
similar legislation, which provide for the prohibition, but contain an
exception that the transfer may occur if approved by the relevant
regulatory body.
3.20.1 Clause 20 of the Bill seeks to amend section 21 of the Act. The
proposed amendment to section 21(1) of the Act seeks to qualify this
provision to give due consideration to the application of section
14(1)(t). The proposed amendments to section 21(3), (4), (4)(c), (e)
and (f) of the Act, are textual amendments.
a necessity to provide measures that would ensure that third parties are
not discriminated against, and that they will be granted access to the
Transmission System Operator SOC Ltd’s transmission or distribution
power systems to evacuate their generated power. This would ensure
that the competitive market would be able to function. This
necessitates that measures, such as legislative provisions providing for
non-discrimination against third parties, be put in place to provide for
the interaction between the different role players in the electricity
sector, to provide the process whereby new role players would be
guaranteed access to the use of the electricity grid system, and to
provide for such access charges.
3.20.3 The proposed insertion of the new section 21(3A), (4A), (4B) and (4C)
into the Act seeks to ensure that there will not be discrimination
between different generators or customers in relation to dispatching or
balancing the system. Balancing the system refers to the process of
ensuring that electricity consumption matches the electricity produc-
tion of the electrical grid (the system) at any moment. Third party
access to the transmission and distribution power system will be based
on published tariffs, applicable to all eligible customers, and applied
objectively, without discrimination between system users. The opera-
tion of the system must be transparent, non-discriminatory and in line
with market-based procedures.
Clause 21 of the Bill seeks to amend section 22 of the Act. The proposed
amendment seeks to provide a directive that a form of authorisation must be
in writing.
Clause 22 of the Bill seeks to amend section 24 of the Act. The proposed
amendment seeks to expand this provision to include a reference to ‘‘road’’.
Clause 23 of the Bill seeks to amend section 27 of the Act. The proposed
amendment is a consequential amendment, which substitutes a reference to
‘‘Provincial and Local Government’’ for ‘‘Cooperative Governance and
Traditional Affairs’’.
Clause 24 of the Bill seeks to amend section 30 of the Act. The proposed
amendment seeks to align the provision with those that extend the scope of the
Regulator to arbitrate disputes, provide textual correction, and allocate the
function to prescribe a procedure from the Minister to the Regulator. The
proposed insertion of section 30(5) into the Act seeks to ensure that arbitration
decisions are made and to provide clarity on the status of arbitration decisions.
Clause 25 of the Bill seeks to amend section 32 of the Act. The proposed
amendment seeks to expand the scope of this section to include market
operation or system operation, provide textual clarity and also obliges the
Regulator to produce a preliminary report in relation to investigations
undertaken.
Clause 26 of the Bill seeks to amend section 33 of the Act. The proposed
amendment to section 33(1)(a) of the Act seeks to provide textual clarity.
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3.27.1 Clause 27 of the Bill seeks to amend section 34 of the Act. The
National Development Plan, 2030, envisions a South African energy
sector that will be reliable, efficient and competitive, socially equitable
through expanded access at affordable tariffs and pronounces a
20-year planning horizon to roll out electricity infrastructure, in line
with the Ministerial determinations in terms of section 34 of the Act.
These Ministerial determinations are policy signals to investors to
plan their investments in the South African energy sector.
3.27.2 The National Energy Act, 2008 (Act No. 34 of 2008) (‘‘Energy Act’’)
deals with the issue of energy security for South Africa. Section 2(a)
and (b) of the Energy Act provides for its objectives as being, among
others, to ensure uninterrupted supply of energy to the Republic and to
promote diversity of supply of energy and its sources. The Minister is
responsible for the implementation of the Energy Act.
3.27.3 For the purposes of the security of electricity supply, section 34 of the
Act provides for matters dealing with energy security. Section 2(a) and
(e) of the Energy Act states the objects of this Act to be to achieve the
efficient, effective, sustainable and orderly development and operation
of electricity supply infrastructure in South Africa and promote the use
of diverse energy sources and energy efficiency. The Minister has the
responsibility of ensuring that there is security of electricity supply.
There have been occasions where the Regulator has refused to grant its
concurrence on matters where the Minister sought to implement the
provisions of section 34 of the Act, in his responsibilities to ensure
security of electricity supply. This was because section 34 of the Act
provided for the Minister to make determinations subject to the
concurrence of the Regulator. Various court decisions have also
affirmed that where the Regulator has not provided its concurrence, the
Minister cannot implement the provisions of section 34. This has led
to unintended consequences where the Minister has been rendered
unable to carry out his responsibilities in terms of the Act.
3.28.1 Clause 28 of the Bill seeks to insert sections 34A and 34B into the Act.
The White Paper on Energy Policy, 1998, sets out the energy sector
policy objectives as being, among others, to stimulate economic
development by Government, encouraging competition within energy
markets. The White Paper further provides that to ensure the success
of the electricity supply industry, various developments will have to be
considered by government over time, namely, giving customers the
right to choose their electricity supplier, introducing competition into
the industry, especially in the generation sector; permitting open
non-discriminatory access to the transmission system, and encourag-
ing private sector participation in the industry.
3.28.2 In the State of the Nation Address, 2022, it was stated that, in addition
to closing the energy supply shortfall, South Africa is implementing
fundamental changes to the structure of the electricity sector and that
the proposals in the Amendment Bill will enable the competitive
market for electricity generation.
29
3.28.5 The objects of the Act in section 2(c), (e) and (f) are to facilitate
investment in the electricity supply industry, promote the use of
diverse energy sources and energy efficiency and promote competi-
tiveness and customer and end user choice.
3.28.6 The proposed insertion also provides for the mechanisms to enable
competitive markets in the electricity industry, provide transitional
measures to an open competitive electricity market environment and
encourage private sector participation in the industry as envisaged in
the strategic objectives of Government.
Clause 29 of the Bill seeks to amend section 35 of the Act. The proposed
amendment seeks to clarify and expand the scope of application. The
proposed insertion of section 35(3A) into the Act seeks to empower the
Regulator to make transmission development related rules. The Regulator did
not have this power previously. The proposed deletion seeks to ensure that the
Regulator does not undertake activities for which there are other competent
entities who are required to carry out such activities by legislation.
3.30.1 Clause 30 of the Bill seeks to insert sections 35A and 35B in the Act.
The Act is silent and does not have provisions on the delegation and
assignment of powers and duties, as well as provisions on offences and
penalties for contravention of the Act.
3.30.2 This omission renders the Act not to be aligned with similar
legislation, which contain these provisions.
3.30.3 The proposed insertion of these provisions seeks to ensure that the Act
aligns with other similar legislation. The proposed insertion also seeks
to provide for measures wherein the Minister may delegate powers or
assign duties to the Director-General or other officials. Further, the
proposed insertion will enable certain contraventions to be treated as
offences for which penalties may be imposed.
3.30.4 Clause 30 of the Bill further seeks to insert section 35C in the Act to
provide for the transitional provisions that shall be in effect after the
promulgation of this Bill. The proposed insertion of section 35C
further seeks to enable the Regulator to have the powers to exercise
30
The proposed amendment seeks to substitute the long title of the Act.
4. CONSULTATIONS
The amendments proposed by this Bill were published in Government Gazette No.
45898 Notice No. 1746 of 10 February 2022 for public comments. Comments by
interested parties were considered. A series of consultations were undertaken with
industry and other key sector stakeholders. Accordingly, the general public and
institutions at large have been consulted in preparing the Bill.
6. PARLIAMENTARY PROCEDURE
6.1 The Department and the State Law Advisers are of the opinion that this Bill
must be dealt with in accordance with the procedure established by section 76
of the Constitution since it contains no provision to which the procedure set
out in section 75 of the Constitution applies.
6.2 The Constitution prescribes the classification of Bills, therefore a Bill must be
correctly classified otherwise it will be constitutionally out of order.
6.3 We have considered the Bill against the provisions of the Constitution relating
to the tagging of Bills, and against the functional areas listed in Schedule 4
(functional areas of concurrent national and provincial competence) and
Schedule 5 (functional areas of exclusive provincial legislative competence)
to the Constitution.
6.4 For the purposes of tagging, the constitutional court case of Tongoane and
Others v Minister for Agriculture and Land Affairs and Others CCT 100/09
[2010] ZACC 10 confirmed the ‘‘substantial measure’’ test indicated in Ex
Parte President of the Republic of South Africa: In re Constitutionality of the
Liquor Bill 12/99 [1999] ZACC 15. The test entails that ‘‘any Bill whose
provisions in substantial measure’’ falls within a specific Schedule must be
classified in terms of that Schedule.
6.5 In terms of section 76(3) of the Constitution, a Bill must be dealt with in
accordance with the procedure established by either subsection (1) or (2) if it
falls within a functional area listed in Schedule 4 to the Constitution.
6.6 The issue to be determined is whether the clauses as contained in the Bill, in
a substantial measure, fall within a functional area listed in Schedule 4 to the
Constitution.
6.7 The Bill provides for the electricity of the whole of the Republic, we have
considered all the provisions of the Bill in order to establish the extent to
which the provisions substantially affect any of the matters or functional areas
listed in Schedule 4. The Bill provides for electricity matters for the whole
Republic, and electricity and gas reticulation is listed under part B of Schedule
4, therefore the Bill should be tagged as a section 76 Bill.
31
6.8 Therefore, in our opinion, the Bill is an ordinary Bill affecting the provinces
and must be dealt with in accordance with the procedure set out in section 76
of the Constitution.
The State Law Advisors are of the opinion that it is not necessary to refer the Bill to the
National House of Traditional and Khoi-San Leaders in terms of section 18(1)(a) of the
Traditional and Khoi-San Leadership Act, 2019 (Act No. 3 of 2019), since it does not
contain provisions pertaining to traditional or Khoi-San communities or pertaining to
customary law or customs of traditional or Khoi-San communities or pertaining to any
matter referred to in section 154(2) of the Constitution.
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