SA urged to create a competitive electricity market

Engineering News 5 June 2013.

Solving South Africa’s power crisis will assist the country in achieving sustainable economic growth and help government deliver on its National Development Plan, Free Market Foundation director Eustace Davie said on Wednesday.

He stated that the Department of Energy had to open doors and tweak energy policy regulations to allow for the easy integration of independent power producers (IPPs) into the electricity market…

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Independent System Market Operator (ISMO) Bill and public comments: overview

Published on Parliamentary Monitoring Group website, http://www.pmg.org.za.
Energy Portfolio Committee summary of Meeting.
Date of Meeting: 27 Mar(sic) 2013
Chairperson: Mr S Njikelana (ANC)

Summary:
The Department of Energy provided an overview of purpose, mandate, and logic of the Independent System and Market Operator Bill. ISMO would be an autonomous state owned company, mandated to assist in the development of Generation Resource Planning, buying of power from generators, as the Department was currently not well established to be procurers of energy so ISMO would be the dedicated procurer. Currently, the Department was the procurer of energy but trading took place within an Eskom function, and this was not an ideal structure. it would also deal with electricity trading at a wholesale level and system operations. Bias could not be eliminated unless an autonomous entity was set up to deal with these issues and the playing field was levelled. However, key policy and finance considerations still needed to be made by DoE as well as by government.

Independent Power Producers (IPPs) had not been forthcoming in significant volumes due to:
∙ Perceptions of conflict of interests in vertically integrated Eskom
∙ Perceptions that government was not serious about reforming the industry
∙ Perceptions about long-term viability of present electricity supply industry (ESI) structure
∙ Lack of clear policy specifically aimed at IPPs
∙ Lack of enabling legal/ regulatory framework to facilitate IPPs.

The Committee commented that what came up strongly in the public hearings was that there needed to be a long term vision for the electricity industry and its end state. More concrete work was needed in formulating relevant policy by the DoE to reach agreement on what the ultimate objectives in the energy industry were. DoE needed to revisit some of the issues which had failed in the past and re-cast a new framework. The Minister should therefore address the restructuring of the electricity sector as a matter of urgency, which included policy renewal, legislation, programmes and road map. It was suggested that DoE should hold another energy summit to address some of these issues.

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Establishing the Independent System and Market Operator (ISMO)

Energy Portfolio Committee [1] Meeting Report Information
Date of Meeting: 1 Feb 2013 Chairperson: Mr S Njikelana (ANC)

Summary:

A task team, consisting of the Departments of Energy and Public Enterprises, National Treasury and Eskom, had been set up to prepare inputs for the processing of the Independent System and Market Operator Bill (ISMO). It was to perform a scenario building exercise and further due diligence on the future of the transmission sector vis-a-vis the ISMO Bill. Members of the task team presented their report on the due diligence exercise but stated that no solid conclusions about the recommendations had been reached yet, as the ISMO Bill had still not been approved by the Minister.

Eskom explained how the transfer of its assets would affect their operations and creditworthiness. The majority of members agreed that the transfer of assets and transmission from Eskom and the subsequent establishment of ISMO would lead to the downgrading of Eskom as an entity; concerns about the fair compensation of Eskom were also the main points of discussion. Four key focus areas were identified by the task team for the due diligence exercise: the financial, legal, human resources, and technical/ operational impacts on both Eskom and ISMO. However, the focus of the presentation was only on the financial and legal impacts as the rest of the issues were discussed in greater detail in the report.

Scenario building exercises were also discussed, in an attempt to make an informed decision about whether or not to transfer assets and transmission from Eskom to ISMO, but no conclusions were reached as the Bill had still not been finalised. The two options recommended with regards to the ISMO Bill were that the Bill could be processed without the transmission of assets while the working group continued to resolve the remaining issues pertaining to the transfer of transmission assets, the second option was that the Bill could be placed on hold while giving the work group more time to finalise their outstanding work.

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ISMO Draft Bill briefing by the PMG

Parliamentary Monitoring Group 5 July 2011.

Created 5 Jul 2011 – 12:39

Meeting Report Information

Date of Meeting:

29 Jun 2011

Chairperson:

Mr S Njikelana (ANC)

Independent System and Market Operator Draft Bill [1]
Department of Energy Presentation on Independent System and Market Operator [awaited]

Summary:

The Department of Energy introduced the concept of the Independent System and Market Operator into the energy sector. This body would buy electricity from Eskom and other producers, and sell it on to customers. Legislation was currently being prepared and would be discussed during the following term of Parliament. It was still uncertain if Eskom would retain direct links with some of its key customers.

Members were concerned that the transfer of powers from Eskom to another body might lead to retrenchments. There was a question as to the ability of customers to choose their suppliers, although electricity reticulation within a municipality was the responsibility of that municipality according to the Constitution. Some clarity would be needed as Eskom had fulfilled this function in several areas.