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Sparks to fly in regulator's parting shot

Posted On Monday, 26 January 2004 02:00 Published by eProp Commercial Property News
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Outgoing electricity control body flexed its power in showdown with Eskom

Infrastructure IndustryThe board of the National Electricity Regulator (NER) is hard at work finalising a risk analysis of SA's electricity supply industry.

This will be the last major task undertaken by the regulato r before it hands over the reins to a proposed new national energy regulator later this year. The NER's term of office expires in June this year.

The risk assessment, which is expected to be completed in March, aims to avoid widespread power cuts, which are caused mainly by an ageing infrastructure and lack of investment which in turn the result of restructuring uncertainties that may discourage investment in the economy of the country.

A survey conducted by the NER last year found that 49% of municipalities had no maintenance strategies for their electricity distribution networks and lacked understanding of power quality or performance issues.

This means that almost half of the country's 284 municipalities do not carry out routine maintenance checks and do not have contingency measures to deal with power cuts.

The survey found out that about 45% of electricity distributors are failing to identify areas requiring corrective action and only 2% are able to so.

NER CE Xolani Mkhwanazi says the regulator and the government are "gravely concerned" about the deterioration of infrastructure in the electricity distribution sector.

He says the risk assessment programme, which started in November last year, would be completed by March and then handed over to Minerals and Energy Minister Phumzile MlamboNgcuka in April .

The NER will be replaced by the National Energy Regulator, a new entity that will regulate not only electricity, but also the gas and pipelines industry.

"The new regulator will be in a similar position to judges in that they will be required to hold public hearings, weigh evidence, give written decisions with reasoned arguments, and the decisions will be subject to appeal," Minerals and Energy Deputy Minister Susan Shabangu said at a briefing to Parliament last year. Shabangu says the new regulator will have the power to impose fines of up to R2m.

Sources close to the NER say Mkhwanazi will not renew his contract with the organisation when it expires at the end of this month.

A nuclear physicist by profession, Mkhwanazi joined the NER in 1999 for a three-year term, which was extended by two years.

He is credited with playing a crucial role in the restructuring of the electricity supply industry in SA and with building the NER into an independent and credible regulatory body.

The NER's assertiveness was shown recently when it turned down Eskom's request for an above-inflation tariff hike of 8,5%. Instead it approved a low 2,5% rise, which has resulted in Eskom appealing to the minerals and energy department .

The department has yet to make a decision on the matter.

Whether the NER's decision was right will be determined in just over three years when Eskom is projected to run out of excess capacity.

The NER said Eskom wanted a higher price increase based on its capital expenditure.

Eskom has budgeted more than R50bn for upgrading transmission lines and recommissioning mothballed power stations to augment its capacity.

The state-owned company says that to retain stable and predictable pricing, which is important for investors, it would prefer to have gradual and predictable increases rather than massive increases to pay for new capacity when it is needed.

Eskom says that since 1990 it has reduced the real price of electricity 25%, saving customers more than R18bn.

But the NER says customers must not be made to contribute to the future costs of a future power station.

If the matter remains unresolved, which seems likely as government focuses on electioneering, then the new energy regulator has its hands full even before it is appointed.

 

 

Last modified on Tuesday, 05 November 2013 11:34

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