Nhlanhla Gumede, head of electricity regulation at the National Energy Regulator of SA (Nersa), says the body is under pressure from the presidency to speed up registration and approval processes to enable the rapid implementation of the emergency energy plan.
“We were asking for things like power purchase agreements (PPAs) before approving bilateral contracts (between embedded generators and users) ... so we have eliminated that requirement,” he said.
“We’ve agreed that we are not empowered to ask for that and therefore are not asking for any PPAs. Neither are we approving tariffs for bilateral contracts, which is what the people in Operation Vulindlela (a presidential initiative to accelerate structural reforms) were concerned about.”
For bilaterals between embedded generators and Eskom or municipalities, PPAs and Nersa-approved tariffs will be necessary.
“For that we need a public process in terms of section 217 of the constitution,” Gumede said.
President Cyril Ramaphosa announced last week that red tape would be slashed and processes streamlined to speed up the generation and availability of as much electricity as possible to reduce load-shedding in two to three years.
He has removed the 100MW licence threshold, clearing the way for private producers to generate electricity without a licence.
However, this has to be formalised with an amendment to the Energy Regulation Act by the department of mineral resources & energy. This could require time-consuming consultation, public hearings and the concurrence of Nersa, depending on the wording of the amendment.
If minister Gwede Mantashe invokes a consultation clause, Nersa will be forced to hold a public consultation process.
Given the regulator’s track record, there are concerns this won’t happen quickly.
Gumede, a metallurgical engineer with an MBA from Johannesburg’s Wits University, was an adviser to international oil companies on regulatory frameworks, energy policy and strategy before being recruited by Nersa two years ago to improve its performance. He said he is “worried about the narrative that we’ll go out of our way to delay the process”.
He said Mantashe has been advised not to use wording that will require a public hearing.
“He doesn't need to use this clause. There is another clause which does not require public consultation ... which would make the process a whole lot shorter.”
Nersa is awaiting a response from the minister, Gumede said.
“Unfortunately, we have not been consulted yet. We’re hoping the department would have noted what we advised the minister previously (when the licensing threshold was lifted to 100MW) and will use the same clause.”
We have our own internal processes which may be deemed by others to take their time, but there are cases where the blame does not reside with Nersa. But because we’re on the front line we tend to be blamed
The decision needs to be made as soon as possible, he added.
“Until the amendment is gazetted there can’t be any action. Only the minister can gazette it.”
Gumede said he is concerned Nersa is often blamed for departmental delays.
“We have our own internal processes which may be deemed by others to take their time, but there are cases where the blame does not reside with Nersa. But because we’re on the front line we tend to be blamed.”
Nersa has been criticised for the slow process of procuring new generation capacity, but “new capacity has got nothing to do with us. We don’t procure new capacity”.
He said deregulation, which is at the heart of the energy plan, won’t necessarily reduce the role of Nersa so much as change it.
“Maybe we'll be licensing people not so much now, we'll be moving more to registering, which is basically keeping a record of data, something we should have been doing anyway.”
How many hurdles will embedded energy producers have to jump over to access the grid?
“From us, very few. The issue is going to be the network service provider (NSP), the owner of the grid, whether that is Eskom or a municipality. They’re the ones that need to give the OK.”
The process of registration is simple, Gumede said.
“If somebody has a connection agreement with the NSP, they come to us, provide that information, pay R200 and that’s it.”
The process is down to 19 days, but could be done online in 12, he said.
But Nersa is still paper-based, though it has been promising to go online for at least a year.
“We are fairly slow. Strategy-wise we’ve made the decision to do that. It’s done by the IT guys, so they’ve been looking for solutions.”
Then it will have to go out to tender.
Gumede said there’s a need to synchronise the electricity licensing process with other procedures for environmental, water and land use approvals, among others, into a one-stop shop.
“Though the presidency wants this and we’re all one government, it’s not going to be easy.”
Issues considered by the department of environment are different to those considered by the department of water, for example.
“It’s even worse when you’ve got technical and economic regulatory issues governed by different laws. It takes two years for an applicant to give effect to a project. That is, unfortunately, a reflection of the number of laws we’ve got in the country.”
Synchronising processes to provide a one-stop solution may require changes in the law, which Gumede hopes the presidency can expedite. This would make the process faster and easier, and help attract investment.
“There’s an urgent need for this, not only because we’re in an emergency situation, but also because, as an investment destination, SA is difficult. There are too many individual hurdles to cross.
“It takes a decision from the presidency to say we need these things done. How do we bring all these different departments together so there is one single entry point for applicants?
“This is not something Nersa can do. Unfortunately, government needs to take the lead in terms of policy and the accompanying legislation.”
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