Key recent developments

Companies Act (71 of 2008)

The workgroup to prepare Eskom and its subsidiaries for the implementation of the Companies Act from 1 May 2011 considered the governance, legal, insurance and financial implications of the Act, among others, in conjunction with an external law firm, which has signed off on Eskom’s readiness to implement the Act.

Consumer Protection Act 2008

The workgroup to prepare Eskom for the implementation of the Consumer Protection Act from 1 April 2011 had to consider various business areas and activities. Some of the issues only became clear after the draft regulations were published (towards the end of 2010), such as the requirements for auctions. An external law firm provided advice and will sign off on Eskom’s readiness to implement this Act.

Key emerging legislation and policies

Eskom commented and made submissions to parliamentary portfolio committees on the year’s new and evolving bills. Some of these were:

Protection of Information Bill

This bill deals with the classification of information and will be applicable to state-owned enterprises.

State Liability Amendment Bill

This Bill provides for the attachment of government moveable assets in the event of non-payment of a court judgement sounding in money. The Bill and the Act do not apply to Eskom as a judgement debtor, but Eskom will use it as a judgement creditor if necessary.

Protection of Personal Information Bill

This Bill deals with the way public and private bodies may rightfully collect, store and use personal information about their contacts. It will impact on Eskom, from its employees to commercial relationships with customers and suppliers.

Carbon tax discussion paper

The Ministry of Finance issued for comment the discussion paper on the introduction of carbon taxes in the future. See here in the Finance section for Eskom’s comments.

Energy policy framework

Some of the most important recent developments in the electricity sector are summarised below.

Development of the Integrated Resource Plan for Electricity (2010 – 2030)

At a Cabinet meeting held during March 2011, Cabinet approved the IRP for Electricity (2010 – 2030) as the basis for South African power generation for the next 20 years. The plan has been promulgated by the Department of Energy.

The approved plan is geared towards a low carbon future and aligned with the country’s long-term mitigation scenarios which allow greenhouse gas emissions to peak, plateau and decline in line with national government’s aspiration. Between 2011 and 2030, 42% of the new build programme excluding the current committed Eskom build programme will be from renewable energy sources. By 2030, it is anticipated that the percentage of energy generated from CO₂ free sources (including nuclear energy) will be nearly 30%.

Electricity regulations on new generation capacity¹

On 10 November 2010, the Minister of Energy promulgated electricity regulations (in terms of the Electricity Regulation Act) on new generation capacity. These draft regulations are a review of the regulations promulgated on 5 August 2009 and are yet to be finalised and promulgated. The regulations provide guidance on future investments in generation capacity by both Eskom and independent power producers, in accordance with the integrated resource plan.

Eskom supports the introduction of independent power producers, which have an important role to play in addressing South Africa’s energy needs. They will contribute to diversifying the source and nature of energy production, introduce new skills and capital into the industry, and enable the benchmarking of pricing and performance.

Independent system operator (ISO)

On 11 February 2010, in the State of the Nation speech, the President of South Africa announced the establishment of an independent system operator, a mechanism to support the introduction of independent power producers by creating a non-conflicted buyer of power.

At a Cabinet meeting on 16 March 2011, Cabinet approved the tabling in Parliament of the Independent System and Market Operator Bill. It is envisaged that this Bill will make provision for the establishment of an independent system and market operator for the electricity supply industry of South Africa, and for matters associated therewith. Cabinet encouraged stakeholders in the power generation sector to participate in the deliberations on this Bill.

This restructuring of the electricity supply industry will have a significant bearing on how the industry is to be regulated in the future.

Regional electricity distributors (REDs)

In October 2006 Cabinet had approved the proposal to create six regional electricity distributors. The plan for restructuring the electricity distribution industry in South Africa was reviewed by Cabinet during the year and will now not proceed.