Newsletter contributors - NERSA · The Energy Regulator set Transnet’s petroleum pipeline tariff, granting Transnet an 8.53% increase in allowable revenue for the period 03 April

Official Newsletter of the National Energy Regulator of South Africa Volume VII, Edition II, 2013

NEWSContents

1 Editor’s NoteA new financial year with new challenges

2 From the desk of the CEO Highlights for the 2012/13 financial year and achievements to date

INSIDE OUT,reflecting our outward-bound activities...

3 NERSA announcement on MYPD3 applicationOutcome of Eskom’s MYPD3 application announced

5 NERSA announcement on Sasol application NERSA approves Sasol gas applications

7 NERSA announcement on Transnet application Latest petroleum pipeline tariffs approved for Transnet Limited

8 Approval of new IBT structure Revised IBT structure to assist municipalities

9 Municipal tariff guideline 2013/14Decision on municipal tariff guideline for the 2013/14 financial year and the revision of municipal tariff benchmarks

10 Stakeholder workshop Successful workshop held regarding NFI manuals

11 ExhibitionNERSA Exhibits at Africa Energy Indaba 2013

12 Farewell NERSA bids farewell to Ms Ethèl Teljeur

OUTSIDE IN,a glimpse at our internal activities…

13 Employees Event IRM Information Open Week 12 to 15 March 2013

14 HR IssuesGender equality quotas not the answer, say experts

15 Calendar of Events Schedule of Energy Regulator and Subcommittee meetings for the period April to June 2013

Volume VII, Edition II, 20131

Mr Charles Hlebela

Newsletter contributors:Our thanks goes to:

Arthur Lees-Rolfe

Patrick Mabuza

Azwindini Nelwamondo

Brian Sechotlho

Tabisa Nkopo

Porcia Makgopela

Thandeka Jamba

Mpho Nemukongwe

Veli Mahlangu

Faizal Karani

Jacquelene Coetzer

Wanda Langenhoven

Linda Nkuna

It is the beginning of a new financial year, and with it comes new challenges. NERSA, through its competent team, is more than ready to face these challenges head on and has already processed a number of high-profile applications during the 2012/13 financial year.

In the Outside In section we look at the Energy Regulator’s decision on Eskom’s highly-contested Third Multi-Year Price Determination (MYPD3) application. Eskom applied for a 16% tariff increase per year over the next five years, but NERSA approved an 8% increase with certain conditions.

The Energy Regulator set Transnet’s petroleum pipeline tariff, granting Transnet an 8.53% increase in allowable revenue for the period 03 April 2013 to 01 April 2014. The applications by Sasol Gas for maximum gas prices for prescribed customer categories, as well as for transmission tariffs, were approved by NERSA on 26 March 2013.

In this edition we also report on the Energy Regulator’s revision of the Inclining Block Tariffs, the decisions made regarding the municipal tariff guideline for 2013/14, as well as the revision of the municipal tariff benchmark.

On 22 February 2013, NERSA held a very successful workshop on the first draft of its Non-Financial Information Regulatory Reporting Manuals as part of Phase 2 of the Regulatory Reporting Manual project.

We are proud to report that NERSA recently exhibited at the prestigious Africa Energy Indaba, the World Energy Council’s African event, in association with the South African National Energy Association, where we engaged with numerous industry role players from across the globe.

In Outside In, we look at the impact of the Gender Equality Bill and give some feedback on the exciting IRM Information Open Week.

As always, your input to and feedback on NERSA News is much appreciated. Send an email to Poppie Mahlangu ([email protected]) with your comments or to contribute to the next issue.

Warm regards

Charles Hlebela

Visit our website at www.nersa.org.za for updates on our activities, public hearings and events calendar.

Editor’s Note

A new financial yearwith new challenges

The Official Newsletter of the National Energy Regulator of South Africa 2

With the financial year-end upon us, it is important that we look at our performance as the Energy Regulator against our key performance indicators. To date, we have met:

• 79% of our energy targets;

• 90% of our piped-gas targets;

• 90% of our petroleum pipeline targets;

• 100% of our cross-cutting targets; and

• 86% of our organisational targets.

This gives us an overall average of 88% of targets met in the first three quarters of this financial year. There is still room for improvement and we have to increase this in the last quarter.

NERSA is in the process of reviewing its institutional and organisational design to ensure that these aspects function optimally in the execution of its mandate and in meeting and exceeding stakeholder expectations.

Eskom, Sasol Gas and Transnet applications

The Energy Regulator recently approved an 8% average increase per annum for Eskom’s Third Multi-Year Price Determination (MYPD3), which will apply for the next five years. We conducted a thorough public consultation process, and received more than 200 written comments, while 162 oral presentations were made at the country-wide public hearings.

The Energy Regulator also approved Sasol Gas Limited’s two applications, one for the approval of maximum prices for piped-gas for various categories of customers, and another for the approval of gas transmission tariffs. The determination of the maximum prices of gas is a consequence of the expiry of the existing Special Regulatory Dispensation period on 26 March 2014, at which point the provisions of section 22 of the Gas Act, 2001 (Act No. 48 of 2001) became fully operational. On 13 March 2013, the Energy Regulator set petroleum pipeline tariffs that will allow Transnet to realise an 8.53% increase in allowable revenue compared to the 2012/13 tariff period. Transnet applied for a 22.6% increase in its allowable revenue.

Development programmes

Twelve learners were recently selected for the NERSA Leanership Programme. This programme is aimed at providing access for young graduates to both theoretical and on-the-job training to prepare them for future employment opportunities, as well as to create a pool of potential candidates for employment by the Energy Regulator.

I am also proud to announce that during the March/April school holidays, NERSA hosted the second group of young female learners from previously disadvantaged groups as part of our Annual Job Shadowing programme, which aims to expose them to different careers within the energy sector. This programme is presented in

partnership with Uweso Consulting and the Department of Women, Children and People with Disabilities.

IRM Open Week

The Information and Resource Management Department (IRM) held an Open Week between 12 and 15 March 2013 to showcase their products and services. Some of the IRM service providers also visited NERSA during this period and shared information on their product offerings – Stats SA discussed the 2012 Census results.

I wish to thank each one of you for your hard work and dedication during this financial year. Our good performance to date shows that your hard work has paid off.

Warm regards

Phindile NzimandeCEO

Highlights for the 2012/13 financial year and achievements to date

Ms Phindile Nzimande

From the desk of the CEO


INSIDE, REFLECTING OUTWARDS ...In the front section of our quarterly newsletter we provide readers with an ‘inside, reflecting outwards’ perspective of NERSA’s challenges and achievements, as well as our work-in-hand and the status of our regulatory activities as they affect our stakeholdes and the public at large.

Outcome of Eskom’s MYPD3 application announced

On 28 February 2013, NERSA announced its decision to grant Eskom the right to an 8% average increase per annum for the next five years (2013/14–2017/18).

Eskom’s MYPD3 application, requesting a 16% increase per annum, was received on 18 October 2012 and NERSA followed due process in considering the matter. This included publishing the application on the NERSA website, inviting written stakeholder/public comments and conducting information-sharing sessions and public hearings. The Energy Regulator received approximately 200 written comments, while 162 oral representations were made during the public hearings. Stakeholder comments were received on the following issues:

• weighted average cost of capital;

• regulatory asset base;

• primary energy;

• purchases from independent power producers;

• integrated demand management;

• economic impact;

• operating expenditure; and

• tariff restructuring.

A detailed analysis of Eskom’s application was conducted based on the above issues, together with sales volumes.

NERSA’s decision was informed by the information received, as well as the written submissions, oral representations, reasons, facts and evidence provided. NERSA’s Chairperson, Mrs Cecilia Khuzwayo, advised that the Eskom application was also considered against the backdrop of the continuing global economic recession, which challenges the achievement of the National Development Plan goals of addressing poverty, inequality and unemployment.

‘Our challenge as the Energy Regulator has been and still remains regulating the energy sector in a manner that balances the interests of energy producers on the one hand and consumers on the other hand. This is never an easy task, for inevitably it is influenced by the greater economic environment both locally and internationally

NERSA announcement on MYPD3 application

From left: Mr T Bukula (Regulator Member – Electricity), Mrs C Khuzwayo (NERSA Chairperson) and Ms P Nzimande (NERSA CEO) during the announcement of the Eskom MYPD3

NERSA team assisted during MYPD3 till the announcement of the decision. Standing left: Walter Mabunda, Elizabeth Taylor, Patricia Bahula, Linda Nkuna, Amanda Mtembu, Edith Mkhabela and Peter BuysSeated left: Vonani Mangwe, Shirley Kgope and Poppie Mahlangu

The Official Newsletter of the National Energy Regulator of South Africa

NUMSA members picketing outside the NERSA office before the MYPD3 announcement in Pretoria

4

and as directed by the policy environment of government,’ she said.

The legal basis for the Energy Regulator’s decision is derived from the Electricity Regulation Act (Act No. 4 of 2006) and the National Energy Regulator Act (Act No. 40 of 2004). The procedure followed in deciding on the final price is derived from the Promotion of Administrative Justice Act (Act No. 3 of 2000).

Based on the available information and the analysis of Eskom’s MYPD3 application, NERSA approved the following:

• an 8% average increase per annum for the next five years, where the average electricity price will increase to 65.51 c/ kWh in 2013/14 and up to 89.13 c/kWh in 2018, with the total revenue approved for the five-year period amounting to R906 553 million;

• the increase for Homelight 20 A customers consuming up to 350 kWh per month will be limited to a Consumer Price Index (CPI) of 5.6%;

• the increase for Homelight 20 A customers consuming more than 350 kWh per month will be 7.6% (CPI plus 2%); and

• all other residential customers’ (Homelight 60 A and Homepower) electricity tariffs will increase by an average of 8%.

In addition, Eskom must ensure that:

• the Time-of-Use off-peak to peak demand is adjusted to a ratio of 1:8;

• all tariff cross-subsidies (received and paid) must be shown transparently (these subsidies are related to affordability subsidies, low voltage subsidies and historic electrification and network subsidies in large power urban tariffs);

• the Use-of-System charges must be based on the cost per voltage level for all large power user customers and where there are low voltage subsidies, these must be transparently shown as a low voltage subsidy charge;

• the reliability and service charge covering the cost of providing ancillary services, which is currently embedded in the energy charge, must be shown separately for large power user tariffs;

• the environmental levy charge must be embedded into the energy charge component of the tariff and not shown separately; and

• alternate tariff options (other than Time-of-Use tariffs) are available to municipalities with a predominantly residential load mix.

The Energy Regulator wishes to assure stakeholders and the public that it will continue to carry out its mandate responsibly, taking into consideration government developmental objectives as articulated in the National Development Plan. The sustainability of the electricity industry, security of supply, affordability of and accessibility to electricity will always remain key considerations in any future determinations.


Nersa approves Sasol gas applicationsOn 26 March 2013, NERSA approved two Sasol Gas Ltd applications, namely:

• an application for maximum gas prices for the prescribed customer categories for the multi-year period 26 March 2014 to 30 June 2017; and

• an application for transmission tariffs for the period 26 March 2014 to 30 June 2015.

The determination of the maximum prices of gas is as a result of the existing Special Regulatory Dispensation period that is due to expire on 26 March 2014. During the late 1990s, while legislation for the regulation of the piped-gas industry was still under discussion, Sasol Ltd entered into negotiations with the governments of Mozambique and South Africa to bring natural gas into the country. As a result, Schedule One to the Agreement Concerning the Mozambican Gas Pipeline between the Government of the Republic of South Africa and Sasol Limited was concluded.

The determination of maximum prices of gas is essentially a price-restructuring exercise which will have a number of benefits for the piped-gas industry. Overall, it will promote price transparency and the prevention of discrimination. It is expected that after this price-restructuring exercise, most of the customers’ gas prices will come down while a few will go up, leaving Sasol Gas revenue neutral.

NERSA requested Sasol Gas to submit the applications a year in advance of the introduction of the new pricing regime in an effort to facilitate consultation and ensure there was sufficient time for the contractual negotiations to be concluded following the determination.

Maximum Gas Price Application

The decision on the maximum gas price application was based on the Gas Energy (GE) Price Indicators, with Sasol Gas’ overall maximum GE escalating in a 1.1.2 formula. The Energy Regulator also approved Sasol Gas’ proposed discounts by customer class, which are based on an international study on comparable customer classes.

The approved maximum prices can be summarised as follows:

1. Sasol Gas’ overall maximum GE price of R117.69/GJ as at 26 March 2013 to be escalated with the formula in (2) and to be implemented on 26 March 2014;

2. a quarterly adjustment of the overall maximum GE price by the changes in the actual maximum GE price, calculated in terms of the approved GE formula, lagged by one quarter until 30 June 2017 (i.e. the maximum prices for Q3 will be adjusted based on data from Q1);

3. the maximum GE prices per customer category class as follows as at 26 March 2013:

Table 1: Final Customers’ Maximum GE Prices as at 26 March 2013

Class 1 Class 2 Class 3 Class 4 Class 5 Class 6

< 400 GJ p.a.

401 – 4 000 GJ p.a.

4 001 – 40 000 GJ p.a.

40 001 – 400 000 GJ p.a.

400 001 – 4 000 000

GJ p.a.> 4 000 000

GJ p.a.Gas Energy Price (GE) – R/GJ 117.69 117.69 117.69 117.69 117.69 117.69Reduction from the maximum price 7.5% 7.5% 15.0% 22.5% 30.0% 37.5%Maximum GE (R/GJ) 108.86 108.86 100.04 91.21 82.38 73.56

Stakeholder presenting during the public hearing on the Sasol application

NERSA announcement on Sasol application

6The Official Newsletter of the National Energy Regulator of South Africa

4. a quarterly adjustment of the maximum prices per customer category class by the actual Gas Energy price less the percentage reduction indicated in Table 1 for each customer category class; the quarterly adjustment will be lagged by one quarter until 30 June 2017 (i.e. the maximum prices for Q3 will be adjusted based on data from Q1);

5. that discounts from these maximum prices are allowed and must be applied in accordance with the non-discrimination provisions of section 22 of the Gas Act;

6. an additional discount to traders (all resellers of gas including distributors and reticulators) equivalent to 50% of Sasol Gas’ trading margin, applicable to each customer class as follows:

- R 4.11/GJ for the period 26 March 2014 to 30 June 2014, and

- R 5.20/GJ for the period 1 July 2014 to 30 June 2015;

7. a trading margin of R8.21/GJ for the period 26 March 2014 to 30 June 2014 and R10.40/GJ for the period 01 July 2014 to 30 June 2015; and

8. a transitional mechanism as applied for in terms of section 22 of the Gas Act for price increases, where these are required to achieve non-discrimination and in compliance with the approved maximum prices, as follows:

i. wherea≥15%increaseisrequiredof the customer’s prevailing price as at 25 March 2014 to achieve non-discrimination, but where such increaseis≤30%ofthecustomer’sprevailing price, a maximum 15% increase will be effected on 26 March 2014; the remainder of the increase must be effected in quarterly adjustments between 26 March 2014 and 25 March 2015,

ii. forincreasesabove30%but≤45%of the customer’s prevailing price as at 25 March 2014, the increases must be effected as follows: a maximum 15% increase will be effected on 26 March 2014; a further 15% increase must be effected in quarterly adjustments between 26 March 2014 and 25 March 2015; and the remainder of the increase must be effected in quarterly adjustments between 26 March 2015 and 25 March 2017,

iii. for increases above 45% of the customer’s prevailing price, the increases must be effected as follows: a maximum 15% increase will be effected on 26 March 2014; a further 15% increase must be effected in quarterly adjustments between 26 March 2014 and 25 March 2015; another 15% increase must be effected in quarterly adjustments

between 26 March 2015 and 25 March 2017, and the remainder of the required increase must be spread over an appropriate time period subject to approval by the Energy Regulator,

iv. Sasol Gas must provide NERSA with quarterly updates of the prices offered and concluded with customers during negotiations and demonstrate compliance with the price differentiation as contemplated in section 22 of the Gas Act, 2001 (Act No 48 of 2001) and all quarterly reports are to be submitted within 1 month of the end of the quarter, commencing on 26 March 2013 and ending on 30 June 2017, and

v. Sasol Gas must demonstrate revenue neutrality between annual revenues based on prevailing prices between 26 March 2013 to 25 March 2014 and the forecasted revenues for the period 26 March 2014 to 25 March 2015 based on the approved Maximum Prices as at 26 March 2014, less any revenue foregone due to the transitional mechanism.

It is important to note that the above application is for maximum prices, not actual prices, and it would therefore be misleading to compare current actual price with future maximum prices.

Transmission Tariff Application

Sasol Gas’ transmission tariff application was made in terms of the Tariff Guidelines as approved in 2009. These guidelines are used to monitor and approve piped-gas transmission and storage tariffs.

The transmission tariffs approved are summarised below:

(i) Zone 1 (Secunda–Gauteng) is allowed a transmission tariff of:

• R5.09/GJ for the period 26 March 2014 to 30 June 2014; and

• R5.13/GJ for the period 01 July 2014 to 30 June 2015.

Stakeholders attending the public hearing on the Sasol application


Public hearing – Midrand

Latest petroleum pipeline tariffs approved for Transnet Limited On 13 March 2012, NERSA set petroleum pipeline tariffs that will allow Transnet an 8.53% increase in allowable revenue for the period 03 April 2013 to 01 April 2014. This is an increase from R2,575.92 million in 2012/13 to R2,795.61 million in 2013/14. In the past, the Minister of Energy has used the Transnet pipeline tariff as a proxy for the cost of transporting fuel from Durban to Johannesburg. Should this be the case for the 2013/14 period, the petrol price is expected to rise by 1.4 cents per litre (c/l), which represents a 0.1% increase in the February 2013 retail price of 93 octane petrol in Gauteng. The 1.4 c/l increase in the pipeline tariff from Durban to Johannesburg represents a 6.4% increase in the pipeline tariff.

Although Transnet applied for a 22.6% increase in its allowable revenue, which would have resulted in a 4.72 c/l increase in inland petroleum product prices, the Energy Regulator published a draft tariff determination for public comment proposing a 7.3% increase in allowable revenue.

However, further information came to light during the public consultation process, and NERSA weighed a variety of factors, including the public interest, regulatory certainty, the fact that the New Multi-Product Pipeline (NMPP) is reaching its capital expenditure peak, and current and future debt funding, before arriving at its final decision. In NERSA’s view, the 8.53% increase strikes a satisfactory balance between the various factors it considered.

One of the Energy Regulator’s main concerns was the fact that Transnet Pipelines reported a 7.1% reduction in total volumes of petroleum pumped – from 18.025 billion litres in 2010/11 to 16.741 billion litres in 2011/12. NERSA, in collaboration with the Department of Energy, is investigating this trend and hopes to find a way to remedy it. Transnet has, however, forecast a 4.6% overall increase in volumes to be pumped in the 2013/14 financial year. This includes an approximate 5.96% increase in the transportation volumes of petroleum products from the coast to the inland region as a

result of the NMPP, which will reduce the volumes of petroleum products transported by road and rail.

NERSA will continue to monitor the transition away from road and rail transport, as there is still scope to move larger volumes to pipeline transport. Increased pipeline volumes are desirable as this lowers tariffs and also reduces the health, safety and environmental risks associated with road and rail transport.

With the view to improve pipeline efficiencies, NERSA has instructed Transnet to provide NERSA with a proposed system of penalties to be included with its future tariff application. The idea is to penalise Transnet’s customers who cause inefficiencies in the operation of the pipeline system by, for example, not delivering slugs to the pipeline on schedule or by failing to take delivery of slugs of petroleum on schedule.

(ii) Zone 2 (Witbank–Middelburg) is allowed a transmission tariff of:



(iii) Zone 3 (KwaZulu-Natal) is allowed a transmission tariff of:



(iv) The approved tariffs are maximum tariffs.

(v) Discounts are allowed and must be applied in accordance with the non-discrimination provisions of section 22 of the Gas Act.

NERSA announcement on Transnet application

Ms Ethèl Teljeur announcing the NERSA decision on the Sasol application during the editors breakfast in Johanneburg


Revised IBT structure to assist municipalitiesOn 24 February 2010, the Energy Regulator approved the four-block IBT structure and further decided that residential Inclining Block Tariffs (IBTs) must be implemented by both Eskom and municipalities.

The system of using an IBT structure to determine electricity prices for domestic/residential customers was implemented in April 2010 by Eskom and on 01 July 2010 by municipalities. The system was designed after a wide-ranging, international benchmarking study had been undertaken and comprehensive workshops had been held with the six metropolitan municipalities, Eskom and vending system suppliers. The structure materialised as a four-block structure, with consumption levels inclining between the first and fourth block as follows:

Four-block IBT structureBlock 1 Block 2 Block 3 Block 4

Consumption levels

1–50 kWh

51–350 kWh

351–600 kWh

> 600 kWh

As is often the case, it was only during the implementation process that certain municipalities began to experience difficulties when they found that the four-block structure did not suit their particular circumstances or was difficult to implement.

NERSA embarked on further comprehensive stakeholder consultation, taking into account:

• compliance with the Electricity Pricing Policy (EPP);

• municipal data;

• the review of the IBT structure;

• potential implications of IBTs;

• multiple household dwellings;

• issues regarding customers with irregular usage;

• issues regarding resellers;

• technical challenges;

• alternate options;

• cash flow issues; and

• the impact of the signal that prices/tariffs would send to customers implementing energy efficiency measures.

Following due process, including collation of written comments and a public hearing in 2012, the Energy Regulator announced its decision to revise the IBT structure on 04 April 2013.

This new IBT structure is a two-block structure based on two tariffs, named Domestic Low and Domestic High. The latter is applicable to customers who, on average, consume more than 350 kWh per month. The essential difference between the two is that the Domestic High tariffs include a fixed charge, which allows the distributor to recover the maximum share of its fixed cost, whereas the Domestic Low tariffs do not. In the case of Domestic Low tariffs, the cost of supply is recovered through a single energy charge in accordance with the EPP. The two-block IBT system is represented as follows:

Two-block IBT structureTariff name Approved structure DetailsDomestic Low 2-block IBT Block 1: 0–350 kWh

Block 2: > 350 kWhDomestic High 2-block IBT +

fixed chargeBlock 1: 0–350 kWhBlock 2: > 350 kWhFixed charge

Those municipalities that would prefer to continue using the four- block structure may do so. However, any municipality wishing to use any other structure is required to make application to NERSA and to soundly justify the reasons therefore.

Approval of new IBT structure


Decision on municipal tariff guideline for the 2013/14 financial year and the revision of municipal tariff benchmarksNERSA calculates an appropriate guideline for tariff increases for municipalities on an annual basis. This is communicated to municipal distributors as a guide in determining their annual electricity tariff increases, but does not preclude them from their legal obligation to apply to the Energy Regulator for tariff increases before implementation.

On 20 November 2012, the municipal tariff guideline, benchmarks and the proposed timeline consultation paper was published on the NERSA website, with an invitation to stakeholders to submit comments. Following this process, on 04 April 2013, NERSA announced its determination of the municipal tariff guideline increase and the revision of the municipal tariff benchmarks for the 2013/14 financial year as follows.

A guideline increase of 7% was approved after taking into consideration the following assumptions:

• the approval of Eskom’s Retail Tariff Structure Adjustments which amount to an average increase of 7.3% for municipalities;

• a consumer price index (CPI) of 5.5%;

• salary and wage increases of CPI plus 1.25%, as indicated in Circular No.6/2012: Salary and Wage Collective Agreement; and

• repairs and maintenance, capital charges and other costs increased by CPI.

NERSA also approved the following benchmarks for implementation, based on the 7% guideline:

The basis that was used in developing the rates for the IBTs is as follows:

• Block 1 – The 2012/13 benchmarks were increased by the CPI of 5.5%;

• Block 2 – The 2012/13 benchmarks were increased by the CPI of 5.5% plus 1%, which results in a total increase of 6.5%;

• Blocks 3 and 4 – The 2012/13 benchmarks were increased by the municipal tariff guideline increase of 7%; and

• the 2012/13 commercial and industrial benchmarks were increased by the municipal tariff guideline of 7%.

The Industrial Time-of-Use (TOU) tariff will be benchmarked with the approved Eskom Megaflex tariff, plus a maximum of 20%.

In addition, NERSA approved the revision of the IBT structure and benchmarks as follows:

Domestic Low Inclining Block Tariffs (comprising the energy charge)Block 1

0–350 kWh(c/kWh)

Block 2> 350kWh

(c/kWh)80–85 110

Domestic Low Inclining Block Tariffs (comprising the energy charge)Block 1

0–350 kWh(c/kWh)

Block 2> 350kWh

(c/kWh)80–85 110

It should be noted, however, that the current four-block IBT structure will still

be acceptable for approval by the Energy Regulator.

NERSA acknowledges that municipalities need to recover their costs, but these charges should not be excessive to the extent that they do not incentivise the customers.

In the 2013/14 financial year, in line with the Electricity Pricing Policy, municipalities are required to undertake Cost of Supply studies. This will assist in developing appropriate tariff structures and tariff levels to ensure sustainability, which in turn will convey the correct pricing signals to influence customer behaviour.

Municipalities applying for an increase that is above the guideline, or for tariffs that are outside the approved benchmarks, will have to justify these to the Energy Regulator. They will be expected to:

• present NERSA with a full analysis of the additional funds requested and motivate their request to exceed the guideline increase;

• ring-fence the additional funds so as to ensure that they are strictly used for the identified projects; and

• report to NERSA on a six-monthly basis on how the additional funds are being used.

The Energy Regulator will consider other reasons such as historical low tariffs for municipalities applying for an increase that is above the guideline.

Municipal tariff guideline 2013/14

Domestic Inclining Block Tariffs (IBTs) Commercial 2 000 kWh IndustrialBlock 1

0–50 kWh(c/kWh)

Block 251–350 kWh

(c/kWh)

Block 3351–600 kWh

(c/kWh)

Block 4>600 kWh

(c/kWh)Prepaid(c/kWh)

Conventional(c/kWh)

43 800 kWh(c/kWh)

64–70 82–87 111–117 133–138 139–144 140–145 142–157

The Official Newsletter of the National Energy Regulator of South Africa 10

Funds that are not used for the purpose for which they were approved will be clawed back in the following financial year.

Costs deemed not to be incurred in the direct supply of electricity will be dealt with by NERSA on a case-by-case basis for each municipality. These will be determined by comparing the municipality’s average cost to supply electricity with the average price charged. The difference will then be used to adjust the overall increase awarded to the municipality. Furthermore, the municipality’s overall financial and technical performance will be reviewed prior to a final decision

on the overall increase. Indicators to be considered in this regard include:

• percentage surplus;

• percentage energy losses;

• percentage power costs;

• bad debt provision; and

• average purchase price/ average selling price ratio.

Successful workshop held regarding NFI manualsOn 22 February 2013, NERSA held a workshop on the first draft of its Non-Financial Information (NFI) Regulatory Reporting Manuals (RRM) as part of Phase 2 of the Regulatory Reporting Manual project. These manuals are:

1. RMM Volume 5 – Electricity;

2. RMM Volume 6 – Piped-Gas; and

3. RMM Volume 7 – Petroleum Pipelines.

The purpose of the NFI-RRM is to prescribe the non-financial information required by NERSA and to guide regulated entities in the energy sector in terms of the format and submission of this information to NERSA. This aids in achieving uniformity in content, measurement, and preparation, which will allow NERSA to perform its functions more efficiently and effectively.

Ms Ethèl Teljeur, Full-Time Regulator Member responsible for Piped-Gas, introduced the draft NFI manuals and discussed the process which will be followed to enhance and develop these manuals for final approval by the Energy Regulator.

Mr Patrick Mabuza, Senior Manager for Regulatory Analysis and Research, focussed on cross-cutting issues and elaborated on the approach taken in the development of the draft NFI manuals, reporting timelines, the rationale and purpose of the manuals, as well as the users of the NFI manuals.

Each regulatory division summarised the content of its NFI manual, after which attendees were given the opportunity to raise questions and comments. The draft NFI manuals are currently being improved, taking into account the comments made by

stakeholders during the workshop. More workshops with specific stakeholders are planned in order to further refine the draft manuals, after which the manual will be submitted to the Energy Regulator for approval. Further workshops are to be held with the following stakeholders to receive their input:

• NERSA to consult with National Treasury;

• NERSA to hold a workshop with Eskom;

• NERSA to hold a workshop with the Association of Municipal Electricity Undertakings;

• NERSA to meet with the South African Petroleum Industry Association to discuss how to incorporate their comments; and

• NERSA to meet with the South African Local Government Association.

Stakeholder workshop

Volume VII, Edition I, 201311

The Africa Energy Indaba, adopted by the World Energy Council (WEC) as its African event, is globally recognised as one of the foremost events for energy professionals worldwide.

Presented by the WEC in association with the South African National Energy Association (SANEA), this forum has achieved the highest level of endorsement and support and is, without a doubt, the leading energy event in Africa.

Africa is a continent of contrasts – it is the fastest urbanising continent in the world, and must provide energy to meet the annual urban growth rate, which is twice as high as the rates in Asia and Latin America. On the other hand, as home to the poorest of the poor (50% of the world total), it must produce innovative energy solutions.

The fifth annual African Energy Indaba took place from 19 to 21 February 2013 at the Sandton Convention Centre in Johannesburg and presented a business networking opportunity for decision-makers and leading role players in the planning and development of Africa’s energy future.

The conference continues to grow and has become the leading forum for debate and the exchange of solutions for Africa’s energy challenges. Focus areas include African power suppliers; alternative and renewable energy; oil and gas; the legal and regulatory framework; and investment opportunities in African energy projects, to name a few. The exhibition has become a significant marketplace for African and international stakeholders doing business in Africa’s energy sector.

Exhibition

NERSA exhibits at Africa Energy Indaba 2013


NERSA bids farewell to Ms Ethèl TeljeurIt is with great sadness that NERSA said farewell to Ms Ethèl Teljeur after the Minister of Energy accepted her resignation as Full-Time Member of the Energy Regulator, effective from 07 April 2013. Ms Teljeur was appointed in 2005 and during her tenure, she chaired the Piped-Gas Subcommittee, while also serving as a member of the Electricity and Petroleum Pipelines subcommittees, as well as the Regulatory Executive Committee and the Finance Committee.

Since the inception of piped-gas regulation in 2005, Ms Teljeur has spearheaded the licensing of previously unlicensed piped-gas facilities and the enforcement of pricing and supply obligations in the regulatory framework.

Assisted by a dedicated team of staff members, Ms Teljeur led the development of methodologies, procedures and processes required for the implementation of the Gas Act and the annexed agreement

between the Government of South Africa and Sasol Ltd concerning the Mozambican Gas Pipeline.

‘I would like to thank Ms Teljeur for her valuable contribution and wish her all the best in her future endeavours,’ says NERSA CEO, Ms Phindile Nzimande. The Energy Regulator believes that Ms Teljeur will continue to make a significant contribution to the South African energy sector through her future undertakings.

Farewell

Regulator members bidding farewell. Left: Mr O Komane, Ms K Mthimunye, Ms G Whittington Banda, Ms Ethèl Teljeur, Ms P Nzimande, Mrs C Khuzwayo, Mr T Bukula and Mr J Lesejane


OUTSIDE, LOOkING IN ...The second section of our quarterly newsletter provides readers with an ‘outside in’ perspective of NERSA’s people and their activities during the previous quarter and how NERSA’s values and goals drive its vision of being a world-class energy regulator.

IRM Information Open Week 12 to 15 March 2013During the week of 12 to 15 March 2013, the Information Resource Management (IRM) Department held its annual Information Open Week. Through this joint event, all the IRM sections [Knowledge Management Section (KMS), Information Technology Section (ITS) and Data Analysis Section (DAS)] had the opportunity to advertise and showcase both current and future products and services on offer to other NERSA divisions.

Among others, ITS exhibited various types of hardware and demonstrated different software that can be used by employees, while DAS impressed visitors with an interesting presentation by Statistics South Africa. Those who attended the first two days of the Open Week were introduced to the new online library service, e-brary, and had the opportunity to experiment with this exciting new product.

Visitors were also provided with the opportunity to express their views by completing an online survey with regard to the event and the products and services rendered by the IRM Department.

Suggestions received will assist the Department in improving its services.

Visitors eagerly entered the IRM Department’s competition which ran during the Open Week, and seven lucky NERSA employees won amazing prizes. They were:

• Zuzeka Manciyoza and Mpho Maphakisa who won the KMS prizes;

• Maureen Mokgale who won an iPod, and Porcia Makgopela and Donald Nkadimeng who received the ITS prizes; and

• Zaakirah Ismail and Andile Mayisela who were the lucky winners in the DAS segment of the competition.

The IRM Information Open Week was a great success. The Department firmly believes that this was the first of many such events and looks forward to showcasing exciting new products and services to the NERSA team in the future.

Employees Event

Ms Thandeka Jamba handing KMS prize to Ms Zuzeka Manclyoza

Ms Thandeka Jamba handing KMS prize to Ms Mpho Maphakisa

Ms Thandeka Jamba handing ITS prize to Mr Donald Nkamideng

Ms Thandeka Jamba handing ITS prize to Ms Porcia Makgopela

Ms Thandeka Jamba handing DAS prize to Ms Zaakirah Ismail

Mr Nicholas Manefeldt handing 1st prize to Ms Maureen Mokgale


Gender equality quotas not the answer, say expertsThe period for public comment on the Women Empowerment and Gender Equality Bill ended late in 2012, and some human resource experts have warned that absolute quotas for equal representation of men and women in the workplace might not be feasible.

The draft bill, which was approved by cabinet in August 2012 and published in the Government Gazette, requires ‘all entities’ to ‘achieve at least 50% representation and meaningful participation of women in decision-making structures’. This includes, inter alia, all spheres of government, private companies, non-profit organisations, and even trade unions and political parties.

The bill mandates the Minister of Women, Children and People with Disabilities to issue compliance notices to entities that he/she believes are not complying with the legislation. If an entity fails to obey such a compliance notice, its head or directors can be fined and even receive a prison sentence of up to 10 years if the fine is not paid.

Sandra Burmeister, CEO of Landelahni Recruitment Group, said the problem with the bill is that is does not distinguish between industries. ‘The black economic empowerment [BEE] industry charters have set specific gender targets per sector. This allows industries to set realistic, achievable targets for sectors where there are simply not enough suitably qualified women,’ Burmeister said.

‘A blanket target of 50% will pose difficulties for sectors where two-thirds of workers in their core business are technical – such as construction, infrastructure and mining.’

Burmeister said South Africa has had progressive gender legislation for some time. This includes BEE regulations,

industry charters and the Employment Equity Act, which ‘all had a positive effect on increasing gender equity at every level of the organisation’.

According to the Commission for Employment Equity’s 12th Annual Report, released in September 2012, the representation of women in top positions increased from 13% in 2001 to 18.7% in 2011. The percentage of women in senior management increased from 21% to 27.7% and the percentage of women in skilled positions from 40% to 46.2%.

Women account for 45.4% of the economically active population, according to Stats SA, and according to Labour Minister, Mildred Oliphant, are still grossly under-represented in key areas of the labour market.

However, Burmeister believes South Africa’s legislative and regulatory framework has had a positive effect on gender equity.

‘The question is whether we need more legislation,’ she said.

Gerald Seegers, Human Resources Services Director at PwC, said that so far, South Africa has done well by not using quotas but benchmark percentages for gender equality.

‘If we ever do get a quota system it would be a mistake,’ he said. ‘Quotas could govern a particular behaviour, but you also have to be realistic in terms of looking at what is available [in the labour market]. Every industry is different. Women would prefer not to work in some industries. For example, not all women want to be mine bosses.’ Seegers said gender equality in the workplace should be a behavioural issue and not a monitoring issue.

However, when the bill was published for comment, the Department of Women, Children and People with Disabilities made it clear in a statement that ‘the empowerment of women and gender equality cannot be left to market forces’.

Cornelius Monama, the Department’s spokesman, said that public inputs received were ‘generally in support of the draft bill’ and would be considered for integration in the bill. After that, the bill will be submitted to cabinet again, with a recommendation that it be introduced to parliament. Monama would not say when the Department hoped the bill would be approved by parliament and would take effect.

Source: Vollgraaff, R. 2012. Gender equality quotas not the answer, say experts. In: Business Day. 30 September 2012.

HR Issues


Schedule of Energy Regulator and Subcommittee meetings for the period May to July 2013

Phone: 012 401 4600Fax: 012 401 4700Physical Address: Kulawula House, 526 Madiba Street, Arcadia, PretoriaPostal Address: PO Box 40343, Arcadia 0007, South Africa

Publisher: Corporate ServicesEditor: Charles HlebelaSub-editor: Poppie MahlanguWriter: Kashan AdvertisingDesign, Layout and Printing: Kashan Advertising

ISSN: 222-898XKey Title: NERSA NewsAbbreviated Key title: NERSA News

This publication is produced by NERSA Corporate Services and may not be reproduced without the written consent of the NERSA.

Calendar of Events

Type of meeting Date of meeting PurposeMay 2013

Piped-Gas Subcommittee Thursday, 02 May 2013, 09h00–12h00 • Reports/delegated mattersRegulator Executive Committee Monday, 06 May 2013, 09h00–11h00 • Municipal tariff increases

• Reports/governance/delegated mattersHuman Resources and Remuneration Committee Tuesday, 07 May 2013, 09h00–12h00 • ReportsElectricity Subcommittee Wednesday, 08 May 2013, 09h00–12h00 • Reports/delegated mattersPublic Hearing Thursday, 09 May 2013 • ReportsRegulator Executive Committee Monday, 13 May 2013, 09h00–11h00 • Municipal tariff increases

• Reports/governance/delegated mattersPetroleum Pipelines Subcommittee Tuesday, 14 May 2013, 09h00–12h00 • Reports/delegated mattersExecutive Committee Tuesday, 14 May 2013, 14h00–16h00 • Reports/governance/delegated matters

• Unaudited Annual Financial StatementsRegulator Executive Committee Monday, 20 May 2013, 09h00–11h00 • Performance Against Predetermined Objectives

• Unaudited Annual Report• Reports/governance/delegated matters

Joint Audit and Risk and Finance Committees Thursday, 23 May 2013, 09h00–12h00 • Unaudited Annual Financial Statements• Performance Against Predetermined Objectives• Annual Report

Regulator Executive Committee Monday, 27 May 2013, 09h00–11h00 • Municipal tariff increases• Reports/governance/delegated matters

Energy Regulator Tuesday, 28 May 2013, 09h00–13h00 • Unaudited Annual Financial Statements• Performance Against Predetermined Objectives• Unaudited Annual Report• Subcommittee reports

June 2013Regulator Executive Committee Monday, 03 June 2013, 09h00–11h00 • Municipal tariff applications

• Reports/governance/delegated mattersExecutive Committee Tuesday, 04 June 2013, 09h00–11h00 • Reports/governance/delegated matters

• Budget assumptions and parametersRegulator Executive Committee Wednesday, 05 June 2013 • Strategic planning sessionEnergy Regulator Thursday, 06 June 2013 • Strategic planning sessionEnergy Regulator Friday, 07 June 2013 • Strategic planning sessionPiped-Gas Subcommittee Monday, 10 June 2013, 09h00–12h00 • Reports/delegated mattersElectricity Subcommittee Wednesday, 12 June 2013, 09h00–12h00 • Reports/delegated mattersPublic Hearing Thursday, 13 June 2013, 09h00–16h30Regulator Executive Committee Tuesday, 18 June 2013, 09h00–11h00 • Municipal tariff applications

• Reports/governance/delegated mattersPetroleum Pipelines Subcommittee Thursday, 20 June 2013, 09h00–12h00 • Reports/delegated mattersRegulator Executive Committee Monday, 24 June 2013, 09h00–16h30 • Strategic planning session

• Municipal tariff applicationsReserved for induction 25–28 June 2013 • Induction of Energy Regulator members

July 2013Piped-Gas Subcommittee Wednesday, 03 July 2013, 09h00–12h00 • Reports/delegated mattersPublic Hearing Thursday, 04 July 2013, 09h00–16h30Electricity Subcommittee Wednesday, 10 July 2013, 09h00–12h00 • Reports/delegated mattersExecutive Committee Wednesday, 10 July 2013, 14h00–16h00 • First Quarter Performance Report

• First Quarter Management Accounts• Risk Register

Regulator Executive Committee Monday, 15 July 2013, 09h00–11h00 • First Quarter Performance Report• Reports/governance/delegated matters

Petroleum Pipelines Subcommittee Monday, 15 July 2013, 13h00–15h00 • Reports/delegated mattersFinance Committee Thursday, 18 July 2013, 09h00–12h00 • First Quarter Management Accounts

• Audited Annual Financial Statements• Budget Assumptions and Parameters• Other Reports

Audit and Risk Committee Thursday, 18 July 2013, 12h30–14h30 • First Quarter Management Accounts• First Quarter Performance Report• Audited Annual Financial Statements• Audited Performance Against Predetermined Objectives• Audited Annual Report• Other reports

Regulator Executive Committee Monday, 22 July 2013, 09h00–11h00 • Reports/governance/delegated mattersEnergy Regulator Monday, 29 July 2013, 09h00–13h00 • First Quarter Management Accounts and First Quarter

Performance Report• Budget assumptions and parameters• Audited Annual Financial Statements• Audited Performance Against Predetermined Objectives• Audited Annual Report and Subcommittee Reports

Documents

Newsletter contributors - NERSA · The Energy Regulator set Transnet’s petroleum pipeline tariff, granting Transnet an 8.53% increase in allowable revenue for the period 03 April