PMG 31 January 2012.

National Energy Regulator Amendment & Electricity Regulation Second Amendment Draft Bills: briefing

Requests for comment on these Draft Bills:

Audio recording of the meeting:

The Department of Energy briefing looked at the deficiencies of the Acts that led to the proposed amendments and provided an analysis of these.

Notable amendments made to the Electricity Regulation Act included the insertion of a section dealing with the Integrated Resource Plan (IRP). The new section outlined the process for the development of the IRP. The regulator was required to license according to the determination made by the Minister in accordance with the IRP. In terms of determination the proposed amendments included that the Minister was required to determine the buyer, the purchaser and type of technology in accordance with the IRP. In turn the regulator was to license in accordance with the determination.

Proposed amendments for the Independent Power Producer (IPP) programme included a new inserted section outlining the procurement framework. In trading the Minister could develop regulations outlining the different categories of trading. In addition the regulator could be required to license in accordance with the regulations promulgated by the Minister. The regulator on request from the Minster under the amendments could predetermine tariffs for the IPP Programme. In addition the regulator could predetermine licence conditions for bidders bidding under the IPP programme.

In terms of transmission planning, the Transmission Licensee was empowered to develop a transmission plan. The plan could be approved by the regulator after consultation with the Minister and the buyer to ensure alignment with the IRP. About expropriation, the Minister could be empowered to expropriate land for electricity on behalf of a licensee. The costs of the expropriation could be covered by the licensee. The regulator could also provide technical advice to the Minister on expropriation matters.

On amendments to the National Energy Regulator Act, the focus was on the establishment of an independent regulator. In addition the regulator could sit as a tribunal allowing for an independent to contest the decision of the regulator within an independent tribunal. Further amendments included the establishment of a regulatory commission which could provide for a one-full time commissioner with three deputy commissioners each responsible for a specific sector. The final amendment was the creation of an Independent Appeals Board which could be part-time and independent from the regulatory Commissioner.

These amendments were as a result of the major shortcomings of the Act. Most significant was the conflicting relationship between the full-time regulator members and the CEO that was not clearly defined. The objectives of these amendments were summarised. These included the improvement of the decision making process through the establishment of an Appeal Board, improving the governance, accountability of the regulator and the working relations among the regulator members.

Members discussed the issue of misalignment between the National Energy Regulator Act and Electricity Regulation Act and the Independent System and Market Operator (ISMO) Bill. Members, in response to the presentation on the National Energy Regulator Act, asked about the cost implications of the restructuring and the repositioning of the CEO and how it could mitigate conflicts in the present reporting mechanisms. Members also asked about the role of the subcommittees and the centralised regulation of all energy sources besides piped gas.

In response to the presentation on amendments for the Electricity Regulation Act, they asked questions on the role of the government and regulators and the current electricity dispatch. Members asked for clarification on the buyer and seller and expropriation of land. They also deliberated on alternative funding models to alleviate the burden on the consumers. They emphasised the need to prevent centralisation of power to the Minister and public participation in the legislative process.