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ISMO Bill Submission May 2012

ISMO Bill Submission May 2012. Content. Background, the energy crisis: How serious? Causes? Short-term solutions? Sustainable solutions? ISMO Bill DoE policy The Bill Recommendations. Background. Energy crisis, how serious? Cost includes: Economic Developmental Social

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ISMO Bill Submission May 2012

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  1. ISMO Bill Submission May2012

  2. Content • Background, the energy crisis: • How serious? • Causes? • Short-term solutions? • Sustainable solutions? • ISMO Bill • DoE policy • The Bill • Recommendations

  3. Background • Energy crisis, how serious? Cost includes: • Economic • Developmental • Social • Psychological (subjective) • Environmental • Political

  4. Background • Energy crisis, how serious? • R120bn in a single year • Compounded forever(x2 in 10yrs, x4 in 20yrs, x8 in 30yrs) • Does not include: • Lost investment: jobs, growth, wealth • Wasted resources: cutbacks, diesel, etc • Dubious decisions; lack of expertise • eg Duvha accident (uninvestigated)

  5. Background • Energy crisis, how serious? • Over-runs –cost and completion • Medupi–R46bn  R78bn  R146bn??? • Mossel bay diesel OCGT plant baseload–running 24/7; x20 cost; imported fuel • ‘Lights on’ now policy means deeper crisis later • Absolute cap on growth, jobs, etc • ie NGP, NDP, etc, impossible!

  6. Background • Implications: • 15% of budget • Housing for all (entire backlog; x2 RDP houses built since 1994) • Clothing for all • Entire road backlog and maintenance • 25 mines (SA missed minerals boom; again?) • 500,000 cars • Schools, hospitals, investment, jobs …

  7. Background • Cause –policy failure; vacillation; ideology • Solution – viable policy: • Not more of the cause • Demand predicted 1997 • 1998 White Paper –need for IPPs • DoE 2002, etc –Eskom can’t finance need, IPPs essential • Contacts only in 2006 • DoE & NDP –ISMO essential • Global trends –unbundling, IPPs, competition

  8. ISMO Bill • Solution • Could have been at no cost to government / society • Long-term policy • ISMO is essential first step • Global scan –emulate winners: • Developing: India, China, Brazil, Mauritius • Developed: USA, EU, Australia • Proper analysis eg California, India

  9. ISMO Bill • 14 years unresolved, why?Eskom resistance? Political will? Failed ideology? • Solution: • ISMO –single most important issue • ISMO Bill welcomed, historic reform • Pro-transformation, development, BEE • Which model? (error means more failure).

  10. ISMO Bill • Solution: • IPPs (viable, sustainable, diverse, substantial) • Proven ISMO model (world’s experience) • True independence (essential) • Impossible without ownership • Like roads, airports, harbours, etc • Government or private? Not critical (sale would fund government and Eskom build) • Electricity Act envisages competition and consumer choice

  11. ISMO Bill • Solution (most are constitutionally mandated): • ISMO Bill needs Principles of Good Law • Objective rules, criteria, certainty • Genuinely independent grid(ownership essential) • Free competition, level playing field, wheeling (Single buyer? Objectivity and transparency?) • Regulate standards not market • Rule of Law: No pseudo-court or discretionary power

  12. ISMO Bill • Solution • Proper regulation: • Create NERSA independence • Clarify NERSA functions • Possibility of political interference creates needless pressure and distortion(eg California blackout) • ISMO to be regulated by NERSA Commission

  13. End

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