The recent nuclear ruling, which set aside the Ministerial determinations designed to facilitate the procurement of nuclear power stations, may also carry risks for the legality of the various independent power producer (IPP) procurement programmes, which are proceeding on the basis of determinations that were likewise not subjected to public consultations.
This view is expressed in a risk assessment drafted by Craig Morkel for discussion by the South African Independent Power Producer Procurement Association (SAIPPA). Morkel, who is projects director at iKapa Energy, wrote the piece in his personal capacity.
The document also does not represent a legal opinion, but has been circulated among SAIPPA executives to assess the possible implications of the nuclear ruling on IPPs. It has also been presented to the energy subcommittee of Business Unity South Africa, with the recommendation that a firm legal opinion be secured to assess both the status of the other determinations, as well as whether any administrative remedial actions are required to ensure their validity.
In terms of the Electricity Regulation Act, Section 34 Determinations are required before any new generation can be procured and such determinations are drafted by the Energy Minister with the “concurrence” of the National Energy Regulator of South Africa (Nersa).
However, the nuclear judgment handed down by the Western Cape High Court on April 24 stated that, before taking a decision to concur with a Ministerial determination, Nersa is required to hold public consultations. The regulator’s failure to do so in the case of the two nuclear determinations of 2013 and 2016, rendered both “unlawful”.
There is no evidence to show that determinations issued to enable the procurement of new generation capacity from renewable energy, coal, hydro and gas sources were subjected to a Nersa-led public consultation process. Likewise there is no evidence to indicate that the determinations for the cogeneration and medium-term risk mitigation projects were subjected to public consultation processes.
For this reason, Morkel is concerned that the nuclear ruling also poses a legal and regulatory risk to those determinations, as well as the procurement programmes that arose as a result, including the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP), under which some R200-billion worth of investments have been made for the development over 6 000 MW of capacity.
He also believes that it may be necessary for the Department of Energy and Nersa to take remedial action to align the existing determinations with the outcome of the nuclear case.
“The nuclear ruling made it clear that Nersa cannot simply rubberstamp a determination written by the Minister and is required to, independently, apply its mind before offering its concurrence. It also indicated that such consultations need not be exhaustive,” Morkel said in an interview with Engineering News Online.
He also argued that the judgment provided a genuine opportunity for introspection and review so that future processes were not only fully in line with the Constitution, but also far more transparent and accessible to all stakeholders, not only large industry participants.
"We can't allow the IPP baby to be thrown out with the nuclear bathwater," Morkel quipped.