Despite all infrastructure being interdependent in a ‘developmental State’ such as South Africa, a variety of funding and regulatory dispensations made it extremely difficult to find common ground, National Energy Regulator of South Africa (Nersa) regulator member Dr Rod Crompton highlighted during a recent presentation to the South African National Energy Association, in Durban.
The developmental State has infrastructure expansion as one of its key platforms. But, he asked, how this infrastructure was to be procured and paid for and how public and private investors should finance it within the various and, sometimes overlapping, regulatory dispensations.
With the construction of the National Multi Product Pipeline (NMPP), he said, Transet had effectively increased its asset base from R4.7-billion to R23.4-billion. “But how can you do that when you can have no cash injection from your shareholder and no take-or-pay agreements?”
In this instance, he said, choices ranged from applying for large tariff increases, which had proved “partially successful”, to an unsuccessful attempt to change regulations to apply for a security of supply level of R4.5-billion, which frontloaded this asset for 70 years. Crompton said that, in this instance, Nersa had decided to deduct this from the asset base and then to calculate the projected return, as the con- sumer could not be forced to pay twice.
He said frontloading was inescapable; however, as a regulator, Nersa was concerned about intergenerational equity and the fact that each generation needed to pay its fair share.
“To what extent should these State-owned enterprises be independent? There should be government policy on frontloading infra- structure. However, policy is quiet about this and development agencies are left to make the decisions,” he said.
Other key issues were the allocation of risk and the valuation of assets, which varied from historical to replacement value. Crompton said there needed to be a consistent approach. “A bundle of things needs to move together, so, from a State and public point of view, [we need to ensure] there is correct allo- cation of scarce capital. There should be a level playing field from the outset with no distortions.”
He questioned whether different regula- tory dispensations were leading to distortions of the flow of capital and cautioned that there was the risk of competition for capital between sectors.
In addition, problems also arose where more than one regulator governed a single project – with one providing market access and another controlling prices. “Concurrent jurisdiction can lead to forum shopping to get the best deal. So, should concurrent jurisdiction be resolved before construction of infrastructure commences?” he asked.
Crompton said the publication of the Infrastructure Development Bill showed that policymakers were aware of many of the issues. However, he said, in his personal opinion, this was poorly drafted and did not focus on the right issues.