Specialist energy attorney and conveyancer Sue Röhrs has urged independent power producers (IPPs) looking to secure licences to lobby and consult with the drafters of the Integrated Energy Plan (IEP) to prevent the entrenchment of regulatory hurdles inhibiting providers from selling power.

This followed the July launch of a public consultation phase for the formulation of an IEP for South Africa, which the department expected to publish during the course of next year.

While the publication of an IEP was a requirement of the National Energy Act of 2008, South Africa had, hitherto, not had a fully consulted IEP as envisaged in the legislation, despite having published an Integrated Resource Plan for electricity, the IRP2010, in early 2011.

Röhrs said on Wednesday that there were certain shortcomings in the current regulations governing the awarding of licences to IPPs, and advised industry representatives to make thorough submissions to the DoE on the IEP before the public consultation deadline closed on December 15.

“If the numerous rumours about the new draft are true, IPPs must take the opportunity, either individually or through industry associations, to give input to the proposed Bill.

“There is a concern that there could be a situation where energy can only be sold through a national procurement programme, Ministerial consent or by an energy trader,” she commented at a South African Independent Power Producers Association breakfast.

Röhrs said the DoE had started playing a far more active role in the licensing process of IPPs in recent months, assuming the decision-making responsibilities of the National Energy Regulator of South Africa (Nersa), and rendering the awarding of licences hugely dependent on direct Ministerial determination.

“This makes it clear that new generation capacity may only be sold in terms of Ministerial consent, which I think is the result of the DoE taking the view that [it is] going to decide who is going to produce what to prevent a situation of surplus power post-Medupi,” she said.

A further failing of the licensing application process was that it was identical for new and amended licences, impelling licensed regulators to reapply for an original licence should they wish to make any adjustment – regardless of how minor – to any existing power licence.

“This is onerous and complicated for IPPs, creating an administrative burden for Nersa and creating unnecessary cost and time implications. There isn’t even a licence amendment application form available for IPPs,” she noted.

In addition, under the IRP2010, the plan did not take account of all modes of generation, which led to the exclusion of certain generators, as well as the “willing buyer, willing seller” principle, which meant that private sales were not accommodated.

“The plan should, in some way, refer to [and protect] the private sale of energy, as well as the provisions of the Medium-Term Risk Mitigation Plan for electricity, which looks to deal with the anticipated electricity supply shortfall in the immediate term,” she said.

Despite the difficulties associated with the existing licensing application procedure, Röhrs cautioned against attempting to circumvent the process.

Describing the penalties for noncompliance as “severe”, she said that companies would be fined 10% of their yearly turnover, or R2-million a day – whichever amount was higher – if found to be noncompliant, or operating without the required licence.

“The fine is massive, you don’t want to play with this one,” she warned.