Opinion: Court’s ‘clean slate’ nuclear directive a big opportunity for new Energy Minister

26th April 2017

By: Terence Creamer

Creamer Media Editor

     

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Having been effectively directed by the Western Cape High Court to “start with a clean slate” when approaching the controversial issue of nuclear procurement, South Africa’s new Energy Minister Mmamoloko Kubayi has some big calls to make.

In the April 26 judgment signed off by justices Lee Bozalek and Elizabeth Baartman acknowledgement is made that it would be “inappropriate for the court to prescribe to the Minister the form of any procurement process to be adopted”. Nevertheless, the ruling makes it plain that the non-transparent processes hitherto employed for a procurement with such “far reaching consequences” for the South African public, and the allocation of resources by government, are neither rational nor lawful.

Not only was the hurriedly prepared revised nuclear determination of December 2016 (which transferred nuclear procurement responsibilities from the Department of Energy (DoE) to Eskom and the South African Nuclear Energy Corporation) found to be wanting, but so too was the earlier December 2013 determination, which was only Gazetted in December 2015.

In both cases the concurrence of the National Energy Regulator of South Africa (Nersa), in the absence of a public participation process, was held up to be “procedurally unfair”.

The judgment notes, too, that in the 2016 instance – which Nersa delivered within three days of then Energy Minister Tina Joemat-Pettersson’s request – concurrence was given despite the fact that two years had elapsed since the regulator officially concurred with the 2013 determination. It was also provided despite continuing misgivings over the 2010 Integrated Resource Plan (IRP), which called for the building of 9 600 MW of new nuclear capacity by 2030, and was in the process of being updated.

“Given the elapse of two years since Nersa’s concurrency in the 2013 determination and the changed format of the determination, most particularly in its designation of Eskom Holdings or its subsidiaries as the procurer in respect of the nuclear programme, it was, in my view incumbent upon Nersa to afford members of the public and/or interested and affected persons an opportunity to influence the decision,” Bozalek said.

The ruling was also scathing in its assessment of the content of the 2014 intergovernmental agreement (IGA) with Russia as well as the tabling of the Russian, South Korean and US IGAs before Parliament. On the content of the Russian IGA the judges found that it could not be considered a “routine agreement” with many attributes of a binding deal, while its tabling before Parliament was declared “unlawful and unconstitutional”. The court also set aside the tabling of the South Korean and US IGAs, which the applicants described as “mere window dressing” to minimise the impact of the Russian IGA.

The main hammer blow for the current Eskom-led procurement process flowed naturally from the court’s ruling that the 2013 and 2016 determinations were unlawful and unconstitutional. As a consequence, the judgment set aside any ‘Request for Proposals’ (RFP) or ‘Request for Information’ (RFI) issued as a result of the determinations.

This, no doubt, has consequences for Eskom’s RFI, which closes on April 28, and for any subsequent RFP, which the utility had been hoping to issue during the second half of 2017. Eskom says it is studying the judgment and “will, if it deems necessary, comment in the near future”.

However, the ball is now firmly in Kubayi’s court and how she responds will have far-reaching effects not only for the credibility of the DoE and government, but also for the shape and cost of South Africa’s electricity supply industry transition from coal.

Naturally, the Minister has the option of appealing, which is a likely scenario. Here there may even be some merit, as clarification is arguably required on Nersa needing to consult the public when offering concurrence for a Ministerial determination that is based on a IRP, drafted after public consultation. In other words, should Nersa be entertaining further public consultations on a plan that has already been canvassed. If so, would the IRP be adapted after such consultation by the regulator? Additionally, what would it mean immediately for the renewable-energy, coal and gas determinations that have also arisen directly from the 2010 IRP?

However, that clarity aside, Kubayi can either approach this judgment as an unacceptable intrusion on executive power to be contested on all fronts. Or she could use it as an opportunity for re-engaging with stakeholders – including Earthlife Africa Johannesburg and the Southern African Faith Communities’ Environment Institute, which brought the application – to open a proper debate on South Africa’s electricity future.

Surely, the latter would be the better course, particularly in light of the space created by the current power glut – an ironic situation brought about by a combination of worryingly weak demand, higher coal-plant availability and new renewables and conventional supply.

The logical platform for such re-engagement is the process already under way to update the IRP. True, the Base Case has been tabled and there has already been a public participation process. However, there is still an opportunity to make the updating far more inclusive, more transparent and more credible.

For one, Kubayi could announce a temporary moratorium on any further procurement processes based on the 2010 IRP until the update is finalised. That’s not to say that the 37 renewables projects legally procured way back in 2015 should be included under such a freeze; they should not. Indeed, those power purchase agreements should be signed and resolution found to Eskom’s cost-recovery anxieties. However, Eskom’s nuclear procurement should be halted until the IRP is updated and that update should take full account of the public submissions. In addition, any policy adjustments made to the least-cost model should not only be made transparent, but also be justified on the basis of a cost-benefit analysis.

Additionaly, the process of electricity reform could be broadened beyond the IRP and the country's current fixation with generation technologies. South Africans need to have a mature, far-sighted conversation on the future design and operation of the entire system so as to future-proof it (as best as is practically possible) in the face of the ‘disruption’ that is already under way, as well as the disruption that is to come.

How best can South Africa navigate this transition without allowing slippage on what some call the ‘Three A’s’ of electricity – affordability, accessibility and availability?

Naturally, any restructuring of the domestic industry will take time, particularly given the political sensitivities associated with such an overhaul, not to mention the technical and financial dangers associated with any effort to transform.

Nevertheless, the debate cannot be held off forever, with the utility model under threat in many countries, including South Africa, and given this country’s particular challenges around strengthening the transmission grid and the sustainability of some of its municipal distributors that are currently failing.

It’s not often that a Minister has a ‘clean slate’ opportunity. She should grasp it with both hands.

Edited by Creamer Media Reporter

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