ENERGY OFFICE Durban

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o The Electricity Regulation Act 4 of 2006, o Standard Conditions for Small Scale Embedded Generation less than 100kW within. Municipal Boundaries SCSSEG, o Regulations rules guidelines directives and codes of conduct and practice. o Municipal Finance Management Act,o Municipal Systems Act. Local Regulations, o eThekwini municipality electricity supply by law. o eThekwini Power Purchase Agreement,o Natal Local Authority Ordinance.
The purpose of this review is summarise all the key areas of legislation applicable to embedded. generators and to identify areas where legal opinion or interventions are required to create an. enabling environment for embedded generators in the city. 1 1 Definitions, An embedded generator EG is defined as a legal entity that operates or desires to operate an. electricity generating plant that is or will be connected to the Distribution network This definition. includes all types of connected generation including co generators and renewables Alternatively. this definition also applies to the item of the generating plant that is or will be connected to the. Distribution network Eskom distribution 2008 The next sections review the framework that is. applicable to the implementation and operation of embedded generators. 2 National Legislation, 2 1 The Constitution of the Republic of South Africa. The Constitution of The Republic of South Africa Act No 108 of 1996 outlines the roles and. responsibilities of local government The Sections that may be relevant to the implementation of. embedded generators are listed below, Section 151 3 states that a municipality has the right to govern on its own initiative the. local government affairs of its community subject to national and provincial legislation as. provided for in the Constitution, Section 151 4 states that the national or a provincial government may not compromise or. impede a municipality s ability or right to exercise its powers or perform its functions. Section 152 1 lists the objectives of local government Of relevance are b ensure the. provision of services to communities in a sustainable manner and c to promote social and. economic development, Section 156 1 A municipality has executive authority in respect of and has the right to.
administer, a The local government matters listed in Part B of Schedule 4 and Part B of. Schedule 5 In context of embedded generators the municipality is. Page 2 Legal framework for embedded generators, responsible for electricity and gas reticulation where reticulation includes. the trade or distribution and services associated therewith. Section 156 2 A municipality may make and administer by laws for the effective. administration of the matters which it has the right to administer. Section 156 3 states that subject to section 151 4 a by law that conflicts with national or. provincial legislation is invalid If there is a conflict between a by law and national or. provincial legislation that is inoperative because of a conflict referred to in section 149 the. by law must be regarded as valid for as long as that legislation is inoperative. Section 156 5 allows a municipality the right to exercise any power concerning a matter. reasonably necessary for or incidental to the effective performance of its functions. 2 2 The Municipal Structures Act 117 of 1998, The Municipal Structures Act of 1998 states in Chapter 5 the Functions and Powers of Municipalities. In Section 84 1 the Act states A district municipality has the following functions and powers. c Bulk supply of electricity that affects a significant proportion of municipalities in the district. The Association of Municipal Electricity Utilities AMEU states that bulk supply of electricity means. transmission distribution and where applicable generation of electricity and that this is. contradictory with the reticulation of electricity set in the Constitution of South Africa 1996 Section. It is noted that the issue of embedded generation has only emerged in the last few years and was. not anticipated by these laws Municipalities must purchase electricity in order to reticulate it In the. past electricity was exclusively bought from Eskom In the view of their customers municipalities are. responsible for electricity supply In a situation of limited supply by Eskom municipalities should be. able to access other sources such as EG or own generation. 2 3 The Electricity Regulation Act 4 of 2006, The Electricity Regulation Act 4 of 2006 as amended in 2007 ERA sets out the policy for the. electricity supply industry The Act details the legislative requirements with regards to the. generation transmission distribution dispatch reticulation import export dispatch and trading of. electricity The objects of the Act in Section 2 which promote EGs include. a Ensure that the interests and needs of present and future electricity customers and end. users are safeguarded and met having regard to the governance efficiency. effectiveness and long term sustainability of the electricity supply industry within the. broader context of economic energy regulation in the Republic. b Facilitate investment in the electricity supply industry. c Promote use of diverse energy sources and energy efficiency. The ERA appoints the National Energy Regulator South Africa NERSA as the custodian and enforcer. of the regulatory framework provided for in this Act For EG NERSA is responsible for the issuing of. licences setting and approval of tariffs register persons not required to hold a license and enforce. performance and compliance with the Act and license conditions Activities requiring a licence as. listed in Section 7 of the Act and these are,Page 3 Legal framework for embedded generators.
a construct or operate any generation facility, b construct or operate any transmission power system. c construct or operate any distribution power system facility. d import any electricity,e export any electricity or. f dispatch electricity,2 3 1 Exemptions, In this regard the operator of a grid connected generator is required to hold a license from NERSA. Exemptions from obligations to apply for and hold a licence as outlined in Schedule 2 are. Operators of non grid connected generators for demonstration purposes. Non grid connected generation facilities for own use with generation capacity of less than. Non grid connected supply of electricity except for commercial use. 2 3 2 Licence Application Process, The application process to NERSA for embedded generators includes the completion and submission. of an application for an electricity generation licence and a public participation process in terms of. The Electricity Regulation Act 2006 The following information needs to be provided on the. application NERSA undated, Section A requires the particulars of the applicant State whether the applicant is a local.
government body a juristic person established in terms of an act of parliament a. department of state a company or other legal body, Section B requires the desired date from which the licence if granted is to take effect The. normal processing time for a licence application is 120 days once all relevant information. has been provided and there are not objections received. Section C requires applicant to provide information on particulars of proposed generation. station This includes the type of generation expected commissioning date the existing and. or planned capacity maximum generation capacity MW to be available and energy. produced MWh over the next five years of operation energy conversion efficiency and. expected future life of generation station, Section D requires particulars of long term arrangements with primary energy suppliers For. solar PV this will be the solar resource estimations as fuel supply is from the sun. The maintenance programmes and decommissioning costs are required in Section E of the. application The details of any proposed maintenance programmes including the cost and. duration covering the next six years Project proposals to state the expected availability. planned outage rate and forced outage rate of the plant over the first five years of. The customer profile is completed in Section F The persons to whom the applicant is. providing or intends to provide electricity from the generation station such as Eskom local. government or an entity The power purchase agreement in to be attached to this section. The network connection details are also completed in this section This requires information. Page 4 Legal framework for embedded generators, on the connection points voltages wheeling arrangement if applicable and single line. Section G of the application is the financial section of the generator This section requires. the following information, Projections of and current statements of the accounts in respect of the undertaking. carried on by the applicant showing the financial state of affairs of the most recent. period together with copies of the latest audited annual accounts where such have. been prepared, Annual forecasts for the next five years of costs sales and revenues generated by.
the project stating the assumptions underlying the figures. Estimates of net annual cash flows for subsequent periods 5 years 10 years 15. years sufficient to demonstrate the financial security and feasibility of operating. the generation station, Project financing information to include debt funder debt to equity ratio and the. terms and conditions of the funding arrangements, Human resources information is submitted in Section H Information is required on the. number of staff and employees and their categories in the service of the applicant at the. generation station and in any support services separate from the generation station. Section I covers the permissions granted to the generator from other government. departments and regulatory authorities Details of progress made to obtain required. permits and approvals are to be provided in the case where they have not been granted. Section J is the Broad Based Black Economic Empowerment part of the application The. project needs to provide information on direct empowerment human resource. development indirect empowerment and NERSA discretionary points. Section K is for providing of any other relevant information. According to Section 11 of the ERA when the application is made NERSA may require the applicant. to publish a notice of the application on appropriate newspapers or other media in the area of the. proposed activity in at least two official languages for public participation The advertisement must. state the following ERA 11 2006,The name and objectives of the applicant. The location where the application will be available for inspection by the public. The period within which any objections to the issue of the licence may be lodged with. NERSA including the address of the regulator where these may be lodged. The objections must be substantiated by the way of an affidavit or solemn declaration by. the public, Before considering an application for a licence NERSA must furnish the applicant with all. substantiated objections in order to allow the applicant to respond The regulator may also request. additional information as may be necessary at this point After the public participation process is. Page 5 Legal framework for embedded generators, complete and all information is requested is provided NERSA has 120 days to make a decision ERA.
2 3 3 Criteria for granting or refusing an Electricity Generating licence. The application for a generation licence is all encompassing and requires information on the. proposed generation station such as energy available for the next five years long term. arrangements with primary energy suppliers maintenance programmes and decommissioning costs. power purchase agreements and financial models This indicates that NERSA will only licence. economically viable generators with long term sustainability and with generation in line with. national policy As the sole authority to issue generation licences NERSA may refuse a license on the. following grounds, If the generator contravenes the objects of the ERA listed in Section 2. If the generation is not in line with national policy such as the IRP 2010. If the technical requirements are not met in terms of the regulations rules guidelines. directives and codes of conduct and practice The ERA forms the legal basis on which. standards and codes of practice which have to be adhered to. If the application is not made on time and if the application fee is not included. Upon submission of an application NERSA may require the generator to conduct a public. participation process NERSA is obligated to consider all objections to the issue of the. licence which are lodged by the general public If NERSA considers the objections to be. substantive then the application may be declined, 2 3 4 Electricity Regulations on New Generation capacity. Section 34 of the ERA allows the minister in consultation with NERSA to determine that new. generation capacity is needed to ensure adequate supply of electricity This clause of the ERA set the. legal basis for the procurement of electricity from IPP by the Department of Energy through the. Renewable Energy Independent Power Producer Programme REI4P The Electricity Regulations on. New Generation Capacity set regulations for the procurement of new generation capacity by organs. current legal framework that is in place on national and municipal levels for embedded generators In order to increase the uptake of such technologies the legal framework has to be in place to facilitate proper implementation so as not to have a negative effect on the existing electricity network

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