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Date : 22/11/2005
Source: The Presidency
Title: Mlambo-Ngcuka: Launch of National Energy Regulator of SA


  Address by the Deputy President, Phumzile Mlambo-Ngcuka, at the launch of the National Energy Regulator of South Africa, Sandton Convention Centre, Sandton, 22 November 2005

Honourable Minister of Minerals and Energy,
Lindiwe Hendricks,
Honourable Ministers and Deputy Ministers,
Premier of Gauteng, Mbazima Shilowa,
Chairperson of the Parliamentary Portfolio Committee on Minerals and Energy, Nathi Mthethwa,
Members of the Parliamentary Portfolio Committee on Minerals and Energy,
Councillors, Chairperson of National Energy Regulator, Collin Matjila, NER Board Members and NERSA Regulator Members,
Your Excellencies, Members of the Diplomatic Corps,
Members of the South African Utility Regulators Association (SAURA),
Members of the African Forum for Utility Regulators (AFUR),
Members of the Regional Energy Regulation Association (RERA),
Staff of the NERSA Secretariat,
Distinguished guests,
Ladies and Gentlemen

It is very gratifying indeed to be afforded the opportunity to address you on the occasion of the launch of the National Energy Regulator of South Africa (NERSA). On behalf of the Government and people of South Africa, I congratulate all the new board members as well as members of the secretariat. I would also like to extend a very warm welcome to all our distinguished guests, some of whom have travelled from across our continent, in a move which symbolises the interconnectivity that is being achieved through the provision of electric power.

Few among us would be aware that South Africa was one of the first countries in the world to use electricity commercially. Yet this is true. The diamond mining in Kimberley led to electricity streetlights being switched for the first time in 1882, only three years after Thomas Edison started supplying electricity in New York. This was before London had electric street lights. However, as we know, these were very different times and, because of racism and privilege, for decades this resource was to be enjoyed by a minority of South Africans.

A mark of the non-racial democratic statehood which we achieved in 1994 was to banish such crude notions which had done so much, over such a long time, to damage race relations. We are now able to reap the benefits of freedom.

In 1995 the National Electricity Regulator was established to replace the old Electricity Control Board, to ensure equal and universal access to electricity.

I would like to take this opportunity to congratulate the National Electricity Regulator (NER) for the ten years of successful regulation of the electricity industry in South Africa. I would particularly like to thank the past and present NER Chairpersons, Board Members and Chief Executive Officers for their contributions in the electricity industry.

A strong regulatory system allows for the certainty which encourages international investment, confidence in the long-term reliability of supply required by industries in the energy business, and lays down a transparent system which can be benchmarked against any similar system in the world.

Clearly, the arena of energy in which the national energy regulator operates is one of the key drivers of a vibrant and competitive economy as demonstrated by the diversification of the South African energy scene.

Today, our fundamental reliance on coal co-exists with important new developments in natural gas and a strong commitment towards including cleaner energy technologies from clean coal, through natural gas to eventually having a portion of our energy generated by renewable resources.

The regulation of the energy system is vital to the country and even plays an important role in South Africa’s relationships with all our neighbours, from the natural gas pipeline to South Africa to the interconnected electricity transmission grids.

Undoubtedly, effective and efficient regulation is pivotal to South Africa’s economic growth. Indeed, as of 2005, the energy sector has contributed 15 percent of the Gross Domestic Product (GDP). Accordingly, the establishment of a single energy regulator is critical to the promotion of investment, diversification of sources of fuel, and the need for central coordination of the energy industry.

In this regard, the infrastructure development of energy, like other utilities such as telecommunications, transport, and water and sanitation, is central to sustainable development and to the prospect of achieving prosperity for our country. These utilities contribute towards creating an environment that promotes investment across sectors and ensuring that we are the better able to address poverty and underdevelopment. They form our armoury for progress.

In examining the energy industry in South Africa, energy infrastructure needs particular attention if it is to contribute effectively to the growth of the economy; and it is well-known that we are seeking enhanced growth.

The veins of the energy supply system are the pipelines, which connect the nodes of supply and market. In the area of gas this is a developing infrastructural necessity, led by a government company working closely with major energy companies.

The liquid pipelines will develop out of the need to supply liquid fuels from the refining resources at the coast to the markets inland. In this instance, another government company, Petronet, is actively operating the present system and considering upgrades and new liquid pipelines.

Much work in liquid and gas pipelines will take place in the future. We are confident that public-private partnerships (the basis on which our new democracy is built) in these projects will spur development of industries at the important industrial hubs. In these developments, the petroleum pipeline and gas regulators will play an important role.

The inherent worth of the electricity industry and its contribution to the development of the country cannot be overemphasised. As we know, surplus generation capacity is quickly diminishing and provision needs to be made for growth. A significant contribution to these capacity requirements will for the first time be met by private sector generators.

There is no doubt that generation and transmission must respond to the growing demand. While we have unprecedented levels of electrification in South Africa, we are still faced with the challenge of ensuring sufficient access to rural communities. These challenges present fantastic opportunities for the electricity industry to spearhead economic growth and help bring a better life to all our people.

Ladies and gentlemen

It is very important for NERSA to do more to integrate energy resource planning in a manner that is beneficial to all of us. This planning must be done in a manner that takes into account all energy carriers and not only electricity.

The vision of a restructured electricity distribution industry, in which all electricity consumers with the same requirements receive a uniform quality of service at a uniform price, has started to become a reality.

One of the challenges in this sector is to ensure that the electricity infrastructure is recapitalised and managed by skilled technical resources. Regulatory oversight of the total value chain of electricity is essential to ensure that end use consumers benefit from low and efficient electricity prices that are sustainable.

We are all aware that investors, both in electricity infrastructure and in the economy, want assurance of price predictability and stability.

Over the past three years, the developments in natural gas have been small in their total impact, but significant in South Africa’s move to provide an environmentally cleaner fuel resource. The numbers show this movement.

The connection of Mozambique and South Africa through the natural gas pipeline increases our economies’ use of gas. The vision of importing natural gas in the form of liquefied gas from the world markets, once competitively priced, will add to the country’s energy diversification and to the move to cleaner fuels. All these aspects of gas require good and transparent regulations from our energy regulator.

The Mozambique-South Africa gas pipeline project, which cost $1,2b, demonstrates what African countries partnering for the development of their people can achieve. It is a useful example for others to emulate within the context of the New Partnership for Africa’s Development (NEPAD). There is confidence that more gas will be discovered and we anticipate that, together with other African countries, we will use this resource to accelerate development.

We are all very pleased to learn that more natural gas has been found recently in Mozambique. We look forward to expanding our joint natural gas venture for our mutual benefit.

Piped-gas currently makes up a small but growing percentage of South Africa’s energy mix. Piped-gas from coal was previously supplied to industries in KwaZulu-Natal, Mpumalanga, Gauteng and the Free State.

We are also looking forward to the development of new gas fields in South Africa. For this to happen, more exploration along our coast needs to occur and the Petroleum Agency of South Africa (PASA) is playing a key role in encouraging gas and oil companies to prospect along our coast. The National Energy Regulator is thus tasked with ensuring the orderly development of the piped-gas industry and with facilitating investment.

We must not forget the ongoing South African offshore gas developments which have been in progress for many years now and have received a boost in the deep water exploration.

PASA is presently working on this outer continental shelf extension project. The potential oil and gas in this region will have a profound effect on our future. Our energy regulator will certainly be faced with new, exciting and paradigm-changing challenges.

NERSA will also be required to regulate the petroleum pipelines industry. This industry has not previously been subject to economic regulation but will now be under a transparent regulatory process. Transnet, through its subsidiary, Petronet, is the main player in the petroleum pipelines industry. It has approximately 3 000 kilometres of pipelines and a new multi-product pipeline is under consideration.

NERSA will face the challenges of promoting the sustainable and orderly development of the petroleum pipelines industry, promoting competition and promoting equitable access. New players will now be able to import petroleum products and have them transported to the main markets.

One of the pre-requisites for the socio-economic growth of our continent is the development of basic infrastructure. We cannot overemphasise the role regulation has to play in promoting the right framework for infrastructure development and integration.

This is the reason why, in adopting the framework document of NEPAD, we recognised the need for the establishment of organisations such as the African Forum for Utility Regulators (AFUR). The implementation of a harmonised regulatory framework will fast-track and facilitate the implementation of integrative infrastructure projects in pursuit of the socio-economic development of Africa.

The National Electricity Regulator (NER) must be praised as one of the institutions in South Africa to have quickly aligned itself to the NEPAD initiative and played a pivotal role in the launching of AFUR. We are certain that the National Energy Regulator (NERSA) will continue to play a leading role in the development of AFUR as regulatory harmonisation and development on the continent remains critical to the success of NEPAD.

It is further expected that NERSA will contribute to the advancement of regulatory practices applicable to the African continent, including regulatory capacity building and skills development, and to complement the principles set out in the AFUR Framework on Utility Regulation in Africa.

In closing, permit me to wish the National Energy Regulator success in its endeavours. I am confident that working with other partners on our continent we will contribute to the goals and initiatives of the African Union towards making Africa both developed and prosperous. We will provide a better life for all.

Congratulations to all those involved in the launch of NERSA. We await, with great expectations, NERSA’s contribution to the objectives of this better life for all.

Thank you.

Issued by: The Presidency
22 November 2005
   

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