On 16 October 2020, the Minister of Mineral Resources and Energy, Mr Gwede Mantashe (the "Minister"), gazetted amendments to the Electricity Regulations on New Generation Capacity, 2011 (the "Regulations") in terms of the Electricity Regulation Act, 2006 (the "Act"), providing scope for municipalities to develop their own power generation projects, subject to certain requirements. The official media statement issued by the Department of Mineral Resources and Energy on the gazetted amendments can be accessed here.
The purpose of the Regulations is, amongst other things, to facilitate planning for the establishment of new generation capacity. The amendments thus clarify the regime applicable to municipalities in so far as the determinations which may be made by the Minister under section 34 of the Act are concerned.
The key amendments are as follows:
- The Regulations have been limited in application, providing that only organs of state active in the energy sector may procure new generation capacity; and such procurement now includes, amongst others, base load, mid-merit load, peak load new generation capacity, and energy storage;
- Municipalities, as organs of state, are now eligible to apply to the Minister for the procurement or purchase of new generation capacity in accordance with the Integrated Resource Plan. A municipality that does apply as such must:
- conduct and submit a feasibility study where it intends to deliver the new generation capacity project through an internal mechanism as contemplated in section 76(a) of the Municipal Systems Act;
- submit proof that it has complied with the provisions of section 120 of the Municipal Finance Management Act and the Municipal Public-Private Partnership Regulations, where it intends to deliver the new generation capacity project through an external mechanism as contemplated in section 76(b) of the Municipal of the Municipal Systems Act; and
- submit proof that the application is aligned with its Integrated Development Plan.
- Lastly, the conclusion of power purchase agreements between buyers or procurers and IPPs will be further subject to any approvals required in terms of the Municipal Finance Management Act or the Municipal Systems Act, together with the Public Finance Management Act, as the case may be.
Written by Alexandra Felekis, Jason van der Poel, Mzukisi Kota, Partners at Webber Wentzel