Independent Electricity Management Operator Bill: deliberation & rejection

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Mineral Resources and Energy

01 September 2020
Chairperson: Mr S Luzipo (ANC)
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Meeting Summary

The Committee discussed the Independent Electricity Management Operator (IEMO) Bill in a virtual meeting. Members of the ANC and EFF expressed strong opposition to the Bill, while Members of the DA argued in its defence.

Members of the ANC said many of the Bill’s objectives will be met in the course of the ongoing restructure of Eskom, and it will interfere with this process. The ANC said the Bill contains many inconsistencies and contradictions, especially about the ownership of the company it will create. It is inconsistent with government policy regarding state ownership of the transmission grid. It does not address the historical disadvantage faced by some communities and favours Metropolitan municipalities.

Members of the DA said the Bill was rejected without due consideration because it originated from the DA. The DA said there was no attempt to engage with its content, negotiate, or compromise, which the DA is always willing to do. The Bill does not seek to create a private company, but a public-private partnership. Eskom is failing to provide the country with energy security, and nothing will change if it continues on its current trajectory. Parties need to look beyond its policies to what is best for the country.

Members of the EFF said the Bill does not address the country’s energy issues. Independent power producers must be scrapped as it will deregulate the electricity price.

The Committee passed a motion to declare the Bill undesirable. The DA noted its dissatisfaction with the handling of the Bill, and said it will issue a minority view as part of the Committee’s report.

In other matters, the Committee considered and adopted several sets of minutes with minor changes.

Meeting report

Consideration of the Independent Electricity Management Operator Bill
The Chairperson said the purpose of the meeting is for the Committee to deliberate and make a recommendation on the Independent Electricity Management Operator (IEMO) Bill. All processes required by the rules of Parliament are completed. This includes giving the Department of Mineral Resources and Energy, and the Member of Parliament who introduced the Bill, an opportunity to address the Committee.

Mr M Mahlaule (ANC) said the letter on procedure which parliamentary legal services provided, makes it clear the Committee is required to express its opinion on the Bill’s desirability before deliberating on it.
It is clear the Bill is not desirable. This can be seen from the Committee’s preceding discussions, as well as the fact it received no public comments. He proposed a motion for the Bill to be declared undesirable.

Ms C Phillips (DA) said everyone said the IEMO Bill will take the country back to apartheid. She reminded the Committee, Eskom in its current form is a creation of the apartheid government.

Mr Mahlaule raised a point of order. He said he never expressed the opinion the IEMO Bill will take the country back to apartheid. So it is incorrect to say everyone said this.

Ms Phillips said not even one of the country’s many State-Owned Enterprises (SOEs) is providing value for money. She asked how Eskom in its current form can be expected to be any different. Nothing will change if Eskom remains on its current path. The country needs cheap electricity. Members must look at what is best for the country and for job creation, not just for its parties. It is irresponsible to reject the IEMO Bill just because it came from the Democratic Alliance (DA).

Mr T Langa (EFF) asked if the Committee received communication from his party on his deployment to the Committee. He asked to be excused early.

Mr K Mileham (DA) said the IEMO Bill was rejected out of hand by the majority of the Committee. There was no attempt to engage with its content, negotiate, or compromise. The DA is always willing to do this, particularly on the issue of metropolitan municipalities. It is therefore disingenuous to say the Committee deliberated on the Bill. It was dismissed over and over again with contempt. This is not how the Committee must deal with any matter. The substance of the Bill was not engaged with, despite the fact it followed international best practice. The only explanation for the contempt the Bill was rejected with, is because it was put forward by a member of the DA. This is a sad indictment of the way it was handled. If the Bill is declared undesirable upfront and without any reasons, the DA will reserve its right to take action, possibly legal action, against the Committee, for failing to follow the required processes for deliberating on legislation.

The Chairperson said discussions took place in the previous meeting. Members expressed views, but technically, deliberations will only take place in the current meeting.

Ms V Malinga (ANC) said the IEMO Bill puts the cart before the horse. Eskom is currently in the middle of a process of restructuring. The 2019 Integrated Resource Plan (IRP) provides for a mixture of energy sources. The IEMO Bill is therefore superfluous. She disputed Ms Phillips statement about supporting Eskom meaning refusing cheaper electricity. Eskom currently provides indigent households with 50kWh electricity per month, free of charge.

Ms N Hlonyana (EFF) said the EFF is opposed the IEMO Bill. The EFF also wants independent power producers (IPPs) to be scrapped. The IEMO Bill is a waste of time. It does not address the country’s issues.

Mr M Wolmarans (ANC) said the Committee had extensive discussions. It received numerous presentations on the IEMO Bill, and many inconsistencies and contradictions emerged. For example, it claimed the IEMO Bill is based on the Independent System and Market Operator (ISMO) Bill, but it differed from the ISMO Bill insofar as it moved in the direction of private ownership of electricity supply. This is inconsistent with ANC and government policy. It contradicts other provisions in the Bill requiring the Minister of Mineral Resources and Energy to appoint IEMO Board Members. These were some of the reasons the Bill is rejected. It has nothing to do with being introduced by a Member of the DA, although the Bill follows the DA policy of privatisation. He supports the motion to declare the Bill undesirable, and there is no basis for the DA to claim it was not engaged with.

Mr S Kula (ANC) called on Members to engage honestly and objectively. It is not correct to blackmail each other. Extensive discussions took place and it is clear the Bill seeks to liquidate Eskom. The Committee cannot support this.

Mr Mileham raised a point of order. He said Mr Kula is misleading the Committee. The intention is not to liquidate Eskom.

The Chairperson said this is a difference of opinion, not a point of order. Members can dispute other Member’s opinion when it is their turn to speak.

Mr Mileham insisted Mr Kula is lying.

The Chairperson objected to this. It is wrong to say another Member is lying. He said Mr Mileham undermines the authority of the Chairperson by not accepting the Chairperson’s ruling.

Mr Mahlaule raised a point of order. He said Mr Mileham made statements which might not be accepted as true, but he is given a fair chance to express his views. Now, Mr Mileham’s attempts to start a dialogue with the Chairperson are out of order.

The Chairperson confirmed Mr Mileham will have a chance to respond to statements he considered misleading.

Mr Kula continued. The private ownership of the IEMO will be a problem because it will fulfil functions which fell within the mandate of the State. Other problems include the explicit exclusion of the State as a shareholder; the transfer of State assets to a private company; and the different treatment of different types of municipalities. The Committee discussed the Bill at length, but the only response is ill-informed arrogance and pomposity from Members such as Mr Mileham. The Bill does not address the challenges Eskom is currently facing.

Mr Mileham said he is not disputing the Committee discussed the Bill. He is saying Members already made a decision to reject the Bill before any discussions or presentations took place. He agreed, like all Bills, the IEMO Bill contained flaws, but it is the duty of the Committee to fix those. Rejecting it without looking at each clause is an abrogation of the Committee’s responsibility. The Bill does not seek to create a private company which is responsible for the transmission of electricity. As was repeatedly stated, it wants to create a public-private partnership. This form of organisation recognises the private sector brought skills, efficiency, knowledge, and experience, which the public sector frequently lacks, and is used throughout the country and the world.

It is common cause that Eskom is failing to provide the country with energy security. Nothing will change it if it continues on its current trajectory. South Africa has an opportunity to look at a better solution, even though it might not be perfect. The world is moving away from State-owned electricity monopolies, toward independent grid operators buying power from a wide range of sources.

He disputed Mr Kula’s contention about the IEMO Bill seeking to liquidate Eskom. In fact, it seeks to take transmission out of Eskom’s hands, but let it continue to generate electricity in competition with Independent Power Producers (IPPs). He denied the Bill discriminates against any municipalities. When challenged, the Minister of Public Enterprises could not show where the Bill discriminates.

Section 155(3) of the Constitution gives Metropolitan municipalities greater powers. He recognised indigent households receive free basic electricity from Eskom, but argued the economy is dying because Eskom is unable to provide energy security, and sells electricity at very high prices. The details of the Bill should have been debated, but Members simply rejected it from the start.

Ms Malinga said the IEMO Bill is not desirable because government acknowledged Eskom’s challenges, and has begun the process of unbundling to address it. The problem with the IEMO Bill is not at the level of clauses, it is the Bill seeks to substitute a private company for a State-owned one, and to create a transmission entity which will only serve Metropolitan municipalities. She asked what will happen to Eskom employees. The Bill is not desirable for the majority of South Africans.

Ms Phillips recognised Eskom provides free electricity to indigent households. The problem is at a larger scale. Smelters are not running in winter, which costs jobs. Even the President’s brother-in-law moved his smelter to an Asian country with cheaper and more reliable energy. The DA does not pedantically insist on privatisation. It is looking for the best way to provide reliable, cost-effective, energy. She asked if government is mandated to provide electricity, or simply to ensure it is provided. She asked if this mandate is something which can perhaps be changed. Eskom jobs are not going anywhere. It is simply changing. Someone working on a distribution network will continue to work on the distribution network. In fact, jobs will be created in the generation sector, and by businesses who gain access to cheap, reliable, electricity. She disputed the IEMO Bill will mean only Metropolitan municipalities will receive power. It will just give Metropolitan municipalities freedom to choose where it buys electricity from.

Mr Mahlaule said blackmail must not be allowed to win any argument. The ANC Committee Members studied the ISMO and IEMO Bills before the latter was presented to the Committee. It was not rejected out of hand, but on the basis of preparation. It is misleading to suggest it was rejected out of hand. When the Department of Mineral Resources and Energy (DMRE), and the Department of Public Enterprises made presentations to the Committee, it raised many of the same points the ANC Committee Members raised. It raised issues such as the contradictions surrounding the Minister’s involvement in appointing the Board. Ms Malinga is correct to say the IEMO Bill handled different municipalities in an unconstitutional way by allowing it discretion to apply special tariffs. The Bill is undesirable. If it is presented with certain changes it may be accepted, but it is the responsibility of its sponsor to make these changes.

The Chairperson said, although there is nothing preventing the legislature from initiating legislation, it tends to originate with the Executive. If a Member of the legislature presents a Bill it will always be presented as a private Member’s Bill, no matter which party it originated with. In this case it is for the Committee to seek clarity and make comments on the Bill. Individual members can express its views and opinions. The Committee now reached the stage of having a debate, which involves engagement and persuasion. Policy is complex by its nature. There is a gap between restructuring Eskom as it was announced in the State of the Nation address, and is currently under way, and the proposals of the IEMO Bill. This gap must be closed. He asked if these speak to each other. There are successful SOEs, such as the Council for Scientific and Industrial Research (CSIR), Mintek, and the Council for Geosciences. He acknowledged none of these are of a size comparable with Eskom. It does prove State ownership does not imply failure. None of the Members possess superior wisdom, and Members must allow for disagreement. He invited Members to make further comments.

Mr Mahlaule agreed with the Chairperson’s summary of the issues. Individual Members of the Committee are entitled to reject or support a private member’s Bill. It is expected different Members of the Committee will take different positions on it. There is also no problem with considering a revised Bill. He called for a motion of undesirability on the IEMO Bill in its current form.

Mr Mileham said Mr Mahlaule’s earlier comments about blackmail and arrogance are unfortunate and unparliamentary.

Mr Mahlaule raised a point of order. He said he did not accuse any Member of blackmail or arrogance. It was a general comment about no-one in particular.

Mr Mileham said once a Bill is tabled, regardless of its origin, it becomes a Bill of Parliament. It becomes the responsibility of the Committee to work with it. It is not the responsibility of the original submitter to re-draft the Bill. He asked the Chairperson if the Committee received a legal opinion on the constitutionality of the IEMO Bill. He clarified his statements about the role of the Executive branch in initiating legislation. He asked if he is saying the Executive has a mandate to write legislation. He would have a problem with this approach: it is for Parliament to determine legislation.

Ms Hlonyana said the EFF saw the problems with the IEMO Bill from the outset. For example, he asked who will control the price of electricity produced by IPPs. No-one will be regulating the price. Municipalities will also be able to do as it wished. The position of the EFF is it rejects the Bill.

Ms Malinga said the IEMO Bill is undesirable. It seeks to replicate the restructure already taking place at Eskom. For example, generation, transmission, and distribution, are already being separated. The Integrated Resource Plan (IRP) provides for a mixture of energy sources, including IPPs. She questioned if Ms Phillips is familiar with the poor. The Bill was rejected because some people tried to push it forward. It is against the ANC stands for. Eskom will be rescued so it can serve black people, which it never did before. The ANC will not be bullied. She asked why a State-owned entity will be allowed to be privatised. She asked how government will ensure a private entity provides energy to the right people. She said if IEMO is able to source funding, the question is why the same sources cannot fund Eskom.

Mr Langa said the EFF rejects the IEMO Bill.

Mr Wolmarans said it is not a foregone conclusion a Bill is passed in any form. The Committee is within its rights to reject a Bill it considers undesirable. The IEMO Bill ostensibly claims to create a public-private partnership. He said the objects of the Bill, in Clause 2 contradicts this claim. It makes it clear it seeks to create a private company. The ongoing restructuring of Eskom must be given a chance to be completed. A number of milestones were already achieved. He disagreed that the IEMO Bill does not amount to the liquidation of Eskom. This is exactly what transferring the assets to the IEMO will achieve.

Ms Phillips said the reason the private sector is not investing in Eskom is because it is not profitable. The National Energy Regulator of South Africa (NERSA) will still set electricity tariffs. The price will not be unregulated. In response to Ms Malinga, she said she represents everyone in her constituency, including the poor. She visits the poor, and understands the issues.

Mr Kula referred to Ms Natasha Mazzone (DA), when she introduced the Bill, claimed it will build on the ISMO Bill to break Eskom down into better manageable entities. However, the current Eskom roadmap addresses this matter. Therefore the IEMO Bill is unnecessary. The Eskom restructuring must be given space to unfold. The Committee must give it support. He agreed the Bill is undesirable, but denied claims it was rejected without consideration.

The Chairperson said he did not mean Parliament must uncritically accept the legislation provided to it by the Executive. He made a point about mandates, specifically, more of the mandates relating to energy supply and security resided with the Executive. He agreed the role of the Committee is to hold the Executive accountable. He said, according to the legal opinion of Parliamentary Legal Services, when it considers a Bill, Parliament can give reasons and declare it undesirable before dealing with it in detail. The requirement to deal with it in detail arises as and when a Bill is accepted as desirable. The question of the constitutionality of the Bill cannot be settled by Parliamentary Legal Services. The Committee fulfilled all the requirements for tabling a motion of desirability. He asked the Secretariat to advise the Committee on the next step.

Mr Mileham said he asked the Chairperson about legal advice on the constitutionality of the Bill at an earlier meeting. The Chairperson said Parliamentary Legal Services will advise on the legality of the Bill, and the processes to be followed. The letter about the processes was received, but nothing about the legality of the Bill was received.

The Chairperson said a Bill cannot be legal or illegal, but there is a procedure which had to be followed.

Mr Mileham said there are questions about the constitutionality of Clause 40 of the IEMO Bill. This particular clause is not indispensable, but if uncertainty about its constitutionality affects the Committee’s decision-making process, clarity must be sought. The Chairperson undertook to do this.

The Chairperson said issues regarding specific clauses will be dealt with if the Bill is declared desirable.

Mr Mahlaule said the constitutionality of any one clause is not an issue about the desirability of the Bill.

Mr Michael Prince, Parliamentary Legal Services, said the rules are clear. The Committee needs to pass a motion of desirability before deliberating on a Bill in detail. The Committee satisfied all the requirements, and can proceed with a motion of desirability of the IEMO Bill.

The Chairperson asked if anyone seconds Mr Mahlaule’s motion of undesirability.

Mr Wolmarans seconded.

The Chairperson asked if there are any objections.

Mr Mileham objected and called for a division on behalf of the DA.

Mr Mahlaule asked for clarification of the rules for voting on the virtual meeting platform. He asked if he is able to vote on behalf of Mr J Bilankulu (ANC) not on the list, who is experiencing technical difficulties and lost connection to the meeting.

Ms Ayanda Boss, Committee secretary, said she is not sure because the situation did not arise before.

Mr Mileham said it is common practice, a Member who leaves a meeting for any reason, cannot be counted in a vote.

Four members of the ANC voted against the desirability of the IEMO Bill, two members of the DA voted in favour of the desirability, and one member of the EFF abstained.

Mr Arico Kotze, Committee secretary, said the next step is for the Committee to compile a report on the Bill, which will be adopted the next day.

Mr Mileham disagreed with the interpretation of the rules. In his view the Committee is allowed consider amendments before deliberating and tabling the motion of desirability. The DA will submit a minority view on the handling of the Bill.

Consideration of Committee Minutes
The Committee considered and adopted the minutes of its meetings on 10, 19, 23, and 24 June, 7, and 14 July, and 18, 21 and 25 August 2020 with minor changes.

The meeting was adjourned.

 

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