Attempts by government to proceed with the next bid window for wind and solar projects without regard to the pace and scale in the draft IRP2018 will lead to further legal actions by the affected parties.
The affected parties have already lodged a court application against the R56-billion renewable energy contracts which were signed between Eskom and Independent power producers on 4 April 2018. The application is enrolled for hearing on 18 and 19 March 2019. My submission is that the Honourable Court will find the renewable energy power producers’ agreements of 4 April 2018 unlawful and unconstitutional. Government, therefore, need to think carefully before it proceeds with the next bid window for wind and solar projects that are not in compliance with the pace and scale envisaged in the IRP2018.
The fall-out from the nuclear judgment of 26 April 2017 by Justice Bozalek and Justice Baartman exposed the defects of the renewable energy determinations of 1 August 2011, 19 December 2012 and 18 August 2015. These determinations suffer from the same defects. They lack public consultations by Nersa.
It is common cause that the defective Nersa process that was followed for the nuclear determinations was also followed for renewable energy determinations. The ministerial determination of 11 November 2013 to procure new nuclear generation capacity with concurrence by Nersa on 17 December 2013 was declared unlawful and unconstitutional and was set aside.
Another ministerial determination of 5 December 2015 for new nuclear generation capacity with concurrence by Nersa on 8 December 2015 was also set aside. All the procurement processes that commenced pursuant to the determinations that were declared unlawful were also set aside.
There is no dispute that the decision to procure new generation capacity has far-reaching consequences for the South African public. It thus makes sense that the Nersa’s decision to concur in the minister’s determinations without public participation process was found to be procedurally unfair and in breach of the National Energy Regulation Act read together with the Promotion of Administrative Justice Act by the Cape High Court.
In its answering affidavit at the North Gauteng High Court, Nersa concedes that it did not allow for a public participation process when it allegedly made the decision to concur with the Ministers determinations to procure new generation capacity from the renewable energy independent power producers. Nersa fails to explain how it then acted in the public interest without taking any steps to ascertain the views of the public or affected parties.
Had Nersa consulted the affected parties, it would have been advised of the irrationality of signing the renewable energy power purchasing agreements on 4 April 2018 in an electricity system that has a reserve margin of 23% when imports, renewable energy and other power purchases are excluded. In other words, Nersa would have been advised that the electricity system is adequate and any new generation capacity including additional capacity from renewable energy independent power producers must be added at a cost and pace that the country can afford. The signing of renewable energy power purchasing agreements on 4 April 2018 is leading to the destruction of 92,000 permanent jobs in the coal value chain and this, is not equitable and just.
There is even a bigger problem for the renewable energy independent power producers programme. The National Energy Regulator Act sets out the requirements for the validity of Nersa decisions and provides amongst others that every decision of Nersa must be in writing and be based on reasons, facts and evidence that must be summarised, recorded and explained clearly as to its factual and legal basis and reasons therefore. Most importantly, any decision of Nersa and the reasons therefore must be available to the public except the information that is protected in terms of the Access to Information Act.
Before Eskom can sign a valid and binding agreement with independent power producers for new generation capacity, Nersa must first make a decision that relates to the types and sources from which electricity is needed; prices and tariffs at which the electricity produced by the independent power producers should be sold and purchased. Most importantly, Nersa must decide whether the power purchase agreements between the independent power producers and Eskom meets all the regulatory requirements.
In its answering affidavit before the North Gauteng High Court, Nersa alleges that it made the above decisions when it concurred with the minister when the minister made the determinations in terms of section 34(1) of the Electricity Regulations Act on 1 August 2011, 19 December 2012 and 18 August 2015. Significantly, Nersa does not attach its decisions nor its reasons for such decisions to its answering affidavits. It only attaches its media statement of 10 August 2011. If the court finds that Nersa has not made the above decisions, then any power purchase agreement signed with independent power producers would be unlawful. To the best of my knowledge, not a single decision of Nersa is placed before the court.
In its answering affidavit before the North Gauteng High Court Eskom goes to great length to show that it does not have a choice but to conclude the power purchase agreements with the independent power producers once the statutory requirements have been met despite the effect it may have on Eskom. The facts are that the statutory requirements have not been met. It is intriguing that the current board of Eskom is not enforcing statutory compliance unless they are deliberately doing the bidding for the independent power producers
As an acting Group Chief Executive of Eskom, I refused to sign the independent power producers’ agreements in the current format because they are not in the interests of Eskom and the consumers. Following a complaint by the South African Wind Energy Association, Nersa found that Eskom was within its right to delay the agreements with the 27 renewable independent producers. The Nersa findings will be the subject of a Nersa tribunal hearing in November and if confirmed its going to be a real game changer.
Government needs to be careful and must tread carefully in the way it plans to proceed with the next bid windows for the wind and solar projects. There is no harm in implementing new generation capacity at a pace and scale that South African can afford. DM
Matshela Koko is former Eskom Acting Group Chief Executive