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Understanding Energy Law: An Overview of the Regulatory Landscape

Understanding Energy Law - An Overview of the Regulatory Landscape

Energy Law involves the regulation of, and transactions within, the energy sector from its procurement to its generation and distribution, and includes the ancillary commercial and financing-related agreements required for the smooth operation of the process.

Who is the regulator of the energy industry in South Africa?

In South Africa, the regulation of the electricity sector falls under the jurisdiction of NERSA, one of three energy regulators established under the National Energy Regulator Act, 2004 (NRA), which regulates electricity, piped gas, and petroleum pipeline industries.

According to the NERSA website, their mandate is as follows:

The National Energy Regulator of South Africa (NERSA) is a regulatory authority established as a juristic person in terms of section 3 of the National Energy Regulator Act 40 of 2004. NERSA’s mandate is to regulate the electricity, piped-gas and petroleum pipelines industries in terms of the Electricity Regulation Act 4 of 2006, Gas Act 48 of 2001 and Petroleum Pipelines Act 60 of 2003.NERSA’s mandate is to regulate the electricity, piped-gas and petroleum pipelines industries in terms of the Electricity Regulation Act, 2006 (Act No. 4 of 2006), Gas Act, 2001 (Act No. 48 of 2001) and Petroleum Pipelines Act, 2003 (Act No. 60 of 2003).

The strategic outcome-oriented goals of NERSA originate from their mandate and reflect key policy priorities of the government. These goals attest to NERSA’s role in facilitating the achievement of the national socio-economic and socio-political development agenda. These strategic goals, within the limit of NERSA’s mandate, are:

  1. to facilitate security of energy supply in order to support sustainable socio-economic  development in South Africa;
  2. to create a regulatory environment that promotes investment in and access to infrastructure in the energy industry in South Africa;
  3. to promote competitive and efficient functioning as well as orderly development  of the energy industry;
  4. to facilitate affordability of and accessibility to energy all; and
  5. to position and establish NERSA as a credible and reliable regulator in order to create regulatory certainty.

How is energy regulated in South Africa?

Energy regulation in South Africa is managed by several government agencies and bodies. The key regulatory framework and institutions involved in energy regulation include:

  1. Department of Mineral Resources and Energy (DMRE): The DMRE is responsible for the overall policy and regulatory oversight of the energy sector in South Africa. It develops energy policies, strategies, and regulations to ensure the sustainable development of the country’s energy resources.
  2. National Energy Regulator of South Africa (NERSA): NERSA is an independent regulatory authority responsible for regulating the electricity, piped gas, and petroleum pipeline industries in South Africa. It determines tariffs for the electricity and gas sectors, issues licences for energy generation and distribution, and ensures compliance with regulations.
  3. Eskom: Eskom is the state-owned electricity utility company in South Africa. While not a regulatory body, it plays a crucial role in energy regulation as it generates, transmits, and distributes around 90% of the electricity used in South Africa. (Source) Eskom’s operations are subject to NERSA’s oversight, particularly in terms of tariff determination and operational standards.
  4. Renewable Energy Independent Power Producer Procurement Programme (REIPPPP): This program is designed to encourage private investment in renewable energy projects. It involves competitive bidding processes in which private companies bid to develop and operate renewable energy projects, such as wind farms and solar installations. The program aims to increase the share of renewable energy in South Africa’s energy mix.

What is the Energy Act in South Africa?

The National Energy Act 34 of 2008 (the Act) is a significant piece of legislation in South Africa that establishes the legal framework for the country’s energy sector. The act aims to promote the sustainable provision of energy services, facilitate energy efficiency, promote renewable energy sources, and ensure the security of energy supply. 

The Act, as set out on the government’s website, has the following specific aims:

  • to ensure that diverse energy resources are available, in sustainable quantities and at affordable prices, to the South African economy in support of economic growth and poverty alleviation, taking into account environmental management requirements and interactions amongst economic sectors;
  • to provide for energy planning, increased generation and consumption of renewable energies, contingency energy supply, holding of strategic energy feedstocks and carriers, adequate investment in, appropriate upkeep, and access to energy infrastructure;
  • to provide measures for the furnishing of certain data and information regarding energy demand, supply, and generation;
  • to establish an institution to be responsible for the promotion of efficient generation and consumption of energy and energy research; and
  • to provide for all matters connected therewith. (source)

Caveat

Energy projects require input from a wide range of overlapping fields of law including commercial law, public procurement law, construction and engineering law, project finance law, environmental law, and regulatory compliance. As such, most major energy companies and energy projects require a multidisciplinary team of energy lawyers to achieve the required result. Caveat’s team assists with all aspects of the process including the drafting of bid documents, conducting environmental impact assessments, drafting of construction agreements, power purchase agreements, rent to own, EPC and O&M agreements, and relevant project finance-related documents.

If you are unsure of your rights and obligations concerning energy law in South Africa and beyond, reach out to our experts for advice.

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