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Reforming South Africa's Electricity Sector

The Electricity Governance Initiative (EGI)---a collaboration of decision-makers and civil society to improve electricity sector governance in developing counties---has launched a new program in South Africa.

The initiative will analyze the South Africa's government and regulatory capacity to create the right conditions for the promotion of renewable energy, efficiency, and social equity, in line with sustainable development and public interests.

Electricity issues are high on the political agenda in 2008 as South Africa confronts a crisis where reserve margins are unprecedentedly low, resulting in inadequate power supply to meet demand. The crisis presents an opportunity for improved integration of clean energy into South Africa’s energy mix – yet robust governance frameworks will be necessary in order to help manage tradeoffs between environmental, social, and financial considerations.

The Electricity Governance Initiative will undertake a systematic assessment of decision-making processes in the electricity sector in South Africa. This independent assessment will be based on the use of the EGI indicator toolkit, a set of indicators designed to assess the three interlocking principles of transparency, accountability and participation, as well as the institutional capacity to operationalize these principles. Analysis of decision-making processes will focus on:

Energy Policy and Planning

Over the past decade, numerous institutional arrangements for electricity have been considered for South Africa, and resulting policy frameworks have been highly uncertain. Implementation of both the White Paper of 1998, which would have included elements of a competitive model for generation, and the Cabinet Memo of 2001 which emphasized private sector participation in generation of new electricity through independent power purchases, have stalled since 2004. Contested definitions of the respective roles of the public and private sector explain, in part, the lack of implementation of these policies. At the same time, the Central Energy Fund (CEF) and the National Energy Efficiency Agency (NEEA) mandates to promote renewable energy and efficiency are increasingly important given current supply shortfalls. The assessment will analyze capacity needs to facilitate coherent, transparent and accountable policy planning and implementation.

Regulatory Capacity

The regulator plays a critical oversight role in the electricity sector. In regulating tariff setting by Eskom, it also has authority over the provision of licenses for generation and approval of new investments. The National Energy Regulator of South Africa (NERSA) has an important role to play in protecting the public interest, including consideration of equity, affordability and access and determining the terms on which renewable energy can be incorporated into South Africa’s electricity mix. The EGI assessment will take a systematic look at the mandate of the regulator in the electricity supply and distribution industries, and the preconditions and challenges of fulfilling its role, including with respect to effective stakeholder engagement. The assessment will use case studies to provide useful insights into practice of regulation of investment decisions.

Distribution of Electricity

Efforts to restructure the electricity distribution industry have been frustrated by the breakdown of a stakeholder process in which the impact of reform on the financial viability of municipalities has not been resolved. The assessment will seek to inform ongoing processes addressing the structure and functions of the Electricity Distribution Industry. The analysis will also consider new processes underway to encourage municipal efforts to promote energy efficiency and renewable energy. Municipal governments have played an important role in independent power production arrangements, in bringing renewable energy online, and in managing demand for electricity – yet national policy support is often necessary to advance such initiatives fully.

EGI-South Africa will be led by Idasa (Institute for Democracy in South Africa), in collaboration with a working group of South African civil society organizations and research institutes, including the Energy Research Center (University of Cape Town), Centre for Renewable and Sustainable Energy Studies (Stellenbosch U.), Green Connection, Sustainable Energy Africa, WWF-SA, Restio Energy, Earthlife Africa, and the International Labour Resource and Information Group (ILRIG).

The World Resources Institute (WRI) serves as the secretariat for EGI in collaboration with Prayas Energy Group (India), and is active in India, Thailand, Indonesia, the Philippines, Brazil and Central Asia.

Through this initiative we seek to engage with legislators, government officials, planners and regulators as part of the assessment process, as well as with industry associations, small providers of alternative energy, and private sector companies with an interest in social and environmental considerations. Our efforts will build the capacity and credibility of our civil society partners in order to enable them to advocate more effectively for public interests. We also seek to build the capacity of policymakers and regulators to practice better governance in order to build political support for innovations to promote clean energy and efficiency.

For more information, please visit the EGI website.

This story originally posted at the Electricity Governance Initiative.

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