The Department of Energy (the Department) intends to submit an Independent System and Market Operator Bill to Parliament. You are hereby requested to submit your comments on this Bill to the Department no later than 13 Jillle 2011.
To provide for the establishment of an Independent System and Market Operator as a national public entity, for the electricity supply industry in South Africa, in line with government policy and for matters associated therewith.
"Companies Act" means the Companies Act, 2008 (Act No.
"distribution power system".
"Electricity Regulation Act" means the Electricity Regulation Act, 2006 Act No.
Act, 2001 (Act No.
"NERSA" means the National Energy Regulator of South Africa established in terms of section 3 ofthe National Energy Regulator Act, 2004 (Act No. 40 of2004); "Public Finance Management Act" means the Public Finance Management Act, 1999 (ActNo.
"transmission" means the conveyance of electricity above 132kV through a transmission network; and "transmission network" means a transmission power system consisting of transmission lines and all associated transmission infrastructure, assets and rights owned, controlled or exercised by a transmission licensee.
The objects of this Act are to provide for an Independent System and Market Operator (ISMO) as a company that is financially viable and responsible for the planning of supply of electricity by generators through the national transmission system, electricity dispatch and aggregation in respect of sale of electricity by generators , act as the buyer of electricity from generators for the Republic of South Africa and sell electricity to ISMO Customers, in a manner that will minimize the overall costs of electricity to customers and to provide for matters incidental thereto.
selling electricity purchased by it to ISMO Customers and for another matters as are within the contemplation ofthis Act to be the responsibility ofiSMO.
Despite the provisions of the Companies Act, the government shall, on incorporation of the Company and for as long as it so wishes, be the only member of such company.
The Registrar of Companies must, notwithstanding any other provisions of the Companies Act to the contrary, upon receipt of the Memorandum of Incorporation from and such other documents provided by the Minister for the purposes hereof register a company as a public company under the name "Independent System and Market Operator of South Africa Ltd."
authorise such changes to standard documentation as may be necessary to give effect to the registration of the company as a public company; and issue to that entity the necessary documents to enable it to conduct business as a corporate entity.
The Minister shall exercise the rights of a shareholder in ISMO in ·respect of the shares held by the government provided that for as long as the government is the sole or majority shareholder in ISMO, sections 60, 66, 190 and 344(d) of the Companies Act shall not apply.
4.(1) The Memorandum of Incorporation of ISMO must be drawn up in such a manner that the contents thereof are consistent with this Act.
The Memorandum of Incorporation shall vest ISMO with the authority to assist the Minister with the planning for new generation capacity, to make recommendation with regard to planning for required additions to the national transmission power system and transmission network, to act as a buyer of electricity from generators and seller of electricity to ISMO Customers, and for all matters connected therewith as may be necessary or expedient.
The Memorandum of Incorporation may vest ISMO with such powers as are typically required for the operation of a company, having regard to provisions of section 4(1).
The Companies Act, or any other act identified by the Minister shall not apply to ISMO to the extent that any contrary arrangement is provided for in this Act; or the relevant minister responsible for such act has issued a declaration under subsection (2).
The Minister may from time to time and when considered necessary, at the sole discretion of the Minister, request the minister responsible for the Companies Act, or any other act identified by the Minister not to be applicable to ISMO.
The request issued in terms of subsection (2) must be appropriately motivated to the relevant minister or other responsible authority, for such act.
The financial year of ISMO shall be from l April in any given year to the end of March the following year.
ISMO's books of account shall be audited in compliance with the Public Finance Management Act and/or such other legislation as is applicable in relation to the audit of the books of national public entities, for as long as ISMO remains to be a public entity.
Subject to the provisions of section 3, the Board is responsible for managing the business and affairs ofthe ISMO.
The Board shall consist of a minimum of seven and a maximum of nine members.
The members of the Board shall be appointed by the Minister from a short-list of candidates presented to the Minister by the Chairperson of the nominations committee in terms of section 8.
The Minister must appoint one member of the Board as the Chairperson.
The Board must elect a Deputy Chairperson from among the directors.
A director shall hold office for a maximum period of four years at a time, provided that they may be reappointed by the Minister to ensure continuity and maintain expertise, but may not serve for more than a maximum of eight consecutive years.
The term of office of non-executive directors terms shall be rotated and staggered in order to ensure efficiency and continuity in that only a minority of the directors term of office ends at the same time.
A director is appointed on such terms and conditions and is entitled to such remuneration as the Minister may, with the concurrence of the Minister of Finance, stipulate in that member's letter of appointment.
Whenever a position on the Board becomes vacant, the Minister may appoint any person to serve as interim Board member until such time as a replacement director has been nominated and appointed in terms of section 8.
(1 0) The Minister may extend the term of office of a non-executive members of the Board upon the expiry of their terms of office for such period as may be necessary to finalise the appointment of new Board members in terms of section 8.
if the member fails to attend five consecutive meetings of the Board without a valid explanation; or on good cause shown.
8.(I) Whenever a vacancy of a non-executive member of the Board occurs, the DirectorGeneral shall as soon as possible by notice in the press invite nominations for candidates to be appointed as non-executive directors to the ISMO Board.
As soon as possible after the closing date for nominations referred to in subsection (1), the Director-General shall call together an ad-hoc nomination committee consisting of representatives of the Department, the · National Treasury, and any other department that the Director General may recommend to the Minister to compile a short list of candidates who have skills in the areas referred to subsection (2).
The nomination committee shall be chaired by the Director General.
The nomination committee shall strive for a unanimous decision in compiling a short list of candidates but in the event that this cannot be achieved the Director General shall have a deciding vote in addition to a deliberative vote.
The Director General shall submit the short list of candidates compiled in terms of subsection (3) to the Minister who shall select a candidate from such list for each vacancy on the Board.
A person may not be appointed or remain a director if such a person is disqualified in terms ofthe Companies Act.
A member of the Board must, upon appointment, and whenever such member's interests changes, submit to Board a written statement in which that member's interests in any other business are declared, and whether he or she has any direct or indirect financial interest in the business of ISMO which could reasonably be perceived to be a conflict of interest.
A member of the Board may not be present at, or take part in, the discussion of or the taking of a decision on any matter before the Board in which that member or his or her family member, business partner or associate has or is perceived to have a financial interest.
If any member of the Board acquires an interest that could reasonably be expected to be an interest contemplated in this section, he or she must immediately in writing declare that fact to the Board.
If an organisation or enterprise in which a member of the Board has an interest contemplated in subsection (2) offer its services to ISMO, the organisation or enterprise must immediately, in \Vriting, declare the member's interest to the Board.
must establish an audit committee and such other committees as required by the PFMA and other applicable legislation.
A committee may be established as a permanent committee or an ad hoc committee.
be chaired by a member appointed by the Board.
Committees will not have executive powers unless the Board delegates any of its powers to the committee; or legislation requires that such power should be exercised by the committee.
the procedures for its meetings; and the frequency of meetings, provided that standing committees must meet at least twice in each calendar year.
Committee members who are not Board members may be remunerated on the basis determined by the Minister with the concurrence of the Minister of Finance.
identifY functions intended to be delegated to management and provide a framework for appointing senior staff for the Agency; and deal with any other matter that may be prescribed.
The Charter must be submitted to the Minister before it is finalized in order to allow the Minister to comment on its contents.
The Board must summarise the Charter in the annual report and review it at least every three years.
13 .(1) The Board shall, subject to the prior approval of the Minister, appoint a Chief Executive Officer, Chief Financial Officer and Chief Operating Officer.
Whenever a vacancy for the position of the Chief Executive Officer occurs, the Chairperson of the Board must invite applications for the posts contemplated in subsection by advertisement in a national newspaper.
A person appointed as Chief Executive Officer, Chief Financial Officer and Chief Operating Officer must have qualifications and experience appropriate to the functions of ISMO and the position applied for; and may not be a person disqualified from holding position of trust or a person who would not qualify to be appointed as a director of a company in terms of the Companies Act.
(4)(a) The appointment of the Chief Executive Officer, Chief Financial Officer and Chief Operating officer is subject to the conclusion of a contract for a specific period of time not exceeding five years on such conditions, including conditions relating to remuneration and performance incentives, as the Board may determine.
The Chief Executive Officer, Chief Financial Officer and Chief Operating Officer may with the prior approval of the Minister be reappointed for a further periods not exceeding five years at a time, provided that he or she may not serve for a period of more than ten successive years.
The non-executive members of the Board shall appoint a person to serve as the acting Chief Executive Officer until such time as a Chief Executive Officer is appointed: Provided that the acting Chief Executive Officer may exercise all the powers, duties and functions assigned to the Chief Executive Officer in terms of this Act.; and the acting Chief Executive Officer shall designate persons to respectively act as Chief Financial Officer and Chief Operating Officer until such time as a Chief Financial Officer and Chief Operating Officer are appointed in terms ofthis section.
ensure that all information required for the Board meetings has been made available to the Board in appropriate time for such meetings; and at the request of the Board, attend Board meetings (together with such other officers of ISMO as may be required for such meetings) in order to assist the Board with its deliberations, provided that the CEO and any such officers shall not thereby have any powers to vote in the meetings.
The Board shall, in accordance with and subject to the applicable laws including the Public Finance Management Act, delegate and assign to the Chief Financial Officer such of his or her powers and duties as may be necessary to enable the management of ISMO based on a delegation policy and framework pre-approved by the Board ofiSMO.
The Chief Executive Officer may, in accordance with a human resource, remuneration and service benefit structure approved by the Board, enter into employment or other agreements with persons for the performance of specific duties or the provision of specific services as may be necessary for the proper discharge of ISMO' s functions.
With respect to the Integrated Resource Plan (IRP), the Minister may require ISMO to provide assistance for the purpose of developing, implementing, and monitoring the IRP.
perform a short term, day to day, week to week, load forecast as an input into the short term energy and capacity planning functions; and develop generation integration agreements that specify the technical requirements that must be met by all generators above a threshold size determined by NERSA, including information to be included such as protection, metering, control, communication, var/voltage control and maintenance scheduling requirements.
develop a risk management policy and associated implementing procedures to ensure that risks associated with the purchase and sale of energy, capacity or other products are addressed, including currency exchange and price risk; and develop and implement capacity and energy supply tariffs for all sales to ISMO Customers.
ISMO shall be accountable for the proper execution of the functions referred to in sections 16 to 18.
(2)Notwithstanding the provisions of subsection (I), the Minister may, in consultation with Cabinet transfer the functions referred to in section 16 to 18 to ISMO by notice in the Gazette. The functions referred to herein may be transferred through a regulation specifying the process to be followed by both Eskom and ISMO.
The State, represented by the Minister, may grant loans to ISMO from moneys made available by Parliament for that purpose.
ISMO will pay interest on such a loan at a rate determined by the Minister acting with the concurrence of the Minister of Finance, and must repay the loan in line with the arrangements agreed with the Minister.
(l)(a) Not later than 30 days before the end of each financial year ISMO must submit its business and financial plan for the following financial year to the Minister for approval.
Notwithstanding, the business and financial plan for ISMO's first financial year must be submitted to the Minister for approval within 90 days after the incorporation date.
any other information and particulars that may be prescribed; and any additional relevant information that may be requested by the Minister in writing.
(3)(a) ISMO must submit to the Minister for approval, not later than 30 days before the end of its financial years and of every financial year thereafter, a strategic plan covering the period of five years commencing on the first day of the firstfollowing financial year concerned.
A strategic plan must be annexed to ISMO's business and financial plan for any financial year which is also the first year ofthe five-year period to be covered by the strategic plan.
Notwithstanding the provisions of any law, ISMO may not at the instance of any person other than the government be placed under judicial management or in liquidation except ifauthorised by an Act of Parliament adopted specifically for that purpose.
such other funds and assets as may be approved by the Minister after consultation with the Minister ofFinance.
The funds and assets of ISMO may only be used for the performance of its functions and activities related thereto.
ISMO may not dispose of the majority of its assets or such part of its assets as would have a significant impact on the ability to perform its functions without the prior approval of the Minister of Finance.
All of ISMO's normal costs shall be recovered from tariffs, rates and charges to ISMO Customers, provided that ISMO shall only not be allowed to recover a tariff, rate or charge to the extent that it is not prohibited by legislation or regulation from levying such tariff, rate or charge.
In the event that an ISMO Customer does not pay any tariff, rate or charge due, and notwithstanding ISMO's remedies in law, ISMO may, notwithstanding any provision in any law to the contrary, refuse to provide part or all of any services to such customer until all outstanding arrears, including administration fees, collection costs and legal fees, have been paid by such customer.
provide security for money thus borrowed or raised.
may at all reasonable times enter any premises to which electricity is or has been supplied by ISMO, in order to inspect any lines, meters, fittings, works and apparatus belonging to ISMO, or for the purpose of ascertaining the quantity of electricity consumed, or where a supply is no longer required, or where ISMO may cut off the supply, for the purpose of removing any lines, meters, fittings, works and apparatus belonging to ISMO.
Any person wishing to enter any premises in terms of subsection (1) shall if possible, make the necessary arrangements with the legal occupant of the premises before entering such premises and shall adhere to all reasonable security measures, if any, of the occupant or owner of the premises; and exhibit his authorisation at the request of any person materially affected by his activities.
Damage caused by such entry, inspection or removal shall be repaired or compensated for by ISMO.
All borrowings effected by ISMO and any interest or other costs due or to become due in respect thereof, unless otherwise agreed between ISMO and the lender, shall be a first charge against all revenues and assets of ISMO and on all moneys recovered or to be recovered by it.
(2)(a) If any interest due in respect of any securities remains unpaid for three months after demand therefor in writing has been lodged with ISMO, the holder thereof may apply to a high court having jurisdiction for the appointment of a receiver of the revenues and assets referred to in subsection (1).
make such order and give such directions as in the circumstances it may deem necessary for the raising and payment of the moneys due; and in particular, order that any prices of electricity supplied or to be supplied be increased to meet the deficit, and the exercise of such order does not require the sanction of any authority.
If such default in payment of interest in whole or in part continues for a further period of three months, the holder of the securities may apply to a high court having jurisdiction for a declaration that the outstanding principal sum for the time being has become due, and the court may make such declaration, together with any consequential order or declaration.
In the event of default in payment of the principal sum of any security for one month after the date on which it is repayable, the provisions of subsections (2) and (3) apply with the necessary changes.
(l)(a) Eskom Holdings shall upon commencement ofthis Act, and within the time period determined by the Minister by notice in the Gazette, compile a list of all the fixed property and other real rights in fixed property, movable assets, intellectual property and all liabilities, rights and obligations arising from or relating to or attributable to the functions performed by Eskom immediately prior to the commencement of this Act and that can legally be transferred, ceded or assigned to ISMO in order that it can perform its functions as set out terms of this Act, including the values applicable to each asset, right liability or obligation, and provide such list to the Board for its consideration.
The Board shall consider the list provided in terms of paragraph (a) and may consult and negotiate with the Eskom Holdings Board thereon with a view of obtaining a comprehensive list of all assets, rights, liabilities and obligations arising from or relating or attributable to the functions that will be the responsibility of ISMO in terms of this Act, their associated values, and whether such assets, rights, liabilities and obligations can be transferred, ceded or assigned to ISMO.
Upon agreement between the Board and the Eskom Holdings Board as to the contents of the list and the values as contemplated in subsection (1), the The Minister may determine by notice in the Gazette that the fixed property, servitudes and other real rights in fixed property, movable assets, intellectual property and all liabilities, rights and obligations set out in such list, with effect from a date specified in such notice, be transferred, ceded or assigned to ISMO from another organ of state organ, after consultation with such organ of state.: Provided that in the event that no agreement is reached between the Board and the Eskom Holdings Board within a reasonable time, the Minister shall finally determine the fixed property, servitudes and other real rights in fixed property, movable assets, intellectual property and all liabilities, rights and obligations and corresponding values to be transferred, ceded or assigned to ISMO; and different vesting dates can be determined by the Minister for different assets, rights liabilities and obligations to facilitate the phasing in of functions by ISMO in terms of section 20(2).
(2)(a) Any reference to such organ of state in the patents register, trademarks register, designs register, deeds register or any other register is with effect from a vesting date contemplated in subsection l(c) deemed to be a reference to ISMO.
Notwithstanding the provisions of section 5 of the State Land Disposal Act, 1961 (Act No. 48 of 1961), and the provisions of the Deeds Registries Act, 1937 (Act No. 47 of 193 7), a registrar of deeds referred to in section 1 02 of the latter Act must, on submission of a certificate by the Minister that land, servitudes, real rights in land or leases have vested in ISMO under this section, make such entries and endorsements free of charge as the registrar considers necessary in any appropriate register in order to register the transfer thereof in the name ofiSMO.
· (3) Notwistanding any provision in any other law to the contrary, ISMO and such organ of state shall be exempt from any value-added tax, donations tax, capital gains tax, provincial or municipal fees or taxes, stamp duties, transfer duties or registration fees payable in terms of any law in relation to the transfer of anything specified on the list.
After the transfer of any of the function to ISMO in accordance with section 19, ISMO has six months to acquire the required licence in terms of the Electricity Regulation Act. The Minister may extend the period through a notice published in the government gazette.
The Minister may by notice in the Gazette, make any regulation necessary to facilitate the establishment and operation ofiSMO.
This Act is called the Independent System and Market Operator Act, 2011, and comes into operation on a date fixed by the President by proclamation in the Gazette.