Author: Gary Moore

Date: 1 November 2016 (updated 9 October 2017)

The Electricity Regulation Act, 2006[1] states[2] that[3] no person may, without a licence[4] issued by the Regulator,[5] operate an electricity generation, transmission or distribution facility.[6]

(Generation means[7] the production of electricity by any means; transmission means[8] the conveyance of electricity through a transmission power system;[9] and distribution means[10] the conveyance of electricity through a distribution power system.[11])

The Act states that, notwithstanding its licensing requirements,[12] a person involved in an “activity”[13] specified in a schedule to the Act[14] need not[15] hold a licence.[16]

The schedule contains three items, each mentioning[17] a different activity or “plant:”[18]

  1. Any generation plant constructed and operated for demonstration purposes only and not connected to an inter connected power supply;
  2. Any generation plant constructed and operated for own use;
  3. Non-grid connected supply of electricity except for commercial use.

Item 1 exempts[19] a generation plant constructed and operated for demonstration purposes only and not connected to an inter connected power supply.

It is unclear why item 1 exempts[20] a plant “constructed and operated” for demonstration purposes. The Act only requires a licence to “operate” a generation facility.[21]

It is also not clear why the item exempts generation plants constructed and operated “for demonstration purposes only:” Probably[22] very few[23] generation plants are constructed and operated for demonstration purposes only.

It is also unclear why the item exempts a generation “plant” for demonstration purposes. The Act proper refers to a generation[24] “facility.”

The item exempts a generation plant for demonstration purposes that is “not” connected to an “inter connected power supply.” It is unclear what is intended by an “inter connected power supply:”[25] It could refer to any means of supplying power from a generation plant to a point of consumption in order to demonstrate that the plant functions.[26] But this would require all demonstration plants to be licensed, and reduce the exemption to a nullity.

Item 2 exempts a generation plant constructed[27] and operated for own use.

It is not clear if this item exempts only a generation plant operated for one’s “own domestic” use, or if the exemption extends to plants operated for one’s “own business” use.

It is also unclear if item 2 exempts the operation of a generation plant by a lessee of the plant for “the lessee’s own” use.[28] And it is unclear if item 2 exempts a “grid-connected” generation plant operated for own use.[29]

Item 3 exempts non-grid connected supply of electricity except for commercial use.

But the Act defines[30] “supply” as trading,[31] and trading as the buying or selling of electricity as a “commercial” activity.[32] Item 3 on the face of it might therefore be contradictory. Supply means trade, and trade is synonymous with commerce.[33]

It is thus unclear whether item 3 (which exempts non-grid connected supply of electricity except for commercial use) applies—

Only if no remuneration is receivable by the supplier for the supply to the customer, and only if the supply is for the customer’s domestic use; or

even if remuneration is receivable by the supplier for the supply to the customer, but only if the supply is for the customer’s domestic use;[34] or

only if no remuneration is receivable by the supplier for the supply to the customer, even if the supply is for the customer’s commercial use in his business[35] (provided that the customer does not on-sell the electricity); or

only if no remuneration is receivable by the supplier for the supply to the customer, even if the customer on-sells the electricity; or

even if remuneration is receivable by the supplier for the supply to the customer, and even if the customer on-sells the electricity, but only if the electricity is for the final purchaser’s domestic use.[36]

The exemptions contained in these three items,[37] whether interpreted strictly[38] or benevolently,[39] violate the principle of the Rule of Law that laws should be sufficiently clear[40] that a course of action can be based on it.[41]

A proposal to replace all three exemptions[42] has not been implemented.[43]

[1] Electricity Regulation Act 4 of 2006.

[2] Inter alia.

[3] Electricity Regulation Act s 7(1)(a).

[4] The Regulator is not obliged to issue a licence; may make a licence subject to conditions relating to sundry matters; and may vary, suspend or remove any licence condition or include additional conditions on various grounds.Electricity Regulation Act s 13(4), s 14(1)(a)–(z) and (2), and s 16(1)(a)–(e) and (2).

The unfettered character of these discretionary powers of the Regulator, from the viewpoint of the Rule of Law, have been addressed separately.

[5] The National Electricity Regulator established by the National Energy Regulator Act. Electricity Regulation Act s 1 sv “Regulator” read with National Energy Regulator Act 40 of 2004 s 3.

[6] The term “facility” is not defined.

[7] “Generate” and “generating” have corresponding meanings. Electricity Regulation Act s 1 sv “generation.”

[8] Excluding trading, and “transmit” and “transmitting” have corresponding meanings. Electricity Regulation Act s 1 sv “transmission.”

[9] I.e., a power system that operates above 132kV. Electricity Regulation Act s 1 svv “transmission power system.” (The expression “power system” is undefined.)

[10] Excluding trading, and “distribute” and “distributing” have corresponding meanings. Electricity Regulation Act s 1 sv “distribution.”

[11] I.e., a power system that operates at or below 132kV. Electricity Regulation Act s 1 svv “distribution power system.” (As mentioned, a “power system” is undefined.)

[12] Electricity Regulation Act s 7(1)(a) inter alia.

[13] The term “activity” is not defined.

[14] Electricity Regulation Act, Sched II (Exemption from obligation to apply for and hold a licence).

[15] Apply for or.

[16] Electricity Regulation Act s 7(2).

[17] The three items are reproduced here verbatim.

[18] The term “plant” is not defined.

[19] From the licensing requirement.

[20] From the licensing requirement.

[21] Electricity Regulation Act s 7(1)(a). No doubt a prudent developer would discuss his contemplated construction of a new facility with the Regulator beforehand:

The Act states that nothing in it precludes a potential licensee from discussing the contemplated operation of generation (or transmission or distribution) facilities or any other activity relating thereto prior to filing a licence application with the Regulator. Electricity Regulation Act s 7(3)(a).

[22] One imagines.

[23] If any.

[24] Or transmission, or distribution.

[25] The term “inter connected power supply” does not appear elsewhere in the Act, which refers instead to a “transmission power system” and “distribution power system.”

[26] It is probable that no generation plant can be demonstrated without connection to a consumption point.

[27] The criticism regarding item 1’s exemption from the Act’s licensing requirement, of plants “constructed” and operated for demonstration purposes, also applies to item 2’s exemption, of plants “constructed” and operated for own use. The Act requires a licence merely to “operate” a generation facility.

[28] C. LeLean, 7 Oct 2015, Knowles Husain Lindsay Inc Attorneys News, “In the dark – The licensing provisions in the Electricity Regulation Act as they relate to small scale electricity generation” http://www.polity.org.za/article/in-the-dark-the-licensing-provisions-in-the-electricity-regulation-act-as-they-relate-to-small-scale-electricity-generation-2015-10-07 (accessed 6 Oct 2017).

[29] A popular form of private generation is a grid-tied solar photovoltaic system connected to the utility’s network to allow the operator to alternate between the municipal electricity-generation system and the photovoltaic generation facility. Due to their grid connection these systems might well be excluded from the third exemption, but it is unclear if they could nevertheless fall under the second exemption. LeLean op cit.

[30] Unless the context indicates otherwise.

[31] And the generation, transmission or distribution of electricity. Electricity Regulation Act s 1 sv “supply.”

[32] Electricity Regulation Act s 1 sv “trading.”

[33] See also Black’s Law Dictionary, 6 ed, sv “commerce.”

The context of item 3 may thus indicate that “supply” should not include “trading.” LeLean op cit.

[34] This is arguably the better interpretation of the exemption.

[35] This is a less likely meaning of the exemption.

[36] This is, arguably, the most likely meaning of the exemption.

[37] Electricity Regulation Act, Sched II items 1, 2 and 3.

[38] Where a statutory provision is an exempting section, there must be brought within its operation only such cases as clearly fall within the scope of the language used. SA Army Fund v Umdloti Beach Health Committee [1974] 4 All SA 601 (N) 609E-G per Hoexter J as he then was.

Provisions for exemption from a clause of general application are normally interpreted strictly, although perhaps not invariably so. Hartman v Chairman, Board for Religious Objection and others [1987] 1 All SA 205 (O) 210 per Smuts JP (Van Coller and Malherbe JJ concurring).

[39] In interpreting statutory provisions, in cases of doubt it is presumed that the most beneficial, or least arduous, interpretation is to be preferred: semper in dubiis benigniora praeferenda sunt. See, e.g., Suid-Afrikaanse Geneeskundige & Tandheelkundige Raad v Strauss 1991 4 All SA 554 (A) 563H–J.

Reliance on the presumption can facilitate resort to constitutional values in statutory interpretation. Joubert et al, Law of South Africa, vol 25(1) 2ed, “Statute Law and Interpretation,” LM du Plessis, par 334(c).

[40] Even if that means taking advice, as it usually will.

[41] Lord Bingham (then Senior Law Lord), “The Rule of Law” (Sixth Sir David Williams Lecture 2006, Centre for Public Law, Univ. of Cambridge), first sub-rule. Black-Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG [1975] 1 All ER 810 (HL) 836; R v Goldstein, R v Rimmington [2005] UKHL 63 par [33].

A citizen should be able to have an indication that is adequate in the circumstances of the legal rules applicable to a given case. A norm cannot be regarded as a ‘law’ unless it is formulated with sufficient precision to enable the citizen to regulate his conduct. He must be able – if need be with appropriate advice – to foresee, to a degree that is reasonable in the circumstances, the consequences which a given action may entail. Sunday Times v United Kingdom (1979) 2 EHRR 245, 271, §49.

[42] With seven new items. Govt Notice 1482 of 2 Dec 2016 (Gazette 40464). “Electricity Regulation Act, 2006: Published for public comments: Draft licensing exemption and registration notice.”

[43] As at time of writing.

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Gary Moore

Gary Moore BA LL.B. (Witwatersrand) LL.M. (UC London) is a South African lawyer and Senior Researcher at the Free Market Foundation.

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