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TRANSMISSION
SA ISMO in current form
deeply flawed
South Africa’s Independent System and Market Operator (ISMO) bill is
intended to help the country create a competitive electricity market and
facilitate further, much needed, new generation capacity.
In its current form it will not achieve these objectives.
U nlike South Africa’s ground breaking integrated resource
plan (IRP2010), this key piece of legislation has not
seen nearly as wide a consultation process. In the
view of research professor at the Energy Institute of the Cape
Peninsula University of Technology, Dr Philip Lloyd, it deserves
greater attention, particularly in light of existing flaws in the
draft bill. “The problem that exists with the bill in a sense might
be because there has been a lack of debate, and such an
important bill has not gotten the public exposure it deserves.”
In September 2012, following a hearing before the
parliamentary portfolio committee (PPC), South Africa’s draft
ISMO bill, which was released during May 2011, was sent back
to the country’s department of energy (DoE) for further scrutiny.
A response is due in December 2012 or January 2013, though
it is believed the DoE may be hard pressed to achieve this
timeframe. One of the key flaws with the ISMO as envisaged in the
draft legislation is that this entity will not own any transmission
assets. While the model of an independent transmission
system and market operator is widely used in Western Europe
and other parts of the world, the way it works there is that the
system operator operates the transmission network, buys
power from independent providers via a bidding process and
sells power to independent distributors via a bidding process.
As envisaged in the draft bill, the ISMO will undertake
planning of transmission and power generation capacity as
it has to procure sufficient energy and capacity to meet load
and transmission system requirements. “In its present form
it will accomplish nothing except to insert another layer of
bureaucracy into an already over-regulated environment,”
Lloyd tells ESI Africa. “It will interfere with operations of the
various parts of the electricity sector, and this proposed
legislation confers powers without conferring responsibility. It
does not achieve its stated objective.”
The stated objective of the bill is to achieve safe, secure
and efficient operation of the integrated power system and
trading of electricity at a wholesale level. However, even its
definition of an integrated power system is extremely fuzzy,
stated in the draft legislation as the power system that is
interconnected to the generation facility, transmission power
system and distribution power system. “This legislation is too
important to have such shoddy thinking as demonstrated here,”
Lloyd says.
He finds little positive in the legislation as envisaged, other
than that it does allow independent power producers (IPPs) to
sell power to it and allows wheeling. One of the cons is that it
adds a layer of bureaucracy between Eskom and the National
Energy Regulator of South Africa (Nersa). “Essentially this
ESI AFRICA ISSUE 4 2012
ISMO entity would have power over everything but no assets
and a company with no assets should not be in business.
There will be generator operators, transmission operators and
distribution operators, all of whom are supposed to do the
ISMO’s bidding, even building new power stations on demand.
This represents a super bureaucracy, centralised planning to a
degree that not even the Soviets considered,” Lloyd says.
In general, based on international experience, the concept
of a neutral electricity broker works, and most of Western
Europe has that model. However, the key difference, which
bears repeating, is that the broker owns the transmission
infrastructure and maintains it. The DoE’s further due diligence
on the ISMO is now considering two scenarios. The first is
that contemplated by the ISMO bill where it does not own the
transmission assets, and the second is a scenario where it
does own the transmission grid.
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