Gas Bill submissions: response by Department; Cinergy submission

Meeting report

MINERALS AND ENERGY PORTFOLIO COMMITTEE; ECONOMIC AFFAIRS SELECT COMMITTEE: JOINT MEETING
13 June 2001
GAS BILL SUBMISSIONS: RESPONSE BY DEPARTMENT; CINERGY SUBMISSION

Chairperson: Mr Nkosi (ANC)

Documents Distributed:
Cinergy Global Power Submission
Gas Bill Submissions: Response by Department
Suggested Amendments Submitted by Stakeholders
[documents awaited; will be attached here as and when they arrive]
Gas Bill [B18-2001]

SUMMARY
The Committee listened to the submission of Cinergy Global Power on the proposed Gas Bill. The Department of Minerals and Energy commented on Cinergy’s submission saying that Cinergy's suggestions would not fit into the Bill's framework or facilitate its goals.

The Department presented a response to submissions from Sasol, Shell, Texaco, Petronet, UCT Commerce Department, Suregas, Afrikaanse Handelsinstituut, LP Gas Association, Forest Exploration International and the Institute of Civil Engineering.

Review of the proposed amendments prepared by the Department in response to suggestions by stakeholders was postponed until June 20, pending receipt of requested inputs from certain stakeholders.

MINUTES
Cinergy Global Power Submission
Mr Kevin Chapman noted that Cinergy is a "shareholder driven", 125 year old American company, based in Cincinnati, Ohio. Cinergy is a co-owner, with a South African black economic empowerment consortium, of Egoli Gas (Pty) Ltd ("Egoli"), which is currently exclusively licensed by the Greater Johannesburg Metro Council to supply piped gas in the Johannesburg metro area. In summary, Cinergy, speaking on behalf of Egoli, is essentially concerned with the effects of the Bill on the exclusivity of Egoli's license. This concern also relates to Egoli’s access to high volume/high profit customers, and the possibility of Sasol effectively having been granted a statutory monopoly by virtue of the Mozambique Gas Pipeline Agreement ("the Mozambique Agreement"). Cinergy's submission detailed these concerns, and it suggested amendments to the Bill to deal with these issues.

Discussion
Economic Affairs Select Committee Chairperson, Mr Moosa (ANC), asked where Cinergy received its gas currently, who its customers are, and whether it had requested information concerning the Mozambique Agreement.

In reply Mr Chapman stated that Cinergy receives its supplies from Sasol in order to fulfil its exclusive license to supply piped, rather than bottled, gas in the Johannesburg area (which he noted, responding to a question from Mr Ramodike (UDM), does not extend as far as Secunda). He also indicated that information concerning the Mozambique Agreement had been requested from Sasol, but that it had not been provided due to its supposed "sensitive commercial nature".

In this regard, Mr Chapman said that Cinergy recognises that the Mozambique pipeline must be built, and agrees with the remarks of Mr Lucas (IFP) that a period of exclusivity for Sasol is appropriate given the scope of its investment and risk exposure. However he added that in order for Cinergy and other entities to make a long-term commitment to the South African gas industry it is necessary to determine what the effects of the Mozambique Agreement might be on the gas sector as a whole. Further, he said that if Cinergy can profitably service large commercial customers, then only can expansion of infrastructure to less profitable smaller service users be justified. Hence it is critical to ensure that such commercial customers are not "cherry picked" by Sasol. Mr Chapman insisted that this is only possible if there is greater transparency viz a viz the Mozambique Agreement.

Mr Chapman also noted that Cinergy is not attacking the Bill, but raising issues to facilitate the establishment of a solid regulatory framework which will lead to the development of the gas business in South Africa. He noted that Johannesburg Council regulations effectively function as price controls, thus preventing Egoli from overcharging, notwithstanding its exclusive license.

In addition to members' aforementioned comments and questions, Mr Davidson (DP) observed that the net effect of Cinergy's proposed changes would be to greatly expand the rights of municipalities' licensees, thus changing the functionality of the Bill.

In conclusion, the Chair noted that Cinergy’s submission will contribute to the Committee's consideration and deliberations. The Chair asked Dr Crompton of the Department for comments concerning Cinergy's submission. Dr Crompton explained that more time was necessary to consider the submission in detail, but it seemed the suggestions do not fit into the Bill's framework, or facilitate its goals.

Review of Department Response on Gas Bill Submissions
Dr Crompton presented at length the Department comments on submissions received thus far. Most of the suggestions were not endorsed by the Department.

Before Dr Crompton presented the Department’s document detailing the specific amendments suggested by stakeholders, the Chair suggested that presentation of the White Paper be postponed for a week pending receipt of further input on specific clauses requested from Shell, Eskom, Sasol and other stakeholders. The Committee agreed, and established a 15 June deadline for such submissions, thus giving the Department opportunity before the 20 June Committee meeting to analyse any that are received.

Prior to adjourning the meeting, it was noted that during the next parliamentary session both Committees would be focusing on the Gas Bill and the Mineral Development Bill.