Joint Submission to the Parliamentary Portfolio Committee on Minerals and Energy

1. Joint Submission to the Parliamentary Portfolio Committee on Minerals and Energy THE GAS BILL 2001 13 June 2001

2. Content of Presentation • Introduction to Egoli Gas & Cinergy Global Power • Areas of Key concerns • Proposed Amendments to Current Gas Bill

3. Egoli Gas (Pty) Ltd • Established August 2000 • Supplying 13,000 industrial commercial & domestic, customers in Johannesburg • Licensed & Regulated by GJMC • Mission Statement - to expand provision of affordable piped gas throughout the whole of the GJMC area

4. Egoli Gas needs …… • Geographic exclusivity • Single regulatory control • Access to all economic classes of customers • Transparent and equitable rules

5. Areas of Concern 1The Moçambique Gas Pipeline Agreement • Determines the Industry Landscape • Legally problematic • May create a statutory monopoly Relevant Provisions of the Agreement must be disclosed with the Gas Bill

6. Areas of Concern 2Exclusive Geographic Area • Principle enshrined in Government’s Energy White Paper of 1998 • Needed to prevent “Cherry Picking” • Needed for confidence in investment • Ensures delivery of affordable gas to wider community including low volume customers

7. Areas of Concern 3Definitions of Reticulation & Distribution Division / Distribution: are really the same thing Defining them on the basis of an artificial limit is problematic • Dual regulation • Increased costs to customer • Frustrate market growth

8. Production Transmission Distribution Reticulation Gas Eligible Customer > 1 million GJ/annum Operating Pressure > 15 bar 15 bar – 2 bar < 2 bar Class of Customer IPP Steel Works Large industry Large Commercial Domestic Small Business Low Income Households High Volume Low Margin Economic Class High Volume High Margin Low Volume Low Margin ATTRACTIVE ATTRACTIVE UNATTRACTIVE SECTORS PROPOSED IN BILL

9. PROPOSED AMENDMENTS TO THE GAS BILL • Definitions • 1.1 Change definition of “eligible customer” to: • “means a customer who [in the prescribed manner may buy] buys gas, directly from suppliers without the intervention of a distribution • company in a quantity in excess of one million gigajoules per annum, for a single point of ultimate consumption subject to any other • requirements and on terms and conditions that may be prescribed; provided that such eligibility shall be limited to that single point of ultimate • consumption.” • 1.2 Change definition of “reticulation” to: • “means the division of bulk gas supplies and the transportation of bulk gas by pipelines where the majority of those pipelines operate, • generally, at a [with a general operating] pressure of no more than 2 bar gauge to points of ultimate consumption, and any other activity • incidental thereto, and ….” • 1.3 Add new definition of “local government regulation” and define as follows: • “means any licence or similar authorisation issued pursuant to local government legislation by a municipality as defined in Section 155(6) • of the Constitution”. • 1.4    Add new definition of “municipal area” and define as follows: • “means the area within the boundaries of a municipality determined pursuant to the Local Government: Municipal Demarcation Act, 1998 • (Act 27 of 1998)”. •  2.     Conditions of licence • Add new Section 21(1)(n): • “an exclusive geographic area contemplated in paragraphs (j), (k), (l), or (m) shall exclude a municipal area in which gas is distributed, • reticulated or traded subject to local government regulation, and may exclude any other municipal area”. • 3.      Schedule 1 – Exemption from obligation to apply for and hold a licence • Change Item 3 to read: • “Reticulation or distribution or trading in a municipal area where those activities are subject to local government regulation”.

10. Conclusion: • The Bill is undergoing positive development • A couple of Key issues need to be resolved or else … Frustrate promotion of access to gas by the wider community Reduce development of competitive markets for gas and gas services