Version 26-6-01


DME Comments/Position

Recommendations to the PPC



General Statement on Regulatory Certainty and Independence: Shell

Regulatory certainty and independence are two key requirements for investor and consumer confidence in any industry, particularly a pioneering one such as the emerging gas industry in South Africa. The level of regulatory certainty and scope for intervention by the Minister of Minerals and Energy ("the Minister") should therefore be subject to the legislative procedures currently entrenched in South Africa’s Parliamentary process. This process ensures that the constitutional objectives of openness and transparency are upheld and ensures extensive parliamentary participation in any changes to legislation and in the appointment of candidates to the regulatory authority.

In particular, it is proposed that:

  • further to clauses 5, 6 and 7 of the Bill, any appointments or decisions that influence the constitution of the Gas Regulator, should be made by the Minister from a list of candidates selected by the Portfolio Committee after calls for public comment;
  • further to the provision in clause 20 (1), the Minister should consult with the Gas Regulator before directing that a licence be issued to a State-controlled entity responsible for the establishment and operation of a specified gas transmission pipeline, and that the Minister should also consult with the Portfolio Committee after the latter’s consultation with stakeholders of the proposed transmission pipeline;
  • the consultation required by the Minister pursuant to clause 34 (2) prior to promulgating any regulations contemplated in clause 34 (1) should be expanded to include consultation with the Portfolio Committee after the latter’s consultation with the Gas Regulator and stakeholders likely to be affected by the proposed regulation or regulations.

Acceptance of the recommendations above will enhance the desired independence of the Gas Regulator and enhance both regulatory certainty and confidence in the legislative process because of greater consultation with the Portfolio Committee and stakeholders




See remarks under each of the relevant sections.












































See recommendations under the relevant sections.

Section 4 Sundry: Eskom

This section is peremptory by use of the word "must". While it applies appropriately to most of the provisions set out thereunder, the wording should be reviewed in respect of:

  • sub section (a) – the Regulator should have an obligation to consider applications and issue licences if appropriate, and not have an obligation to issue a license;

  • sub section (d) – this should read "undertake investigations and enquiries into the activities of licensees if deemed necessary."
  • sub section (e) – this is too wide in its existing format;



The sub-section refers to "licences" in general and not to a specific licence.


This is also a general duty.


There seems to be no point in limiting the bodies that the Regulator may consult with in the future












No change recommended.

Section 4 Sundry: Shell

4. The Gas Regulator must, in accordance with this Act—

(a) issue licences for—

(i) construction of gas liquefaction, re-gasification, transmission, storage and distribution facilities;

(ii) conversion of infrastructure into liquefaction, re-gasification, transmission, storage and distribution facilities;

(iii) operation of gas liquefaction, re-gasification, transmission, storage and distribution facilities; and

(b) gather information relating to the production, liquefaction, re-gasification, transmission, storage, distribution and trading in gas;

(f) consult with government departments and gas regulatory authorities of other countries to promote and facilitate the construction, development and functioning of gas liquefaction, re-gasification, transmission, storage and distribution facilities and services;


"liquefaction, re-gasification," inserted in each of these sub-sections. No objections.

















Accept the changes.

Section 4.(a)(iii): Petronet

The need to licence the operation of transmission pipelines is not understood. In the case where the operator is also the owner then licensing conditions will be achieved vide the owner. Where the operator is not the owner a commercial contract between owner and operator will govern the activities. The introduction of any licence conditions outside of this contract will in our opinion lead to confusion and conflict. The onus to ensure that the operations contract terms and conditions are consistent and compliant with all codes, regulations and licence conditions must remain with the owner.



The Gas Bill wording allows for:

    • the owner operating the pipeline directly;
    • the owner holding the operating licence and appointing a contractor with specific legal responsibilities to operate the pipeline while the owner retains overall legal responsibility (rather like appointing a manager of a mine);











It is recommended that the original wording be retained.

Section 4 (g): Sasol

The Gas Regulator must, in accordance with this Act-

(g) where necessary, regulate tariffs in terms of section 21(1)(n); in the prescribed manner;


  • The Bill stipulates under what circumstances the Gas Regulator must regulate tariffs for consumer protection so the "where necessary" is not necessary;
  • "In the prescribed manner" means that the Regulator must regulate tariffs in accordance with the regulations and is necessary.








Reject the proposals.




Constitution of Regulator: Shell

5. (1) The Gas Regulator consists of five part-time members appointed by the Minister from a list proposed by the Portfolio Committee after calls for public comment.

(2) The Minister, after consultation with the Portfolio Committee, must designate one of the members appointed under subsection (1) as chairperson of the Gas Regulator.

(3) If the chairperson is for any reason unable to perform his or her duties, the other members must choose another person from among themselves to act as chairperson until the chairperson can resume his or her duties or another chairperson is appointed by the Minister after consultation with the Portfolio Committee.

(4) (b) The Minister, after consultation with the Portfolio Committee, may reappoint a member.

(c) If a member of the Gas Regulator ceases to hold office, the Minister may, after consultation with the Portfolio Committee, appoint another person in his or her place for the remainder of the term of office of that member.



In terms of this proposal the Minister will make the appointments and the role of the PPC would be to identify the candidates but it is not clear how this would be done. There is a lack of suitably qualified candidates at this stage and it would seem that initially candidates would have to be trained. This proposal could lead to delays in setting up the Regulator and these delays can be ill-afforded at this stage. This blurs the Constitutional separation of roles of legislation and administration.


















It is recommended that the proposal be rejected.



Section 6: Petronet

The requirements of Clauses 6.(1)(d) & (e) and 6.(2)(a) will in our opinion make it very difficult if not impossible to appoint members who will qualify in terms of Clause 6.(1)(a).



Petronet has identified a real problem but the members could be trained especially as practically all countries (developed and developing) with private gas industries have similar legislative principles to those of the Gas Bill. Consultants could also be used in the initial stages. A far greater danger is regulatory capture and this would occur if these standards were to be lowered. One possible concession would be to allow one or two members to be foreigners but, as most companies involved are international companies, possible conflict of interest would have to be carefully monitored.













It is recommended that the original wording be retained.

Disqualifications and requirements regarding appointment to Gas Regulator: Shell

6. (1) No person may be appointed as a member of the Gas Regulator if that person—

(d) is in the employ of, acts as a consultant to, or has any relationship with any person, firm, association or company engaged in the exploration for gas, liquefaction, re-gasification, production, transmission, storage or distribution of gas or trading in gas, or has any pecuniary interest in any such firm, association or company;

(2) The Portfolio Committee must recommend to the Minister as candidate members of the Gas Regulator, persons who—

(a) have adequate legal, technical, business, economic or other experience relevant to the liquefaction, re-gasification, transmission, storage or distribution of gas or trading in gas;

(4) Before appointing members to the Gas Regulator, the Portfolio Committee must by notice in the Gazette call for nominations from members of the public.










"liquefaction, re-gasification" inserted. Would avoid conflict of interest. No objection.









Experience in liquefaction and re-gasification is not a suitable qualification by itself for members of the Gas Regulator.

This blurs the line between legislation and administration.



Accept the change.














Reject the change.




Meetings of the Regulator: Petronet

The authority vested in the Regulator vide clause 8 (7) b. is of concern. We would propose that mechanisms such as "circulation" be put in place to allow for approval of decisions taken by the Regulator outside of a formal meeting. The mechanism should then be allowed under certain prescribed conditions affecting National interest or Health and Safety.



This provision caters for emergency ad hoc decisions and the necessary safeguards are in place to the satisfaction of the State Law Adviser.







It is recommended that the original wording be retained.



Personnel of Gas Regulator: Shell

11. (5) Notwithstanding subsections (1) and (3), the Minister, after consultation with the Portfolio Committee, may determine that the Gas Regulator appoint or make use of persons employed or contracted by another licensing or regulatory authority falling under the Minister’s jurisdiction.



It is submitted that this is an administrative function – separation of legislation and administration should be maintained.






Reject the change



Funds of the Regulator: Petronet

Clause 12.(b) needs to be clarified. Any consideration of levies based on the Regulators cost structures as mooted in the draft Bill would be unacceptable.


The legislation would be introduced by the Department of Finance and will contain the necessary safeguards developed by that Department.



It is recommended that the original wording be retained.



Reporting by Gas Regulator: Shell

14. The annual report for public entities required in terms of the Public Finance Management Act, 1999 (Act No. 1 of 1999), must be accompanied by information on the

following matters:

(d) the existing position and envisaged commercial developments with respect to the liquefaction, re-gasification, transmission, storage or distribution of gas and the gas trade;



"liquefaction and re-gasification" inserted. No objections.










Accept the change.


H:\bescrom\2001\GAS\GasBill\2001-06-26 Comments on Gas Bill Chapter Two.doc