Cloud over power plan

Representatives of private companies, such as Xstrata and AngloAmerican, and some of South Africa’s largest energy users have been seconded to develop the country’s new integrated resource plan (IRP), sparking concerns of serious conflicts of interest.

But the Department of Energy is adamant there is nothing to be concerned about, and that the individuals who will develop the document have been appointed for their knowledge and expertise.

The Mail & Guardian understands that the panel also includes Eskom employees and a representative from the mining giant, BHP Billiton. Government representatives include the Director General of the Department of Energy, Neli Magubane, and her Deputy Director General, Ompi Aphane. There appear to be no representatives from departments such as the Treasury or public enterprises.

The last IRP process came under fire after a brief three-page document, widely criticised by industry experts, business and civil society, was rushed through on the last day of the year and published in the Government Gazette.

The government intends to publish the new IRP (or IRP2), which is intended to underpin the country’s electricity plans, later this year. But observers say the process will have to be transparent if the government wants access to World Bank funding.

There are further concerns that the Energy Department does not have the capacity to develop such a plan and has effectively had to outsource it. Individuals appointed to the team have been required to sign non-disclosure agreements.

The department has the task of developing IRP2 for submission to the inter-ministerial committee on energy, chaired by Barbara Hogan, the minister of public enterprises, before it is presented to the public for consultation.

Threatened by conflicts of interest
There is concern that the process, which the government promised would be transparent, is being threatened by conflicts of interest because of the positions of those appointed.

Both Xstrata and AngloAmerican have significant coal operations in South Africa and Xstrata has said it may build its own power station. BHP Billiton operates energy-intensive aluminium smelters in Richards Bay.

In January the M&G reported on a leaked version of an IRP originating from Eskom.

In the run-up to the public hearings on Eskom’s recent tariff applications, the WWF objected strongly to the manner in which the initial IRP process had been handled, noting that the first IRP effectively rubber-stamped the leaked IRP draft and “consisted of little more than an extract from one of the tables in that document, with the addition only of modification to the energy savings expected under Eskom’s demand-side management programme”.

The development of the IRP2 is being closely watched, particularly as the final document will influence foreign investment in the energy sector.

IRP2 is meant to be released for general public comment by June after internal consultations with government, labour, business and civil society stakeholders.

The Energy Department emphasised that the development of IRP2 would involve extensive stakeholder consultation.

“It is against this background that we have drawn experts from industry and academia to assist the department in developing some of the technical parameters required in such a process,” department spokesperson Bheki Khumalo said.

“We must stress that this is not a process that replaces the broader consultation process. A stakeholder engagement process will start in earnest in April, at which time an opportunity will be given to all participants to make input—”

Referring to possible conflicts of interest, he said: “We believe that this concern is misplaced because, generally, almost all stakeholders do have specific interests and this is balanced out if everyone gets a fair chance to make inputs. The team that assists the department is balanced and is not dominated by any one interest group.”

The panel included David Macata from the National Union of Mineworkers, Khumalo said.

The department said there was “no sinister reason” behind the non-disclosure agreements. It was just that the process required the sharing of commercially sensitive information.

Independence
Xstrata defended the involvement of its employee, Mike Rossouw, a managing director at Xstrata Alloys, and said it in no way compromised the independence of the panel.

The company said Rossouw was wholly removed from the workings of its core arm of the business, Xstrata Coal.

“Xstrata’s consideration of its own power station is purely for the purposes of meeting the needs of its ferro-alloys operations due to Eskom’s inability to meet demand,” it said in a statement to the M&G.

“[Rossouw’s] involvement in the DoE’s [Energy Department’s] team of experts is purely based on his extensive experience and expertise, and Xstrata’s willingness to assist the government to mitigate risks that are threatening the economy, in particular the mining sector.

“The DG [director general] of the DoE is leading a team to develop a technically competent IRP2 for submission to the inter-ministerial committee meeting prior to its release for public comment,” it said.

“The DG approached various experts and consultants in finance, supply and demand from within the industry to support the DoE in drafting the above mentioned IRP.

“The DG invited individuals based on their knowledge and experience to serve in their personal capacity as experts and [they] cannot, nor do they, represent any particular constituency.

“It is Xstrata’s general approach to work proactively with stakeholders, including the government and this is one of those cases.”

Similarly AngloAmerican said: “The DoE has approached knowledgeable individuals within a number of organisations, including AngloAmerican, to support them in drafting their submission in their personal capacities subject to signing non-disclosure agreements with those individuals.”

Ian Langridge, Anglo’s global energy head, is on the panel. He also chairs the Energy Intensive Users Group.

Peet du Plooy, the trade and investment programme adviser at the WWF, called for an energy planning process “that is transparent, with participation by all stakeholders”.

“It is not clear how companies who are either major suppliers to the electricity system in the form of coal or major clients of the electricity system in the form of mines and energy-intensive minerals processing would be able to provide unbiased advice that is best for the country, rather than best for a narrow set of interests,” he said.

The Department of Public enterprises said that the report of the technical task team would be “subject to layers of scrutiny both within and outside of government”. It would be assessed by senior officials of several ministries who were part of an inter-departmental task team that fell under the inter-ministerial committee. In turn, the report would be reviewed by the “several ministers who participate on the committee”.

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