Can mining companies generate their own power without licenses?

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While South Africa's mining industry can derive some encouragement from Minister of Mineral Resources and Energy Gwede Mantashe proclaiming that mining companies can generate their own power without licenses, they would do well to first examine the detail of any legislative amendment that comes into being.

This is the advice of Jason van der Poel, Mzukisi Kota and Alexandra Felekis of Webber Wentzel attorneys.

At the opening of the Investing in African Mining Indaba in Cape Town on Monday, Mantashe said his department "must allow our mining companies to create energies for self-use. You will not need a licence for that, you just generate for self-use and you run ahead."

The attorneys note that, in the written version of Mantashe's remarks, he said that his department, together with National Energy Regulator of South Africa, is in the process of gazetting a revised version of schedule 2 of the Electricity Regulation Act to enable self-generation. This would also facilitate municipal generation options under "distributed generation", as defined in the current Integrated Energy Plan.

"As Eskom continues with the problems, we must have a fail-safe. We must continue to ensure that we get back to the days when we have a surplus of energy and when we get back to that the price of electricity will be pushed down,” Mantashe said.

In an opinion piece released on Tuesday, the three Webber Wentzel experts explain the current state of affairs for mining companies wishing to generate power. They say that currently, 

  • if mining companies wish to generate their own power less than 1MW, then they need to register with Nersa;
  • If they wish to generate their own power greater than or equal to 1MW but less than 10MW, they can do so under the current IRP, but need to get licensed by Nersa;
  • If they wish to generate their own power greater than or equal to 10MW, they would need a ministerial deviation from the IRP and to be licensed by Nersa. This, said the attorneys, could also be enabled through an amendment of schedule 2 of the Electricity Regulation Act to exempt their intended generation facilities from the licensing requirement.

"Miners and industry can derive some encouragement from the Minister’s comments but should examine the detail of any legislative amendment that comes into being as a consequence of the minister's comments in order to be certain," say the attorneys. 

* Compiled by Carin Smith

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