The Largest Nuclear Procurement In SA To Date Is In The Hands of The Western Cape High Court

By Sam Sole & Micah Reddy*

The brinkmanship over Government’s controversial decision to procure up to 9,600MW of nuclear power capacity is set to be exposed in the Western Cape High Court from February 22 to 24.

Two applicants in the case, Earthlife Africa and the Southern African Faith Communities’ Environment Institute (SAFCEI), are challenging Energy Minister Tina Joemat-Pettersson’s determination to go the nuclear route.

 

At stake is the largest procurement in the history of South Africa which could cost upwards of R1 trillion, which is roughly the size of the national budget. Critics warn that this deal has the potential to bankrupt the country and that there is enormous room for high-level corruption.

In terms of the Energy Regulation Act (ERA), the minister is empowered to take such decisions, known as a section 34 determination, regarding the amount and type of South Africa’s future energy supply.

The original nuclear determination was made – in secret – by then minister Ben Martins in 2013 and suddenly gazetted by Joemat-Pettersson in December 2015.

It was this 2013 decision – nominating the Department of Energy (DOE) to procure 9,600MW of new nuclear power – that the litigants sought to have set aside.

They argued that a decision of such magnitude could not proceed without an open and transparent process of public consultation, something the DoE had failed to do.

Earthlife and SAFCEI also wanted the court to declare unlawful a number of international agreements on nuclear energy that the government signed with the US, South Korea and most importantly, Russia.

The agreement signed with Russia in September 2014 is substantially more detailed than those signed with the US and South Korea, and lays out the specific type of Russian technology to be used in the procurement of nuclear power plants. In terms of the agreement, Russia would also be indemnified from any liability arising from a potential nuclear accident.

Earthlife and SAFCEI argued the agreement with Russia was premature as it amounted to the first stages of procurement. They said the detailed nature of the agreement precluded an open, fair and transparent procurement process and appeared to suggest the outcome was predetermined to favour Russia.

There was a sudden twist when the parties met in court for the first time in December 2016.

On December 13, the first day of the hearings, the government’s legal team revealed that Minister Joemat-Pettersson moved the goal-posts by purporting to issue a brand new determination which would shift the responsibility for procurement from the Department of Energy to Eskom. The determination was published the following day.

By appearing to replace the original determination that the applicants were challenging, this new 2016 determination derailed proceedings. Earthlife and SAFCEI requested a postponement to address the new determination, which was granted along with a cost order against the minister.

In the meantime, Eskom has forged ahead with a Request For Information (RFI) for the 9,600 MW nuclear programme. The power utility describes this as a “stand-alone information-gathering exercise”.

Joemat-Pettersson has submitted an affidavit for this week’s hearing in which she records the process that led up to the revised 2016 determination.

The minister’s affidavit states that in September 2016 she received legal advice which prompted the decision to issue a new determination designating Eskom as the procuring agency instead of the DoE.

However, the legal opinion itself was not submitted to the court.

Earthlife and SAFCEI now argue that the timing of the legal advice and the determination that followed suggest a deliberate attempt to throw a spanner in the works and side-step legal proceedings.

In their final court papers they note: “It seems then that the 2016 Determination was a deliberate attempt by the Minister to avoid the clear issues identified in the applicants’ papers, although this has not been acknowledged.”

Joematt-Pettersson’s papers claim the advice from her lawyer was to the effect that the DoE was not allowed to procure on behalf of other state entities, such as Eskom, without their consent.

It was then supposedly indicated by Eskom that it would not consent to the DoE procuring on its behalf.

Earthlife and SAFCEI question why the minister did not take Eskom to task for its refusal to cooperate, but instead rewarded the company by making it the procuring authority, despite outstanding questions as to how the troubled utility would afford this hugely expensive project.

Joemat-Pettsersson maintains that the 2016 determination “was mainly informed by the same considerations that informed the 2013 determination” and that “no process of public participation and was and is required in respect thereof”.

However, Earthlife and SAFCEI will argue in court this week that the current determination, like the previous one, is unlawful precisely because there was no consultative process undertaken by the minister or the energy regulator, Nersa.

The two NGOs also point out that the minister has “irrationally and unlawfully” based her decisions on an outdated Integrated Resource Plan (IRP), which is supposed to guide ministerial decisions by forecasting energy needs and determining the types of sources from which electricity is to be generated.

The minister based her determination on the 2010 IRP, which calls for a large role for nuclear in the energy mix. But the IRP is supposed to be updated every two years and a subsequent IRP in 2013, which showed a greatly reduced need for nuclear, was shelved.

Earthlife and SAFCEI point out that a public process to generate an updated IRP is underway, and with it an up to date assessment of the need for and cost effectiveness of nuclear, given the renewable energy revolution.

In the circumstances, it is clear, with respect, that the Minister has again unreasonably and irrationally placed unqualified reliance on the IRP2010, and to make matters worse the Minister did so when the Minister knew that the IRP2016 update process was underway, including an extensive public participation process on the IRP2016, and which had indicated a change in approach to nuclear procurement.

Nersa is also criticised for simply rubber-stamping the determinations without fully and independently applying its mind.

Critics say that government is rushing headlong into a nuclear future while ignoring important evidence before it. An example of this is the Ministerial Advisory Council on Energy report which was submitted to the minister in October 2016.

A key finding of the report is that a least cost model does not include new nuclear power stations. “The optimal least cost mix is one of solar PV, wind and flexible power generators,” the report states.

Despite this, Eskom has been reluctant to sign on renewable independent power producers, but has shown determination in pushing for nuclear.

Eskom’s fragile financial position, and the fact that the utility has been beset by political interference and governance problems that saw the resignation of CEO Brian Molefe after being implicated in the Public Protector’s State of Capture report, are added reasons why the decision to make it the procuring agency has drawn criticism.

In November last year ratings agency Standard and Poor’s downgraded Eskom’s credit rating from ‘BB+’ to ‘BB’, maintaining a negative outlook.

The shift of responsibility to Eskom could potentially have implications for Treasury oversight and the cost of electricity for users, yet there is little in the record to suggest that the minister has fully applied her mind to these matters.

Earthlife and SAFCEI are asking the court to force the minister and Eskom to go back to the drawing board by declaring both the 2013 and the 2016 determinations unconstitutional and invalid.

 

*This article was published in the Huffington Post

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