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PRICING AND ECONOMIC REGULATIONS REFORMS PROJECT (PERR)

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Activities

GAZETTES


Gazette Notice no:1153 of 2015 - Norms & Standards for setting water services tariffs

Gazette Notice no: 1154 of 2015 - Pricing Strategy for water use charges


Calendar

TERMS OF REFERENCE

TERMS OF REFERENCE OF THE PROJECT STEERING COMMITTEE FOR PRICING AND ECONOMIC REGULATION REFORMS (PERR) PROJECT FORMALLY KNOWN AS REVIEW OF THE PRICING STRATEGY FOR RAW WATER USE CHARGES, DEVELOP A FUNDING MODEL FOR WATER INFRASTRUCTURE DEVELOPMENT AND USE AND A MODEL FOR THE ESTABLISHMENT OF AN ECONOMIC REGULATOR FOR THE WATER SECTOR PROJECT STEERING

1. BACKGROUND INFORMATION

DWS is embarking on Pricing and Economic Regulation Reforms in the water sector through a project that will review the pricing strategy, develop an infrastructure funding model and establish or strengthen an economic regulator. It is generally agreed that pricing and economic regulation plays a key role in infrastructure service provision by assuring investments to support socio-economic growth and ensuring that services are widely available and accessible, and priced at levels supportive of current and future needs.

In our context there is also tension between assuring security of supply, adequate investments and quality standards on the one hand and extension of services at subsidized tariff structures on the other.

The Raw Water Pricing Strategy sets out the government’s approach to pricing raw water. This pricing strategy provides, in principle, for full cost pricing for non-agriculture water users, including depreciation and a return on assets. In practice, annual price increases have been capped and hence prices are below full cost for most water schemes. Agricultural water uses, in general, do not pay a return on assets and the depreciation charge is capped. As a result irrigation charges are significantly below full cost. All water users pay a catchment management charge. The water conservation charge (intended to reflect the value of water itself) that is provided for in the National Water Policy has not yet been implemented. The waste discharge charge system, intended to implement the polluter pays principle, has also not yet been implemented. The department is both the price setter as well as the operator of water resource infrastructure.

The current water pricing strategy does not include pricing for water services as this is the mandate of local government. Municipalities (those designated as water services authorities) have constitutional responsibility to ensure the provision of water services within their area of jurisdiction and this must be done in terms of minimum standards defined by national government. Municipalities have the right to set their own water services tariffs, subject to national norms and standards. National government is not able to directly regulate local government tariff levels and can only regulation water services through setting national minimum standards.

2. PRIMARY OBJECTIVES OF THE PROJECT STEERING COMMITTEE

  • To provide strategic direction, vision and guidance in the conceptualisation and finalisation of key areas and outputs of the project.
  • To ensure alignment with the national government objectives and current strategic projects including the National Water Resource Strategy, the Legislative Review and the Institutional Reforms and Realignment.
  • To review and comment on progress made.

3. PROPOSED MEMBERS OF PROJECT STEERING COMMITTEE

Table 1 below give a list and a short summary of proposed members of the PSC.

NAME UNIT RELEVANCE
Mr Helgard Muller Policy and Regulation He is currently Acting DDG-P&R and therefore the project falls under his domain. He will be the Chairperson of the Project Steering Committee.
Mr Trevor Balzer Chief Operations Office He has extensive experience and knowledge on pricing and tariffs determination. Has worked with various users and will add value on giving guidance on strategic direction.
Mr Rashid Khan Western Cape Region Has good knowledge on application of pricing and regulation at regional level. Has previously served on the Regulation Task Team.
Ms Zandile Mathe Infrastructure Branch She is currently Acting DDG Infrastructure and has huge knowledge on the implementation and challenges of the Pricing strategy.
Mr Fazel Ishmael Water Trading Entity He is the custodian of the billing and revenue collection and he is mainly affected by the pricing strategy. He has good knowledge of financing of water infrastructure.
Ms Jenny Evans Regional Coordination Is responsible for local government turnaround strategies. Will bring huge local government experience and latest thinking from COGTA and SALGA.
Mr Ntili Free State He understands regulation of water use and has used Water Users Associations extensively in the Free State. He will also contribute on practical regulation of municipalities.
Mr Fred Van Zyl Policy He is currently a Project Leader for the NWRS and has good knowledge of planning in the water sector-understands water business well.
Ms Debra Mochotli Regulation She is leading regulation for both water resources and water services in the country. Has extensive experience on water use regulation and should have an interest as she is the future home for regulation.
Mr Solly Mabuda/ Mr Johan Van Rooyen Water Resources Planning They are both planning gurus in South Africa with wealth of experience on regional and national planning. They have huge understanding of the future water demands and also the future cost of water in the country.
Mr Nepfumbanda Act DDG P&R : Water Resource Management He is Acting DDG for water resource management –has passion for decentralising water resource management. Also is the custodian of water resource information.
Mr Anil Singh Legal Services He is fairly new in DWS but has good legal knowledge and experience. Guidance on legal is a necessity.
Mr Dhesigen Naidoo Water Research Commission Has extensive experience on pricing and will be a resource in terms of knowledge of the international practises and other studies conducted elsewhere.
Mr Petrus Matji National Treasury He represents the main stakeholder who has interest in the pricing strategy. Has good knowledge of the water sector will be able to provide strategic guidance.
BPR representative Professor Nkondo Mr Modise Ms Barbara Schreiner

4. PROJECT GOVERNANCE

The project will be managed by Mr T Mqina who is at the office of the Chief Director – Institutional Oversights and the project office is to be supported by the Work stream Leaders and DBSA. Technical support will be provided by consultants. Figure 1 summarises the project governance structure.


4.1 There shall be three work streams (Review of the Pricing Strategy, Funding Model and Strengthening of economic regulation) however discussions are taking place that work streamon Pricing and Funding model should be merged-this will be finalised during the first meeting of the Project Steering Committee.

4.2 Each work stream(table 2 below) will be led by two work streamleaders one from DWS and another from the sector. Work streamleaders are selected based on their experience and knowledge of the subject which they lead. Work streamleaders are not full time on the project but they will provide strategic guidance and direction and ensure that the project is on track and within policy framework. Work streamleaders also need to convene work sessions and finalise members of their workstreams. It is anticipated that workstreams will meet on quarterly basis.

WORK STREAM WORK STREAM LEADER INTERNAL WORK STREAM LEADER EXTERNAL TECHNICAL RESOURCES
Pricing Review Mr Fazel Ishmael Agriculture Mr S Machitje Ms S Haswell Mr M Nepfumbada Mr J Van Rooyen
Economic Regulator Ms Debra Mochotli SALGA Ms S Moshidi Mr L Manus Ms E Bofilatos
Funding Model Ms Zandile Mathe Rand Water Mr F Van Zyl DBSA

5. SECRETARIAT

5.1 Secretariat for the PSC and work streams will be provided by DWS Institutional Oversight

6. FREQUENCY OF MEETINGS

It is proposed that the PSC will only meet three times during 2012/2013 financial year.

  • Inception Meeting - March/April 2012
  • Progress Meeting - July 2012
  • Meeting to review document before gazetting for comments - February 2013.

7. CONCLUSION

The members of the PSC have huge responsibility to provide strategic guidance and they have been chosen on the basis of them committing to put national interest over their own individual interest.

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