Central RED hits a brick wall, electricity law to be rewritten

THE country’s biggest regional electricity distributor, Central RED, appears unlikely to be established before the end of the year because of a number of shortcomings in the legal framework.

Concerns raised by the City of Windhoek with Government and the Electricity Control Board (ECB) over its transfer of assets to a new company and a surcharge to be levied by the RED to the City’s benefit, have led to Government deciding to draw up a new Electricity Bill. It was the ECB’s intention to have all REDs established by December.At its monthly council meeting last week, Windhoek councillors met behind closed doors with legal advisors and consultants working on the transformation process to discuss the way forward.It is believed that it could be as much as a year before the City will be ready to transfer its electricity division to the new company, which will be Central RED.It is foreseen that the new Electricity Act will not be enacted before next February.Fears that by handing over its electricity distribution to the new company, the City would lose out on its biggest income earner – the sale of electricity – resulted in a legal tussle with the ECB for nearly a year now.”It is clear that that the decision of Council not to proceed with the establishment of the Central RED Co was a sound one, as the legal framework is not yet in place,” the council noted on Wednesday night.Several legal changes will have to be made before the City says it will be prepared to hand over its electricity distribution.These include Joint Business Venture Regulations which will entitle local and regional authorities to transfer their assets to a company, as well as determine how shares should be allocated, and who the directors should be.These are expected to be gazetted soon.Some months ago, it was decided to amend the Electricity Bill to insert certain provisions which would make provision for the licensing of REDs, give the ECB the power to approve tariffs and introduce a surcharge to be levied by REDs for the benefit of local authorities.Now, a whole new bill will be submitted to Parliament to cover these aspects.The council also gave its approval last month for drawing up a Transitional Agreement that will identify the roles, functions and powers of all the parties involved.It was further proposed that a Project Manager be appointed to take charge of the processes and procedures to establish the Central RED.The end date of the Transitional Agreement will be the effective date on which the Central RED will be fully operational.With the City’s electricity distribution licence lapsing in December, the ECB will have to extend its licence until it is ready to transform to the RED.The City is set to become the biggest shareholder of the RED with around 77 per cent shares.Despite the concerns of the City of Windhoek, which would have counted for other municipalities too, two REDs – Erongo RED and Cenored – started operating on July 1.Along with the oldest RED, Nored, this brought the total number to three.The delay in establishing Central RED will also affect the municipalities of Gobabis and Okahandja, as well as the village councils of Witvlei and Schlip and the Regional Councils of Omaheke and Otjozondjupa.Southern RED has also not yet been established.It was the ECB’s intention to have all REDs established by December.At its monthly council meeting last week, Windhoek councillors met behind closed doors with legal advisors and consultants working on the transformation process to discuss the way forward.It is believed that it could be as much as a year before the City will be ready to transfer its electricity division to the new company, which will be Central RED.It is foreseen that the new Electricity Act will not be enacted before next February.Fears that by handing over its electricity distribution to the new company, the City would lose out on its biggest income earner – the sale of electricity – resulted in a legal tussle with the ECB for nearly a year now.”It is clear that that the decision of Council not to proceed with the establishment of the Central RED Co was a sound one, as the legal framework is not yet in place,” the council noted on Wednesday night.Several legal changes will have to be made before the City says it will be prepared to hand over its electricity distribution.These include Joint Business Venture Regulations which will entitle local and regional authorities to transfer their assets to a company, as well as determine how shares should be allocated, and who the directors should be.These are expected to be gazetted soon.Some months ago, it was decided to amend the Electricity Bill to insert certain provisions which would make provision for the licensing of REDs, give the ECB the power to approve tariffs and introduce a surcharge to be levied by REDs for the benefit of local authorities.Now, a whole new bill will be submitted to Parliament to cover these aspects.The council also gave its approval last month for drawing up a Transitional Agreement that will identify the roles, functions and powers of all the parties involved.It was further proposed that a Project Manager be appointed to take charge of the processes and procedures to establish the Central RED.The end date of the Transitional Agreement will be the effective date on which the Central RED will be fully operational.With the City’s electricity distribution licence lapsing in December, the ECB will have to extend its licence until it is ready to transform to the RED.The City is set to become the biggest shareholder of the RED with around 77 per cent shares.Despite the concerns of the City of Windhoek, which would have counted for other municipalities too, two REDs – Erongo RED and Cenored – started operating on July 1.Along with the oldest RED, Nored, this brought the total number to three.The delay in establishing Central RED will also affect the municipalities of Gobabis and Okahandja, as well as the village councils of Witvlei and Schlip and the Regional Councils of Omaheke and Otjozondjupa.Southern RED has also not yet been established.