From Russia, with Liability

The minister of Energy signed an agreement with Russia in September 2014. More recently made a ministerial determination to allow Eskom to go ahead with the procurement of nuclear plants for South Africa.  The National Energy Regulator of South Africa (NERSA) had concurred with this determination.  I sat in for the final day of the three day high court hearings questioning the legality of these dealings.

Drawing of advocate Oosthuisen arguing before the high court, with advocate Unterhalter and assistant

Advocate Oosthuisen driving home a point

The morning was taken up by Advocate Andre Oosthuisen defending the government actions, with Judges Lee Bozalek and Elizabeth Baartman interrupting occasionally with clarifying questions and cutting observations.  In the afternoon, Advocate David Unterhalter gave a rebuttal to Oosthuisen’s points.  Oosthuisen took the approach of  minimising the importance of the steps government had taken, at times overdoing it to the visible irritation of the judges.  Unterhalter had a more gentlemanly demeanour, although he did not pull any punches, and several times described the arguments of his ‘learned colleague’ as ‘untenable’.

In broad strokes…
SAFCEI and Earth Life Africa Johannesburg (ELAJ) were asking the court to set aside the agreement with Russia, the ministerial determination, and also NERSA’s concurrence.  They claimed that the Russian agreement should have been debated in parliament, and that NERSA should have held a full public participation process, as opposed to ‘rubber stamping’ the ministerial determination.

The court room was small, and only about half full.  The front row was reserved for the advocates and their assistants, with the instructing attorneys in the row behind them.  At the back were a handful of members of ELAJ and SAFCEI, and two reporters (and myself) sat in the side benches.

From Russia with Liability…
The agreement with Russia is a seven page document, and contains a few disturbing elements.  Firstly, it guarantees that South Africa (i.e. the South African taxpayer), will be liable for any damage caused by a nuclear incident, including any accident during the transport of nuclear fuel.

Russian agreement holds no financial implications?
The agreement also appears to commit South Africa to purchasing 9.6GW of nuclear power based on the VVER technology of Rosatom.

Oosthuisen attempted to persuade the court that this agreement carried no monetary implications for South Africa, and therefore the plaintiffs had no standing in court as their rights were not directly affected.  Judge Bozalek wryly asked if there was also no potential effect to their rights that could occur in the future, to which Oosthuisen bravely replied ‘No’.

In his rebuttal, Unterhalter easily demolished this point of view, partly by pointing out that committing to a nuclear build was an allocative decision, and held an opportunity cost to the country, and hence its citizens.  Secondly, he pointed out the massive cost that could result from an accident while transporting nuclear fuel, even if this occurred in Qatar while nuclear fuel was en route from Vladivostok.

Minsterial determination…
In 2013, the Minister of Energy issued a determination to the Department of Energy (DoE) to proceed with the nuclear build.  It specified that a special purpose vehicle must be created to procure the nuclear plants.  In December 2016, the new Minister of Energy issued another determination, just before the first court appearance.  This was similar, but this time specified that Eskom would be the procurer of the nuclear plants.  Oosthuisen argued that the 2016 determination was therefore just a minor amendment to the 2013 version, and hence did not warrant in depth consideration.  He went so far as to say it would have been irrational for NERSA to not concur with the 2016 version, since it concurred in 2013.  To me, it seems on the contrary that it would be irrational not to reconsider when the energy landscape and demand forecasts have changed so dramatically.

NERSA and Administrative Justice…
NERSA is bound to hold a public participation process for all decisions it takes. This is clearly laid out in the Electricity Regulation Act (ERA) and the Promotion of Administrative Justice Act (PAJA).

Oosthuisen attempted to explain to the court that this should not be applied to ‘each and every decision’ of NERSA, for example it would be silly to consult the public when deciding the date of their next internal meeting.  Line drawing of Judge Bozalek in the High CourtThen he tried to stretch this to include the approval of the ministerial determination.  Judge Bozalek interjected that before decisions are taken by NERSA on tariff increases, there are radio announcement of a public participation process.  He added that it seemed that there was an ideal opportunity for NERSA to at least invite written comments before concurring with the determination to procure nuclear power.

Is NERSA independent?
Oosthuisen also attempted to make the point that since NERSA was appointed by the Minister of Energy, there was an obligation on their part to support her policy decisions, and hence to concur with the determination.  Bozalek pointed out that the individual regulatory members of NERSA were required to be ‘independent’, and appeared unimpressed with Oosthuisen’s thin argument that the board collectively was not required to be independent, just the members individually.  Judge Baartman also spoke out, saying that NERSA “cannot come to the party with a rubber stamp”.

Unterhalter takes the floor…
Unterhalter took issue with the suggestion that the decision to concur with a nuclear build was not something that required public participation.  This decision was not something as minor as ‘the date for the office Christmas party’ he said, and as it was committing South Africa to a nuclear future it was in ‘in the heartland of the decision making powers of NERSA’.  He put it to the judges that despite the ‘contortions of my learned colleague’ this was indeed a major decision by NERSA, and hence should have been subject to public participation.

Unterhalter was careful to make it clear he was not saying the decision to go nuclear was correct or incorrect, just that there may have been those in South Africa who could have offered technical input on the decision, and also those who may just have wanted to have their opinion heard.  In addition, the electricity demand forecasts at the time of the 2013 determination turned out to be very significantly too high, and therefore NERSA should have taken this into account and reconsidered the matter in 2016.

Judgement reserved…
It was clear that Judge Bozalek was sympathetic to some of Unterhalter’s points, but also had reservations as to the negligible effect some declaratory orders would have.  For example, if he declared the ministerial determination invalid, it would be likely that the Minister of Energy would simply immediately issue another one which corrected any flaws.

In summary, Unterhalter’s point was that the decision to proceed with nuclear power was something that should pass through the ‘gateway’ of public participation, while Oosthuisen said that this was not a final step, and those with a ‘bee in their bonnet’ who were against nuclear power could object at a later stage, such as when a licence to operate the plant was requested.

Judgement was reserved.

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