Acts Online
GT Shield

Electricity Regulation Act, 2006 (Act No. 4 of 2006)


Electricity Regulations on New Generation Capacity, 2011

9. Concluding the power purchase agreement


(1) A power purchase agreement between the buyer and an IPP must meet the following requirements—
(a) value for money;
(b) appropriate technical, operational and financial risk transfer to the seller;

[Subsection 9(1)(b) substituted by regulation 7(a) of Notice No. R. 1366 of 2016]

(c) effective mechanisms for implementation, management, enforcement and monitoring of the power purchase agreement; and
(d) satisfactory due diligence in respect of the buyer's representative and the proposed seller in relation to matters of their respective competence and capacity to enter into the power purchase agreement.

[Subsection 9(1)(d) substituted by regulation 7(b) of Notice No. R. 1366 of 2016]


(2) Before the buyer concludes a power purchase agreement, the buyer or the procurer must, subject to any approvals required in terms of the Public Finance Management Act, the Municipal Management Act or the Municipal Systems Act, as the case may be—

[Words preceding (2)(a) substituted by section 5 of Notice No. 1093, GG43810, dated 16 October 2020]

(a) ensure that the power purchase agreement meets the requirements set out in sub-regulation (1);
(b) ensure that the buyer has a contract management plan that explains the capacity of the buyer, and its proposed mechanisms and procedures, to effectively implement, manage, enforce, monitor and report on the power purchase agreement and any other agreements relating to a new generation capacity project to which the buyer is a party, to National Treasury and the Minister on a regular basis; and
(c) put in place arrangements to ensure that any portion of the buyer's allowable revenue approved or allocated by the Regulator for purposes of implementation of new generation capacity projects will be used solely for the purpose of ensuring that the buyer's financial obligations in respect of new generation capacity projects will be met.


(3) Should the Minister determine, as contemplated in regulation 6(3), that Eskom should establish new generation capacity as part of its services as the national electricity producer, Eskom will be required to enter into a power purchase agreement with the buyer, unless Eskom itself is the buyer.