Regulatory and Literature Review

32 Pages·2014·0.72 MB·English

Regulatory and Literature Review
Promotion of Energy Efficiency in Municipalities

SACN Programme: Sustainable Cities
Document Type: Report
Document Status: Final
Date: August 2014

        
Joburg Metro Building, P O Box 32160, Braamfontein, 2017
Tel: [phone] | Fax: [phone] | email:
----------------------------------------------------------------------------------------------------------------------------- ------------------
CONTENTS
Acronyms 2
Executive Summary 4
1. Background 5
2. Defining the Regulatory Problem 5
2.1. The regulatory question 5
3. The Legislative Framework 7
3.1 Mandates powers and functions 7
3.1.1. The role of national government 7
3.1.2. The role of provincial government 7
3.1.3. The role of local government 7
3.1.4 National and provincial government supervisory role 8
3.2 The regulatory environment 9
3.2.1 Municipal operations 9
3.2.2. Services the municipality sells 11
3.2.3. Areas of municipal regulation 13
3.3 Other areas of regulatory concern 21
3.3.1. Public finance regulations 21
4. Contextualising Regulatory Measures 23
4.1 The cost of compliance 23
4.2. Effects on the poor 24
4.3. The need for conducive internal institutional arrangements 24
4.4. Developing monitoring and evaluation systems 24
4.5 Developing skills and capacity 25
5. Conclusions 26
References 28
Bibliography Error! Bookmark not defined.

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Regulatory and Literature Review
Page 1 of 31
----------------------------------------------------------------------------------------------------------------------------- ------------------
Acronyms
DoE - Department of Energy
DSM - Demand Side Management
DTI - Department of Trade and Industry
EE - Energy Efficiency
EEDSM - Municipal Energy Efficiency and Demand Side Management programme
ERA - Electricity Regulation Act 4 of 2006
ESCO - Energy Service Companies
HVAC - Heating, ventilation, and air conditioning
IDP - Integrated Development Plan
KPI - Key Performance Indicators
MFMA - Local Government Municipal Finance Management Act 56 of 2003
NBRBSA - National Building Regulations and Building Standards Act 103 of 1977
NERSA - National Electricity Regulator of South Africa
RDP - Reconstruction and Development Programme
SABS - South African Bureau of Standards
SACN - South Africa Cities Network
SALGA - South African Local Government Association
SDF - Spatial Development Framework
SPLUMA - Spatial Planning and Land Use Management Act 16 of 2013
SWH - Solar Water Heating

Acknowledgments
Project Team: Michael Kihato, Prof Daniel Irurah, Prof Stephen Berrisford and Saul Roux

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Regulatory and Literature Review
Page 2 of 31
----------------------------------------------------------------------------------------------------------------------------- ------------------
List of Tables
Table 1: Areas influencing Energy Efficiency where municipalities can exercise their legislative powers
Table 2: Green building and solar water by-laws
Table 3: Examples of EE related measures in city SDFs
Table 4: Water and Sanitation By-Law for Nelson Mandela Metropolitan Council

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Regulatory and Literature Review
Page 3 of 31
----------------------------------------------------------------------------------------------------------------------------- ------------------
Executive Summary
The South African Cities Network (SACN) commissioned a project to define a Regulatory Framework to
Promote Energy Efficiency in Municipalities. Part of this process involves a regulatory review on the use of
laws, by-laws and other regulations to ensure the uptake of Energy Efficiency (EE) measures at municipal
level. This is a desktop exercise that looks at literature, legal opinions and laws on EE. Rather than make
exhaustive recommendations on what should be done legislatively, it points out important emerging issues
that are further examined in the case study and gap analysis stages.
It is clear that there are already numerous instruments with legal clout that can be used to ensure that EE
measures are complied with. Additional regulations and by-laws are being formulated by municipalities; an
example is the Green Buildings Development By-law in Tshwane. As a relatively new approach, it would be
interesting to examine whether there are additional benefits of taking this route. Nevertheless, the current
extensive regulatory framework around EE implementation is well supportive of EE at municipal level.
Often the challenges are regulatory, but not because of a lack of regulations. According to the literature,
conservative or wrong legislative interpretation can hamper introduction of EE projects at a municipal level. In
tandem to that, is lack of EE performance based measures for municipal staff. Yet also, some of the laws and
regulations emerging at national level may not be implementable because of problems with the laws
themselves. All this should become clearer from the case studies.
There are also many non-regulatory issues. Important ones include better maintenance of municipal
infrastructure as an effective EE measure as well as better intergovernmental coordination. There are some
important emerging initiatives on intergovernmental coordination, although all indicators are that there is room
for improvement. The report has also shown that while more efficient spatial forms have potential benefits for
EE, this has generally not been an area of emphasis. Indeed, the benefits of spatial interventions are
generally not seen in terms of their EE benefits.
The report shows that regulatory interventions need to be cognisant of some important contextual factors. The
most important of these is the perceived notion of built-in dis-incentives for municipalities to regulate for EE,
related to the threat to revenue sustainability. The literature shows that there are clear counter arguments to
this notion, and the SACN is well poised to champion this debate. Further, there are fiscal instruments that
have been introduced to mitigate these disincentives. An important area of examination and research is an
examination of whether the instruments work in practice. Finally, many EE driven legislative frameworks are
highly technical, and require specialised capacity to implement them. This is not always available at municipal
level.

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Regulatory and Literature Review
Page 4 of 31
----------------------------------------------------------------------------------------------------------------------------- ------------------
1. Background
This review, the first in a series of deliverables for the project, contains a literature scan on how legislative
frameworks are treated by writers when considering EE. It also examines laws, regulations, by-laws and
standards that have ‘legal teeth’ and are used or can be used for energy efficiency. The review also seeks to
understand from the literature, as far as possible, how regulations that are already in place are performing
with regard to EE. From it, two case studies (Cape Town and Tshwane), an identification of gaps and
opportunities as well as an overall synthesis report for specific regulatory interventions on EE at municipal
level would be developed.

2. Defining the Regulatory Problem
2.1. The regulatory question
Substantial work has been done on EE and related topics in municipalities and the intention of this project is
to build on these initiatives. Most of the work done cover aspects of the legislative environment and generally
frame the challenges around it in a number of ways. Firstly, literature points out that it is because local
government has failed to utilise its legislative powers, specifically with regard to creating by-laws, that EE
1 2
measures have found it difficult to gain traction. A 2013 SACN report notes that,
It is interesting to note that although municipalities are empowered to pass by-laws for EE and RE measures, the
preferred approach up to date has been to develop policies, plans and strategies. These policies, plans and
strategies do not impose the same legal obligation as created by by-laws
And continues to add that,
(Municipalities need to) Develop by-laws or regulations – As discussed, although numerous policies and plans
exist showing municipal intent to implement EE and RE initiatives, these do not enforce action. Municipalities
should develop by-laws to enforce implementation of the initiative.
The review has shown that policies, plans and strategies at a municipal level are failing because they are not
supported by the force of law. The City of Tshwane’s actions towards supporting its Green Buildings
Development Policy is often highlighted as an example where a by-law has been used to enforce certain
aspects of the policy.

1
See for example Glazewski, J. and Collier, D. (2013) Achieving climate resilient and low carbon city: a governance framework for this City of Cape
Town; Salga (undated) Status Quo Local Government Energy Efficiency and Renewable Energy Strategy
2
South Africa n Cities Network (SACN). Co nsolidation of the lessons learnt for EE and RE initiatives within cities: development of a roadmap for
future uptake, Report by Aurecon.

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Regulatory and Literature Review
Page 5 of 31
----------------------------------------------------------------------------------------------------------------------------- ------------------
Secondly, reports and legal opinions that point to specific legal problems in implementing EE at assist in
clarifying specific regulatory uncertainties and challenges at local government. The uncertainties include:
3
 Legal barriers for entering into Public Private Partnerships for EE .
4
 How to use the planning regulatory system to ensure EE.
5
 Legal challenges to municipalities facilitating embedded electricity generation.
6
 Legal opinion on the use of by-laws to enforce various EE measures such as solar water heaters and
7
whether approval of national government is necessary when such by - laws are proposed .
8
 The potential role of regulations in land use management in enhancing EE.
 Implications of the Local Government Municipal Finance Management Act 56 of 2003 (MFMA) with
9
regards to municipal building retrofit programmes.
Outside these specific reports and legal opinions, there is broader literature that may highlight a number of
legislative and legal problems at a macro industry wide level , as well as those specific to local government.
The National Treasury and Western Cape G overnment’s Diagnostic Report on Barriers and Challenges to
Implementing Climate Change Projects is an example of this, concerned with how the municipal financial
regulatory environment is a challenge to implementing EE.
The SACN has a series of reports based on its flagship, State of City Finances Reports that deal with
municipal finances. These are particularly useful in looking at the financial incentives and challenges to
pursuing EE agenda among municipalities. This contextualises the regulatory argument and helps to
understand why often, there is little incentive to introduce some of these regulations at a municipal level.
Much of the literature moves away from the notion that the problem is necessarily always a lack of appropriate
regulatory frameworks. Some literature emphasises wrong interpretation of the legislation as the main
problem. This is especially so with regards to regulatory problems when dealing with municipal financial
10
frameworks.

3
De Visser, J. (2012). Cities and Climate Change, University of the Western Cape Community law Centre.
4
Glazewski , J. and Collier, D. (2013).
5
eThekwini Municipality (2013) Literature Review for legal Framework for Municipal Engagement with embedded electricity genera tors.
6
See De Visser, J. (2007). Legal opinion on City of Cape Town’s proposed solar heating byl aw, Report done for Sustainable Energy Africa.
7
De Visser (2007).
8
Glazewski et al (2013).
9
Ruda, M (2007) Legal opinion: whether section 33 of the MFMA is applicable to the energy efficiency building retrofit program
10
See for example National Treas ury (2013) Diagnostic Report.

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Regulatory and Literature Review
Page 6 of 31
----------------------------------------------------------------------------------------------------------------------------- ------------------
3. The Legislative Framework
3.1 Mandates powers and functions
3.1.1. The role of national government
The South African Constitution creates a government consisting of the national, provincial and local spheres
11
of government and allocates powers to each of these spheres of government. National legislative authority is
vested by virtue of S ection 44 of the Constitution. This section confers on the National Assembly the power to
amend the Constit ution, and to pass a law on any matter, including matter s within a functional area listed in
Schedule 4. There are multiple areas within EE , which can be regulated and these include : energy, the
environment , housing, public transport, road traffic regulati ons and urban and rural development. Further,
national government may assign any of its legislative powers, except the power to amend the Constitution, to
12
any legislative body in another sphere of government .
3.1.2. The role of provincial government
The Constitution divides the republic into nine provinces and provincial legislative authority is vested in them
by virtue of Section 104. The provincial legislature may pass legislation for its province on any matter within a
functional area listed in Schedule 4 and Schedule 5, the former of which it shares a concurrent power with
national government. Thus, in addition to the areas mentioned above relating to EE, the provincial legislature
under Schedule 5, has additional powers such as those related to ‘provincial planning’ and ‘provincial roads
and traffic’. It may also legislate for functional areas expressly assigned to it by national legislation, and any
matter for which a provision of the Constitution envisages the enactment of provincial legislation.
3.1.3. The role of local government
Although climate change, renewable energy and energy efficiency are not listed as specific local government
functions, it is clear that municipalities have a central role to play in the overall national effort to ensure these.
A municipality has executive authority and has the right to administer on local government matters listed in
13
Part B of Schedule 4 and Part B of Schedule 5. Listed under Part B of Schedule 4 and with implications on
EE include : air pollution; buildi ng regulations; electricity and gas reticulation; municipal airports ; municipal
planning; municipal public transport; municipal public works; harbours; storm water management; water and
sanitation supply systems. Part B of Schedule 5, includes billboards; markets; municipal abattoirs; public

11
Section 40(1).
12
Section 44(1 ) ( iii).
13
Section 156(1 ) ( a).

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Regulatory and Literature Review
Page 7 of 31
----------------------------------------------------------------------------------------------------------------------------- ------------------
places; street lighting; and traffic and parking. This means that municipalities can make policy regarding these
14
issues. Municipalities can also make and administer by-laws for the effective administration of these matters.
Table 1: Areas influencing energy efficiency where municipalities can exercise their legislative powers
Schedule 4B Schedule 5B
Air pollution Billboards
Building regulations Cemeteries funeral parlours
Electricity and gas reticulation Local sport facilities
Municipal Airports Markets
Municipal planning Municipal abattoirs
Municipal public transport Municipal parks and recreation
Municipal public works Municipal roads
Harbours Public places
Storm water management Street lighting
Water and sanitation supply systems Traffic and parking

EE and other related measures often derive from the municipalities other powers and functions as provided by
the Constitution, and may not be directly related to a municipal legislative mandate. This is because functional
15
areas as defined by the Constitution cannot be regarded as existing in ‘hermetically sealed compartments'.
This is important, as often municipalities do not take action regarding EE measures because they wrongly
believe these to be out of their powers and functions. It also means that municipalities can exercise their
original powers in legislating on EE . If there is no national or provincial law regarding the EE , there is no limit
to the scope of m unicipalities and they can , for example create a by - law on solar water heaters (SWHs)
without the consent of national government under the National Building Regulations and Building Standards
Act, Act 103 of 1977 (NBRBSA) as the requirement for approval offends municipal autonomy (De Visser,
2007) .
3.1.4 National and provincial government supervisory role
While local government may legislate on Schedule 4B and 5B matters, the Constitution does not allocate the
matters in Schedule 4B and 5B exclusively to local government. National and provincial governments may
also regulate those matters. (Steytler and Visser, 2013). National government can legislate on Schedule 4B
matters on the basis of Section 155(7) of the Constitution, which affords it the power to ‘regulate’ the exercise
of municipalities’ executive authority. The constraints to this authority are related to the fact that it should be
exercised in the context of seeing to the ‘effective performance by municipalities of their functions in terms of

14
Section 156(2).
15
Wary Holdings (Pty) Ltd V Stalwo (Pty) Ltd and another (1) SA 337 (CC) para 131.

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Regulatory and Literature Review
Page 8 of 31
----------------------------------------------------------------------------------------------------------------------------- ------------------
Schedule 4’, which means broad managing or controlling rather than direct authorisation. Overall, this means
that the regulatory power enables national government to set essential national standards, minimum
requirements and monitoring procedures among others. The Constitution also provides that a by-law which
conflicts with the national or provincial legislation is invalid in as far as the national and provincial legislation
does not impede on the municipalities ability to exercise its powers and functions.
3.2 The regulatory environment
The regulatory environment for EE is examined according to the following:
 Areas of the municipality’s day-to-day operations, including municipal offices, schools, clinics, streets
and roads, etc.
 Services that the municipality sells, including electricity, water, gas and sewer services
 Areas the municipality regulates, including city planning (building regulations, strategic and statutory
planning) and air-quality.
 The infrastructure provided by the municipality including grid-networks and related infrastructure such
as roads, water, electrical, sewage and gas etc.
3.2.1 Municipal operations
EE issues can be traced to a number of important areas:
 Buildings: besides their own buildings and facilities for official use, municipalities are landlords of
property and buildings in diverse use-categories such as clinics, residential and community centres.
 Plant and machinery: this includes fleets of vehicles, petrol and diesel or electrically operated
equipment of various types, especially for purposes of maintenance of municipal infrastructure and
offering direct services like public transport, water and waste removal.
 Street and traffic lights.
 Low cost housing: municipalities are major players in delivery of subsidised housing at various stages,
even though the core responsibility falls on provincial government. However, given the accreditation
process, this is changing in the larger cities.
The municipalities’ own consumption is an important area of intervention and although energy consumption
for municipalities (metro and smaller) is between 1% and 2% of the total energy consumed, it is still an
important component, especially to show leadership.
Relevant regulatory framework and literature review
The regulatory framework is found in national or provincial legislation and in municipal by-laws. Budgets, IDPs
and Spatial Development Frameworks (SDFs) are part of the regulatory framework binding on municipalities
because they are legally binding on the municipality’s decision-making. Any requirements that relate to EE by
the municipality therefore have the force of law if entrenched in these documents. Voluntary standards for EE,

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Regulatory and Literature Review
Page 9 of 31