Minister and Department of Energy presentations of Strategic Plan & budget 2011

NCOP Economic and Business Development

26 May 2011
Chairperson: Mr F Adams (ANC)
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Meeting Summary

The Minister, Deputy Minister and Department of Energy presented the strategic plans and budget for 2011 to the Committee. The Minister emphasised that free basic services and municipalities’ slow spending on electricity were issues requiring attention, and suggested that the Select Committee would be ideally placed to address them. In addition, she highlighted some problems of service delivery in KwaZulu Natal. She also noted that it was important also to increase awareness on how to save energy, and to ensure that electricity and cable theft were recognised as serious economic crimes. She noted that the backlogs in distribution infrastructure were also important to address. PetroSA must be strengthened to be at the core of the nucleus to build a State-owned mining company. The Deputy Minister added that another important role that could be played by this Committee was lobbying with the budget committees to ensure that sufficient funding was allocated to the Department, to allow it to fulfil its objectives.

The Department tabled the strategic plans and budgets. It noted an emphasis on rural development and greater emphasis on job creation and noted that the service delivery agreements not only incorporated decent employment through inclusive economic growth, but also allowed for provision of services in conjunction with Department of Human Settlements, Education and Health. The main challenges around service delivery were lack of funding and ageing infrastructure. In addition, there was still too much emphasis on coal as the primary energy source. Although 80% of South African homes were electrified, 5% were illegally connected. South Africa’s role in Africa and the world, as the host of the COP17, was emphasised. The legislation that the Department intended to revise was outlined, including the introduction of a Bill to facilitate Independent Power Producers. The Department also noted work on rewarding investors in the value chain, the promulgation of the Liquid Petroleum Gas (LPG) price regulations, and publication of the Fuel Specification and Standards Discussion Paper was published. The
South African National Energy Development Institute (SANEDI), had been established. Cabinet was still considering the regulations for strategic stocks in oil companies. New fuels specifications and standards would improve the quality of transport fuels,  reduce harmful emissions and align with international vehicle technology. It was also noted that people were being encouraged to use gas for cooking. There was ongoing discussion around maize as a bio-fuel. The Liquid Fuels Charter may be revised. Developments would be monitored in the electricity, nuclear and clean energy sectors. The solar water heating programme had slowed down, due to lack of funding. The Department noted that more awareness campaigns would be launched. It noted that the feasibility studies for the Renewable Energy Feed In Tariff should be concluded mid-year. It was intended to absorb Northern Cape projects into the Solar Park area. Integrated Resource Plans had been set in motion and nuclear safeguards had been considered.

The Department outlined its revised organisational structure, but noted that this was not fully implemented as yet.
Three new supporting branches would be established. It was noted that the Department would take over assets from Electricity Distribution Industries (EDI) and would continue to partner with other departments and stakeholders, especially those which involved youth, children and women.

There was not sufficient time for all questions to be asked and answered, so Members were requested to put additional questions in writing. However, those outlined included what government was doing to ensure certainty of energy, the need to emphasise alternative energy sources and to address some scepticism by investors, as well as a call for clarity on basic electricity provision in Cape Town


Meeting report

Department of Energy Strategic Plan and budget 2011: Briefing by Minister, Deputy Minister and Department
The Chairperson welcomed the Minister, Deputy Minister and officials from the Department of Energy (DOE or the Department). He noted that all provinces were represented on the Committee but that at this meeting there were not representatives present from North West, Mpumalanga and Free State.

Hon Dipuo Peters, Minister of Energy, noted that on the previous day the Department had presented its budget in the National Assembly. In the previous year, the Department had spoken to mayors about municipalities’ slow spending on electricity programmes. It was also necessary to speak to free basic services. The Select Committee should engage on these matters since some municipalities in Western Cape were showing reluctance to budget for free basic services. In KwaZulu Natal, some services were based on political affiliations, creating “islands” of services, and this had been raised with both the Premier and MEC in that province. Anticipation by the public was high, and they would be upset by poor service delivery. There was a need to work also with other departments, such as Trade and Industry, Economic Development and Public Enterprises.

The Minister added that it was important to increase awareness on how to save energy, also around electricity and cable theft, both of which were serious economic crimes. It was also necessary for the Department to focus on challenges of backlog in distribution infrastructure. She noted that the Integrated National Energy Plans (INEP) looked at different sources. The roles of the oil companies were important. It was necessary to strengthen and reposition PetroSA, look to projects and unbundle the Central Energy Fund (CEF) to form the nucleus to build a State-owned mining company.

The Minister said that the Department had yet to meet all its objectives. There were challenges around human capital and finances. There had been engagement with the Department of Public Enterprises. About 60% of the top management were women.

Ms Barbara Thompson, Deputy Minister of Energy, noted that the NCOP was a powerful body where departments could lobby, and she suggested that this Committee could have useful engagement with the budget committees on the need for further human capital. She also asked that this Committee should hold the Department to its commitments around service delivery and ensure that it delivered as promised, to become a substantial part of the service delivery circle. She added that the Ministry and Department wished to maintain an open-door policy, so that all Members should feel free to engage on a policy and service level.

The Chairperson recognised that the Minister and Deputy Minister had other commitments and asked them to leave when they needed.

Department of Energy presentation
Ms Thandeka Zungu, Chief Operations Officer, Department of Energy, said that the structure of the strategic plan reflected objectives set out in the State of the Nation Address. She noted that in regard to the INEP, this Department, together with the industry, would coordinate electrification and service delivery. There would be great emphasis on rural development and greater emphasis on job creation, being government outcomes. The Minister had signed service delivery agreements, which included mention of decent employment through inclusive economic growth, an efficient, competitive and responsive economic infrastructure network, and provision of services in sustainable human settlements, as well as services in the education and health sectors. The Department had examined its challenges around service delivery. Two of the main obstacles were that equipment was outdated, and most of the energy was still provided via coal.

Statistics showed that 80% of South African homes were electrified, but only 75% were legally connected. There was growing demand on energy resources as the economy lifted of the recent financial crisis. She reminded Members that the Conference of Parties (COP17) would be held at the end of the year and there was a need to fast-track the introduction of clean energy into the energy mix. The government also had partnerships, in the energy sector, with other countries and this involved many stakeholders. The Clean Energy conference would be hosted in Cape Town on the following Tuesday and Wednesday.

Insofar as organisational and performance environments were concerned, she reiterated that there were challenges around funding and personnel. There would be, during the Medium Term Expenditure Framework (MTEF), a gradual migration to the approved full structure. Ministerial approval of the revised departmental structure was to be given during the MTEF period.

The Department would be attending in this period to review and amendment of the National Energy Regulator Act, No 4 of 2006, the Petroleum Products Act, No 120 of 1997 and would be introducing the ISMO Bill to facilitate Independent Power Producers (IPPs) in the electricity generation sector.

Ms Yvonne Chetty, Chief Financial Officer, Department of Energy, said that some of the possible requests for roll overs might be in the area of non-grid service providers, the Working for Energy project, and the Designated National Authority and Renewable Energy Market Transformation. She noted that the salaries budget, for the new and old posts, had been increased, owing to inflation.

Mr Tseliso Maqubela, Deputy Director General: Hydrocarbons and Energy Planning, Department of Energy, set out some of the 2010 highlights. He noted that the Department had programmes to reward investors in the value chain. There had been work on the accounting systems. The Liquid Petroleum Gas (LPG) price regulations had been promulgated. The Fuel Specification and Standards Discussion Paper was published. The South African National Energy Development Institute (SANEDI), had been established.

The Department also looked at the value chain to trim some prices. It was waiting for Cabinet to approve the regulations for strategic stocks in oil companies. The Department also had focus areas in Integrated Energy Planning Strategy, which outlined the requisite processes, systems and structures for the development of INEP. New fuels specifications and standards would improve the quality of transport fuels, to reduce harmful emissions and align with international vehicle technology. In Western Cape, people were being encouraged not to use electricity for cooking, and therefore the Department was looking at interventions that would encourage people to use gas cylinders. This would also involve other departments. The Biofuels pricing framework should be accelerated. There was ongoing debate about the use of maize as an alternative energy source. The Department had two Integrated Energy Centres planned and its choice of areas was determined by traffic volumes, where oil companies did not have stations there. The Liquids Fuels Charter looked at a new framework, as the outcomes were rather disappointing. There was a concerted effort to strengthen PetroSA as a National Oil Company. The challenges included the failure to secure access of primary energy feedstock for liquid fuels, and insufficient funding
.
Mr Ompi Aphane, Acting Deputy Director General:
Electricity, Nuclear and Clean Energy Programme, Department of Energy, alluded to the objectives of monitoring development in the electricity, nuclear and clean energy (ENCE) sectors, which meant that approval and implementation of appropriate policies was necessary, to promote universal access. The Department had intended to upgrade the solar water heating programme, but this had slowed down, due to lack of funding. With the introduction of Independent Energy Producers (IEPs), there was the need for regulations for this new generation capacity, as well as signature of agreements.

In relation to energy efficiency and demand side management, he noted that the Department would be running more awareness campaigns. For the
Renewable Energy Feed In Tariff (REFIT) and Solar Park, the Department intended to conclude feasibility studies in about July, and do assessments on the grid, as there had been some concerns. Projects in the Northern Cape would be absorbed into the area that would become a Solar Park.

He noted that Integrated Resource Plan (IRP) projects had been
set in motion at implementation phase. Nuclear safeguards had been considered by the department. There was implementation also of the move of accountability and control from National Energy Corporation of South Africa (NECSA). In regard to radioactive waste disposal, this was still with National Treasury. The Department would be asking for amendments to improve governance, in terms of the NECSA Act.

Mr George Mnguni, Deputy Director General: Corporate Services, Department of Energy, introduced the revised organisational structure of the Department. However, he noted that this was not yet fully operative, owing to financial constraints. The revised structure would have three new supporting branches. The Office of the Director General would provide the executive and administrative support. Energy Policy and Planning looked at integrated energy policies and plans to develop, maintain and implement. Petroleum and Products Regulation hoped to manage the regulation of petroleum products, manage the nuclear industry. The Clean and Renewable Energy branch was to manage and facilitate the development and implementation of clean and renewable energy initiatives. Energy Programmes and Projects was primarily involved in the management, coordination, monitoring and reporting on energy related programmes and projects.

The Department would take over assets that belonged to Electricity Distribution Industries (EDI) and would continue to partner with other departments and stakeholders, especially those which involved youth, children and women. The Minister had been appointed the Clean Energy Ambassador for Africa, so South Africa would be closely involved in launching the clean energy environment. The Department had, however, cut down on youth programmes due to the serious lack of funding and budgetary constraints.

Discussion
The Chairperson noted that there was not enough time for all Members’ questions to be answered. However, she would take some questions, and asked that any further questions be furnished to the Committee Secretary, for transmission to the Department, so that the Department could respond by the following Thursday.

Mr A Lees (DA, KwaZulu Natal) hoped that matters of service delivery would improve in his province, and called upon the MEC to deal with the issue. He noted that although the move to solar water heaters was positive, many people still did not have houses on which the system could be installed. He therefore welcomed the statement that the Department would be working closely with other departments. Service delivery was a cross-departmental matter. Solar water heaters would certainly reduce the amount of other energy needed to bring the water to the acceptable temperature.

Mr K Sinclair (DA, Northern Cape) asked in what capacity the Chairperson of the Portfolio Committee on Energy was attending the meeting. He wanted to now what government was doing to ensure certainty of energy in future. Secondly, he agreed that alternative energy sources were a good idea, but said that there did not seem to be enough emphasis on this. Thirdly, during a conference, Members had noted some scepticism on the part of investors and he asked that the Minister take this into account when refining the models.

The Minister responded that Energy Certainty was a topic being taken seriously. She asked that Members be patient and allow the IEPs some time to work fully. She noted that nuclear energy was included in the equation. All parties in the NA had given their acceptance of this.

Mr S Zikalala (ANC) asked for the Minister’s position about basic electricity in the Western Cape.

The Minister responded that the previous mayor had apparently asked that Eskom revise its budget to direct certain amounts elsewhere.

The meeting was adjourned.




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