Energy Budgetary Review and Recommendation Report (BRRR) 2012

Energy

22 October 2012
Chairperson: S Njikelana (ANC)
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Meeting Summary

The Committee considered its Budgetary Review and Recommendations Report (BRRR). The Chairperson took Members through the BRRR page by page, encouraging them to make inputs and recommendations as the process unfolded. One of the recommendations already made in the BRRR was that the Department of Energy (DoE) should conclude outstanding policies, strategies and programmes. A list was included in the BRRR. Some additions recommended by members to be added to the list, were the Regional Gas Master Plan, the Review of the Integrated Resource Plan and the Integrated Energy Plan.  The Renewable Energy White Paper, which had seemingly fallen by the wayside, was also added to the list.  The Solar Heater Programme and the better mapping of indigent households’ electricity were issues which members agreed could be translated into recommendations as well.

There was agreement among Members that there had been no improvement on the South African Renewables Initiative (SARi). The DoE would be asked to brief the Committee on the matter. The Committee had a scheduled meeting with Eskom the following week and would enquire as to what had informed Eskom to propose a 16% hike in electricity tariffs.

An additional recommendation made by the Committee was that the DoE needed to strengthen its internal audit systems.

The BRRR was adopted as amended.

The Committee adopted minutes dated 24 April 2012, 4 and 8 May 2012, as amended. Minutes dated 29 May 2012 and 19 June 2012 were adopted unamended.

Meeting report

Budgetary Review and Recommendations Report (BRRR)
At the outset of the meeting, the Chairperson commented that the Committee had been working under pressure, as it had only had two weeks within which to deal with the Department of Energy (DoE) and its related entities’ reports. He was a bit concerned about timeframes, as in 2011 the Committee had only dealt with the BRRR in the second week of November. On Thursday, 25 October 2012 the Minister of Finance, Mr Pravin Gordhan, would table the Multi-Year Budget Strategy, so the Committee’s reports needed to be in on time. The Committee’s BRRR had to be in the Parliamentary system by the following day, 24 October 2012.

One of the main issues to be considered by Members was the Committee’s recommendations in the BRRR. He pointed out that the section in the BRRR detailing the briefing by Prof E Uken and Prof P Lloyd (Cape Peninsula University of Technology) on the performance of the DoE would be withdrawn from the BRRR. Its withdrawal did not mean that the inputs were not valuable, but rather that there were procedural reasons for its exclusion.

The Chairperson placed the BRRR before the Committee and proceeded to take members through it page by page. He encouraged members to make inputs and recommendations as the process unfolded.

Mr L Greyling (COPE) referred to the bottom of page 5, where “completion of the Integrated Energy Plan“ was mentioned, and stated that as far as he knew, the Integrated Energy Plan was not complete. He suggested that the wording be changed.

The Chairperson suggested the use of the word “formulation” rather than “completion”.

Mr J Selau (ANC) referred to page 8, which contained the proposed solutions with regards to
the Integrated National Electrification Programme (INEP).  He was not satisfied with the manner it was reflected.

The Chairperson suggested that the Committee Secretary, Mr Arico Kotze, check on the solutions proposed by the DoE with regard to INEP.

Mr Greyling referred to point 2.9 on page 10 of the BRRR.  He was not too sure what point was trying to be made in the paragraph. Could the blackouts of 2008 and the global recession really be reasons for the DoE not being on the forefront of energy policy and planning?

Mr K Moloto (ANC) shared Mr Greyling’s sentiments, and said that it was more likely a lack of budget that had prevented the DoE from being on the forefront of energy policy and planning.  He added that the use of long sentences was problematic.  Long sentences should be broken up into shorter ones.

Mr Selau noted that the sequencing of items in the BRRR needed to be corrected. There should be a flow of items from beginning to end.

The Chairperson asked Members to bear with the Committee, as there was a tight schedule. If members so wished, things would be done differently in the future.

Mr S Radebe (ANC) asked whether the last bullet on page 11 was really necessary. It read as follows: “The DoE’s legal support, provides legal advice, legal opinions and legal drafting to the DoE”.

The Chairperson did not think it necessary to include it in the BRRR as the DoE’s legal support’s function was a foregone conclusion.

The Committee agreed.

The Committee agreed to withdraw section 6 of the BRRR which ran from page 21 to page 23. It was the section detailing the briefing by Prof E Uken and Prof P Lloyd on the performance of the DoE.

Mr Radebe took the Committee back to page 18, which spoke about audit outcomes of the DoE and its entities. The figures showed that the South African National Energy Research and Development Institute (SANEDI) for the periods 2008/09; 2009/10 and 2010/11 had no audit outcomes or were labelled “not applicable” for those years.  He said that SANEDI did have reports. SANEDI used to be the
South African National Energy Research Institute (SANERI).

The Chairperson noted that SANEDI could not be linked with SANERI.

Mr Selau explained that SANERI was linked to the Department of Science and Technology, where the emphasis was on research. SANEDI was linked with the DoE, where the emphasis was on development.

The Chairperson asked Mr Kotze to check on the issue.

Ms N Mathibela (ANC), on the same set of information on page 18, noted that the DoE for the year 2009/10 had also had “not applicable” attached to it.  She explained that there had not yet been a DoE as at that point in time, the Department of Minerals and Energy was still in existence.

Mr S Mayatula (ANC) said that the average person reading the BRRR would not know what “unqualified” report meant.

The Chairperson asked Mr Kotze to look into the definition and to add it to the BRRR.  He commented that the National Nuclear Regulator (NNR) used to complain about a lack of funding. The NNR was a case in point of what good restructuring could do. The NNR at present had a good balance sheet.

Mr Mayatula referred to page 33 and under paragraph 9.3 was not to happy about the paragraph on complaints resolution.

The Chairperson asked Mr Kotze to check on the correctness of the paragraph dealing with complaints resolution.

Mr Selau was not satisfied with the conclusion contained in the BRRR.

The Chairperson responded that the conclusion could be chopped and changed according to how the Committee wished it to be.

Mr Selau noted that the present BRRR was the Committee’s third report. The first one in 2010 had been a transitional period BRRR.  In the conclusion of the present BRRR, it was stated that a substantial comparison could be made with the BRRRs for 2011 and 2012.  He asked whether the Committee was able to substantially compare the BRRRs of 2011 and 2012.

The Chairperson responded that BRRRs were used as tools by the Committee to do oversight.

Mr Mayatula asked why the comparing of BRRRs could not be placed in the recommendations of the BRRR.

The Chairperson responded that the recommendations contained in a BRRR were instructions to the Department in terms of what was recommended for them to do. They were not recommendations in terms of what the Committee should do.

Mr Selau said that the conclusion should reflect observations made. The conclusion should state that the Committee had observed improvements in the BRRRs from 2010 to 2012. This in turn reflected an improvement in the performance of the DoE.

Mr Mayatula supported the sentiments expressed by Mr Selau.

The Committee agreed to remove the second last paragraph in the conclusion, which essentially stated that the Committee had not made a comparison of the three BRRRs.  Having not done so, it did not allow for assessment of whether the BRRRs had had any impact on the performance of the DoE. The situation was further compounded by the DoE’s apparent lack of knowledge of the 2011 BRRR.

Mr Greyling pointed out that the finances of the DoE were managed well, but a lack of financial resources and human capital did not allow it to be at the forefront of energy policy and planning.  He asked whether Mr Kotze would capture the comments of Members.

The Chairperson stated that Members should feel free to e-mail or sms any comments on the BRRR to Mr Kotze.

Mr Mayatula pointed out that the conclusion included the following:” Applauds the DoE and its entities on no findings by the AGSA with regards to Human Resources, Information and Communication Technology.”   He said that a lay person would not understand the provision.

The Chairperson explained that the DoE was performing well for a young department. The term “no findings” was a financial term.

Mr Selau suggested that the abovementioned statement should be reworded.

Mr Greyling referred to the recommendations made in the BRRR, and said that he had a list of policy documents which he wished the DoE to work on.

The Chairperson suggested that the Committee first deal with the recommendations contained in the BRRR.

Mr Greyling referred to the recommendations contained in the BRRR that the DoE should finalise outstanding policy strategies and programmes, and said that timeframes needed to be set for their completion. He suggested that the documents be finalised within the financial year. This would give it a sense of urgency. The documents, if finalised, would serve as a guide to the Committee.

The Chairperson reacted that it meant that the DoE needed to build its capacity on policy generation.

Mr Selau pointed out that the recommendations were good, but the Auditor General of SA had raised the issue that the internal audit systems of the DoE needed to be strengthened. The Committee needed to emphasise that the internal audit systems of the DoE needed to be strengthened.

The Chairperson said that the Auditor General had given the DoE an unqualified report with findings.
The DoE had done its best. It was now up to the DoE to try to get a clean audit report. The DoE should inform the Committee as to its plans on how it intended to obtain a clean audit report and to strengthen internal controls.

Mr Selau noted that an internal audit did not only deal with finances, but also identified problems that were there.

Mr Greyling proceeded to list the documents which he recommended that the DoE should finalise.  These were:
Cost recovery mechanism for cleaner fuels;
Review of the Integrated Resource Plan (IRP);
Review of Renewable Energy White Paper;
Regional Gas Master plan;
Integrated Energy Plan (IEP);
Household Energy Strategy.

Mr Selau reacted that the Integrated Energy Plan had touched only one facet – the IRP on electricity. An IRP on gas and petroleum still needed to be done.  An energy plan should cover all energy sources.

The Chairperson said he would remind the DoE to cover the areas mentioned by Mr Selau when they appeared before the Committee. He noted that the IRP 2012 should be concluded by March 2013. The Committee would also enquire about the progress on the Integrated Energy Plan.

Mr Selau emphasised that one should not equate the Integrated Energy Plan with the Integrated Resource Plan. The IRP was subordinate to the IEP. He added that when the IEP was to be considered, it would require an overhaul of the IRP. The IRP would therefore dictate over the IEP.

The Chairperson noted the point made by Mr Selau. It was concerning that there was no IEP as yet and as a result the IRP had to be reviewed every two years.  He added that it seemed that the Renewable Energy White Paper had fallen by the wayside.  Apparently there was a lack of resources.

Ms Mathibela referred to page 14 of the BRRR dealing with the performance of the DoE on service delivery, and recommended that service delivery would improve if funding was increased.

Mr Greyling pointed out that there was no progress on the South African Renewables initiative (SARi). He asked how funds were going to be accessed. The review of the IRP and its implementation was another issue. Prof Lloyd had raised issues relating to the IRP. The Committee needed to know the DoE’s implementation plans on the IRP. Decisions could not be taken due to non-implementation. The end result was that progress on the 20-year energy plan was falling behind. How was the backlog going to be addressed?

The Chairperson stated that the Committee needed to obtain greater exposure on electricity pricing. He added that the National Energy Regulator of SA (NERSA) was in the process of doing consultations. After consultations were complete, the Committee would have a better understanding. The Committee was to meet with Eskom and the South African Local Government Association (SALGA) the following week. The Committee would ask Eskom why it wished to raise the price of electricity by 16%.

Mr Moloto said that the meeting the following week should focus on Eskom and that it was good enough for SALGA to provide the Committee with a written submission.  The interaction with Eskom was considered more important.

The Committee agreed.

The Chairperson stated that the DoE had conceded that it was falling behind schedule on performance management and monitoring. He also listed issues which he felt were important and that perhaps could be translated into recommendations:
Solar Heater Programme;
Better mapping of indigent households’ electricity;
Upington Solar Park;
Clearing obstacles in the way of the Renewable Energy Programme;
Service Delivery Improvement Programme.

He noted that when the DoE briefed the Committee on SARi, National Treasury should also be present. There were even talks of a proposed shift in the Universal Access target from 2014 to 2025. The DoE needed to elaborate on how it intended to do the restructuring, so as to make the shift.  He suggested that members e-mail inputs which they had to the Committee Secretary.

The Committee agreed that the Committee Secretary would effect the necessary changes and incorporate the recommendations made into the BRRR. 

The BRRR was adopted as amended.

Committee Minutes
The Committee made grammatical and spelling changes to minutes dated 24 April 2012.
The minutes were adopted as amended.

Grammatical changes were also made to minutes dated the 4 and 8 May 2012 and they were adopted as amended.

Minutes dated the 29 May 2012 and 19 June 2012 were adopted unamended.

The meeting was adjourned.


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