Ministry and Department of Energy on their 2014 Strategic Plan

Energy

01 July 2014
Chairperson: Mr F Majola (ANC)
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Meeting Summary

The Department of Energy (DoE) briefed the Portfolio Committee on Energy on its Annual Performance Plan, its Strategic Plan and Budget Vote No 29.

The presentation gave a “birds eye” view about the DoE and its National Energy Programme. As the President’s State of the Nation Address (SONA) highlighted; energy was at the centre of the country’s development. The next five years were about moving towards a more secure energy sector. The DoE was in the process of finalizing the Integrated Energy Plan/ Master Plan, the Integrated Resource Plan and the Gas Utilization Plan to name a few. The Gas Utilization Plan would outline issues such as from where the gas would come, the entities which would be dealing with gas, and natural gas resources would also be explored. Regional integration within the Southern African Development Community region was crucial in the country’s efforts towards clean energy. The Democratic Republic of Congo would be a key partner in the country’s interests in hydro power.

The following entities reported to the DoE: National Energy Regulator of South Africa (NERSA); National Nuclear Regulator (NNR); South African National Energy Development Institute (SANEDI); South African Nuclear Energy Corporation, (SOC) Ltd (NECSA); Central Energy Fund (SOC) Ltd (“CEF” Group); and the National Radioactive Waste Disposal Institute (NRWDI) recently established.

Some of the highlights for the first five years of the DoE’s 2009 establishment were that access to energy services in rural communities was improved through the electrification of over 1.1 million new connections and the construction of Integrated Energy Centres. The DoE produced the country’s 20 year Integrated Resource Plan for electricity with a deliberate bias towards cleaner energy. Added to these highlights, the DoE was proud to introduce Independent Power Producers into the sector. Some of the challenges faced by the DoE had been inadequate generation capacity, the maintenance of distribution infrastructure, the rising cost of energy, access to electricity in rural areas, energy efficiency and the slow transformation of the economy.

The key focus areas for the DoE during 2014/15 were to:
▪ Increase access to electricity with an additional 265 000 grid connections and 15 000 non-grid installations
▪ Finalise the Integrated Energy Plan (IEP)
▪ Address maintenance and refurbishment backlogs in the electricity distribution industry
▪ Strengthen the liquid fuels industry
▪ Facilitate the process leading to the implementation of decisions taken on the nuclear programme.

In the spilt of the Department of Minerals and Energy in 2009 into the Department of Mineral Resources (DME) and the Department of Energy , the DoE received only 30% of staff and resources while the majority of the resources were left with the DME. The total appropriation which the DoE received for 2014/15 was R 7.4 billion which was allocated throughout the DoE’s programmes in the following way:
Programme 1: Administration – R 244 122 million
Programme 2: Energy Policy and Planning – R 52 583 million
Programme 3: Petroleum and Petroleum Products Regulation – R 39 865 million
Programme 4: Electrification and Energy Programme and Project Management – R 4.1 billion
Programme 5: Nuclear Energy – R 723 998 million
Programme 6: Clean Energy – R 1.9 billion
The rest was allocated for transfer payments.

Members were appreciative of the Minister and the Deputy Minister attending the meeting and expressed hopes that the Ministry would be attending Committee meetings on a regular basis. Some of the questions raised by Members were: How did the Energy Master Plan proposed by the President differ from all the already existing plans? What was the DoE’s end-state vision for the electricity sector? What was the vacancy rate and what was the DoE’s strategy for filling these posts? How was the country balancing its aspirations for industrialization with the international agreements on a greener economy which the country has already signed seeing that South Africa is still a developing country? How much electricity has the country been producing at the Koeberg nuclear power station and how can the plant’s generation be improved? How reliable was coal as a source of energy - seeing that wet weather conditions meant lower production? Members raised as a serious concern the fact that Eskom was continually receiving funds from the DoE however the entity was not accountable to the DoE; how would the DoE monitor the value being generated by Eskom? What plans did the DoE have for dealing with the current challenge of illegal electricity connections and aging infrastructure?

The majority of the questions could not be responded to during the meeting because they were primarily policy matters. The DoE was therefore asked to respond to those questions in writing. It was however pointed out that the afternoon session of the meeting where the DoE’s entities would be making their presentation to the Committee, would cover some of the questions raised by Members.
 

Meeting report

Chairperson’s opening remarks
The Chairperson welcomed Members to the meeting, together with all representatives from the Department of Energy (DoE).  He indicated that the Minister was running late but would be arriving shortly.

Presentation: DoE Annual Performance Plan, Strategic Plan and Budget Vote 29
Ms Thembisile Majola, Deputy Minister, DoE thanked the Committee for the invitation. She explained that she would lead the presentation and that the Minister would take over upon arrival. The presentation would be to giving a “birds eye” about the DoE and its National Energy Programme. As the President’s State of the Nation Address (SONA) highlighted, energy was at the centre of the country’s development. The next five years were therefore about moving towards a more secure energy sector. The DoE was thus in a process of finalizing the Integrated Energy Plan/ Master Plan, the Integrated Resource Plan and the Gas Utilization Plan to name a few. The Gas Utilization Plan would outline issues such as from where the gas would come, the entities which would be dealing with gas, and natural gas resources would also be explored. Regional integration within the Southern African Development Community region was crucial in the country’s efforts towards clean energy. The Democratic Republic of Congo would be a key partner in the country’s interests in hydro power.

She explained that the DoE’s nuclear programme was in the process of accelerating outstanding programmes such as those on environment, safety and compliance. Nuclear would be an integral part of the country’s energy mix. The DoE was also strengthening its relations with other departments such as the Department of Public Enterprises. A matter which would need greater talks between the two departments was that of Eskom; even though Eskom did not report to the DoE, all entities needed to work towards capacitating Eskom for taking the energy agenda forward. The DoE has various pieces of legislation which were currently being finalized such as that on the Electricity Regulation Plan. The restructuring of the National Energy Regulator of South Africa (Nersa) was also being finalized together with the Regulatory Framework.

Ms Majola highlighted that universal access still remained a key challenge and electrification, grid and non-grid connections, were also practical challenges which needed to be addressed. Close work with municipalities was vital in this regard. Maintenance and refurbishment backlogs continued to be a major challenge, primarily due to overlapping responsibilities and no clear separation of powers. The DoE was busy undertaking a pilot project with seven municipalities and two Metros; R 220 million has been invested in these projects. The repositioning and strengthening of state owned enterprises such as the Central Energy Fund was another priority. She concluded that radical transformation and urgency was the strong focus of the DoE’s mandate for the next five years. The energy sector has been identified as the biggest constraint to the country’s economic development and this needed to be rectified.

Mr Tseliso Maqubela, DoE Acting Director-General, said the DoE was looking forward to working with the Committee. The sector would be moving at a speedy pace especially concerning legislation. He explained that all entities within the DoE were referred to as “Team Energy” in an attempt to highlight the efforts of all the entities in moving the country’s energy agenda forward in an affordable and sustainable manner.

He explained that the vision of the DoE has been envisaged in the National Development Plan. With regard to the landscape of the energy sector, he explained that even though there was a strong focus on electricity, energy was also about liquid fuels, gas and renewable energy to name a fe. These were also important aspects which needed as much attention as electricity. The DoE had a responsibility to keep over 9 million engines running for example in the area of petroleum and this was a major task. The DoE covered over 400 000 kilometres of power lines throughout the country and environmental challenges were a major concern. One of the DoE’s major responsibilities was therefore to ensure that the environment was looked after and that security of supply was ensured through the diversification of energy resources.

The following entities reported to the DoE:
National Energy Regulator of South Africa (NERSA)
National Nuclear Regulator (NNR)
South African National Energy Development Institute (SANEDI)
South African Nuclear Energy Corporation, (SOC) Ltd (NECSA)
Central Energy Fund (SOC) Ltd (“CEF” Group)
National Radioactive Waste Disposal Institute (NRWDI) recently established

Some of the highlights for the first five years of the DoE’s establishment were that access to energy services in rural communities was improved through the electrification of over 1.1 million new connections and the construction of Integrated Energy Centres. The DoE also produced the country’s 20 year Integrated Resource Plan for electricity with a deliberate bias towards cleaner energy. Added to these highlights, the DoE was proud to introduce Independent Power Producers into the sector. Some of the challenges faced by the DoE had been around inadequate generation capacity, the maintenance of distribution infrastructure, the rising cost of energy, access to electricity (rural areas), energy efficiency and the slow transformation of the economy.

The key focus areas for the DoE during 2014/15 were to:
▪ Increase access to electricity with an additional 265 000 grid connections and 15 000 non-grid installations
▪ Finalise the Integrated Energy Plan (IEP)
▪ Address maintenance and refurbishment backlogs in the electricity distribution industry
▪ Strengthen the liquid fuels industry
▪ Facilitate the process leading to the implementation of decisions taken on the nuclear programme.

He concluded that a total of 814 posts were approved within the DoE, of these 569 were funded posts and 245 were unfunded posts. A process was underway with National Treasury with regard to funding issues.

The Chairperson thanked the DoE and welcomed the Minister to the meeting.

Ms Tina Joemat-Petterson, Minister of Energy apologised for her late arrival to the meeting and thanked the Acting Director-General and the Deputy Minister for leading the presentation in her absence.

Programme 2 - Energy Policy, Planning and Programme 6- Clean Energy
Mr Ompi Aphane, Deputy Director-General: Energy Policy and Planning, DoE explained that one of the DoE’s main strategic outcomes was to create decent employment through inclusive economic growth. This would be done through the regulation of demand and the introduction of a diverse mix of energy generation and energy efficiency technologies on an on-going basis. Competition in the energy sector would also be increased by introducing non-Eskom generators.

He explained that the DoE would also be publishing an Annual Energy Statistics Report to facilitate information-based decision making in an attempt to strengthen the DoE’s planning function. Another important outcome was that of improving the regulation and transformation of the sector through an efficient, competitive and responsive economic infrastructure network. The DoE planned to manage climate change and environmental matters by developing and implementing Climate Change Policies and the green economy.

Some of the targets which the DoE envisaged in its Annual Performance Plan for the Programme were to:
▪ Facilitate the process leading to the implementation of decisions taken on the nuclear programme
▪ Improve liquid fuels energy security by developing and implementing the Liquid Fuels 20-Year Infrastructure
Plan over the medium term Integrate the Transmission Development Plan including interconnections into neighboring countries
▪ Introduce the Independent Market and Systems Operator Bill  for consideration and support its  promulgation if approved by Cabinet and Parliament.

Programme 3 - Petroleum and Petroleum Products Regulations Branch
Mr Victor Sibiya, DoE Acting Deputy Director-General: Petroleum and Petroleum Products Regulations, explained that the purpose of the Programme was to manage the regulation of petroleum products to ensure optimum and orderly functioning of the petroleum industry to achieve governments’ developmental goals.

The Programme consisted of the following sub-programmes: Fuel Pricing, Petroleum Licensing and Permitting and Compliance Monitoring and Enforcement. The DoE had the responsibility of providing for an efficient, competitive and responsive economic infrastructure network through monitoring compliance with the Liquid Fuels Charter. Environmental assets and natural resources also needed to be well protected and continually enhanced. The DoE also had a responsibility to facilitate the participation of Historically Disadvantaged Individuals (HDIs) in the petroleum sector by enforcing compliance by wholesalers, manufactures and retailers with the empowerment legislation in the adjudication of licences on an ongoing basis.

Some of the targets outlined in the Annual Performance Plan for the Programme were to:
▪ Ensure enforcement notices issued in 85% of cases where non-compliance is identified during routine compliance inspections.
▪ Ensure that 30% of licence applications were approved with at least 50% BEE ownership
▪ Implement the Basic Fuels Price
▪ Gazette the Bio-fuels Pricing Framework.

Programme 4 - Electrification and Energy Programme and Project Management Branch
Dr Wolsey Barnard, Deputy Director-General: Energy Programmes and Projects, DoE explained that the Programme consisted of five sections, all dealing with different aspects implementation of energy policies, programmes and projects and the promoting of such energy initiatives. The purpose of the Programme was to manage, co-ordinate and monitor programmes and projects focused on access to energy. He explained that over 1.8 million houses still did not have access to electricity, this challenge would be addressed through a combination of grid and non-grid electrification. However the lack of infrastructure was still a problem especially in areas which needed to be electrified the most. Access to these areas was therefore a concern.

According to the DoE’s Annual Performance Plan, these were some of the targets which the Energy Programmes and Projects branch would be working towards:
▪ Plan, facilitate the transfer of funding and monitor the electrification of households in line with the allocated budget  (15 000 Off-Grid connection)
▪ Plan, facilitate the transfer of funding and monitor building/upgrading of electrification infrastructure projects
▪ Monitoring refurbishment of key electrical networks in municipalities (mini-Approach to Distribution Asset Management) – completion of all 7 municipal and 2 metro electrical infrastructure projects
▪ Community Upliftment Programmes for development of Energy Sector (Youth, Gender, Disability, HIV & AIDS) and Public energy awareness campaigns

With regard to the solar geyser rollout, the programme had been experiencing its own challenges. However the DoE had a strict requirement of a 70% local content for production, this was an attempt for generating jobs throughout the country. The geyser programme was done in collaboration with Eskom and local communities; this was specifically earmarked for youth employment.

Programme 5: Nuclear Energy
Mr Zizamele Mbambo, DoE Deputy Director-General: Nuclear, explained that the nuclear programme consisted of three sub-programmes: Nuclear Safety and Technology; Nuclear Non-Proliferation and Radiation Security; Nuclear Policy. The purpose of the Programme was to manage the South African Nuclear Energy Industry and to control nuclear material in terms of international obligations, relevant legislation and policies to ensure the safe and peaceful use of nuclear energy.

One of the Programme’s strategic objectives was that of nuclear security. The DoE had a responsibility to regulate the security of all nuclear material, related material, equipment and facilities through an appropriate statutory framework. The second objective related to the accounting and control of nuclear material through authorizations, ensuring compliance by conducting inspections and audits. The DoE had a responsibility to create decent employment through inclusive economic growth. The Nuclear Energy Expansion Programme would contribute towards ensuring the security of supply by leading, developing and overseeing the implementation of nuclear expansion, guided by the Nuclear Energy Policy and the National Nuclear Energy Executive Coordination Committee. The Integrated Resource Plan (IRP2010-2030) administered all matters related to nuclear safety, liability and emergency management to improve the governance of the nuclear sector.

The DoE had a responsibility to ensure that the environmental assets and natural resources were well protected and were continually enhanced. The DoE would therefore ensure that the National Radioactive Waste Disposal Institute was fully operational for the sustainable disposal of radioactive waste.

Mr Mbambo explained that the DoE still had a lot of work to do with regard to public awareness around nuclear.

Presentation: 2014/15 Budget Overview
Ms Yvonne Chetty, DoE Chief Financial Officer, explained that from the spilt of the Department of Minerals and Energy in 2009 into the Department of Mineral Resources (DME) and the Department of Energy , the DoE received only 30% of staff and resources while the majority of resources were left with the DME. The total appropriation which the DoE received for 2014/15 was R 7.4 billion which was allocated throughout the DoE’s programmes in the following way:
Programme 1: Administration – R 244 122 million
Programme 2: Energy Policy and Planning – R 52 583 million
Programme 3: Petroleum and Petroleum Products Regulation – R 39 865 million
Programme 4: Electrification and Energy Programme and Project Management – R 4.1 billion
Programme 5: Nuclear Energy – R 723 998 million
Programme 6: Clean Energy – R 1.9 billion
The rest was allocated for transfer payments.

Minister Joemat-Pettersson said the DoE’s aim for the presentation was to inform the Committee on progress made so far and how far the DoE was in reaching some of the goals set out in the National Development Plan. There were also a number of draft bills which were currently under discussion within the DoE and these would be presented to the Committee at the proper time. The interface between the DoE, the DPE and National Treasury was key in the DoE achieving its goals and objectives, together with the role played by Eskom with regard to service delivery. She said the Minister’s performance agreement would be presented to the Committee before the President signs it. The performance of the Ministry was closely linked to the work of the Committee, therefore both need to work together.

The Chairperson thanked the DoE for the presentations and opened the floor.

Discussion
Mr L Greyling (DA) thanked the Minister and the Deputy Minister for their attendance and said it would be highly appreciated if one of them attended Committee meetings regularly. With regard to the DoE’s work plan for the next five years, the Independent Systems and Market Operator (ISMO) Bill was a very small part of institutional restructuring. It was evident from the public hearings on the Bill that an end-state vision for the electricity industry was necessary, however one of the reasons that the previous bill failed (other than the political reasons) was that there was no consensus on the vision around the end-state. He argued that the country was in an emergency crisis and that the solutions put forward by the SONA were primarily long term in nature and would not solve the current energy problems. He asked about co-generation and asked why there were no plans in place to relieve Eskom of some of its duties, especially because Eskom had funding issues around generators.

He said some of the DoE’s plans were very confusing; which plans were more immediate, which plans carried more authority etc? He said there were contradictions between the SONA, the Integrated Resource Plan and the National Development Plan; how did all these fit together? How did the Energy Master Plan proposed by the President differ from all the already existing plans? The Inter-Ministerial Committee which was tasked with energy security needed to be more transparent. He asked whether the reports from the IMC would be made available to the Committee and what the makeup of the Ministerial Committee would look like. On the Integrated Energy Plan, he said an external study of energy was needed. The DoE needed to look at the costs of different energy resources in order to ascertain what mix of energy resources the country would rely on and what the costs of these would be. 

Ms L Makhubele-Mashele (ANC) asked that the DoE elaborate on the pilot project mentioned during the presentation; what was the envisioned outcome of this? According to the presentation there were 569 funded posts within the DoE. What was the vacancy rate within these posts and what was the DoE’s strategy for filling these posts? With regard to the volatility of price increases in the fuels sector, why was the country still tapping into other markets for fuel when there were fuel reserves within the country which could sustain the country for the next 200 years? Sasol was busy with an initiative of transferring coal into synthetic fuel; how could the DoE increase Sasol’s capacity in this regard? What plans did the country have to upscale the country’s fuel generation capacity?

She agreed that there was an energy crisis within the country, and there was therefore a need to improve the country’s energy reserves efficiently through, among other things, improving foreign investment within the sector. On the “Green Economy” she asked about how the country would balance with aspirations for industrialization with the international agreements on a greener economy which the country has already signed? Would “green” aspirations not hinder the growth of the country; seeing that most of the countries who propose such agreements are already developed countries. South Africa was still a developing country. On the carbon emissions levy which motor owners paid; how much did these levies generate and how were these funds generated back into the economy? How much electricity has the country been producing at the Koeberg nuclear power station and how can the plant’s generation be improved? How reliable was coal as a source of energy; seeing that wet weather conditions meant lower productions? On the transfer of funds from the DoE to municipalities and state owned enterprises she asked how the DoE held Eskom accountable for the funds it received when the entity was not directly accountable to the DoE. How was the DoE monitoring the value generated from Eskom? She asked that the DoE indicate the number of female managers at senior level within the DoE.

Mr J Esterhuizen (IFP) indicated that the DoE had allocated R 800 million for the development of nuclear projects and programmes. However the SONA indicated that there was also a new nuclear plant in the pipeline; nuclear was therefore a very expensive initiative. On the other hand, R8 million had been budgeted for fracking and the exploration of gas was very important, however fracking used up a lot of water and South Africa was one of the driest countries in the world. Would it not make better sense to continue with renewable energy instead of increasing carbon emissions?

Ms Z Faku (ANC) asked what plans the DoE had in dealing with the current challenge of illegal electricity connections. What plans did the DoE have for dealing with aging infrastructure? She argued that there needed to be clear alignment between the DoE and the Department of Public Enterprises to ensure better monitoring and accountability.

Ms N Louw (EFF) asked whether there was a plan or policy to distribute electricity to unemployed individuals throughout the country who could not afford electricity. She asked that the DoE provide the Committee with a list of all places which had been affected by power cuts as a result of cable theft and what the costs of these were. What amount did the DoE spend on wasteful expenditure?

Ms T Mahambehlala (ANC) asked whether the DoE had a turnaround strategy in place to address the energy crisis and the various other challenges which the DoE had identified. What long term approach was in place for dealing with pricing increases? She asked whether the DoE had any plans of increasing financial support to Eskom so that the entity could better implement Independent Power Producer (IPP) programmes.

Minister Joemat-Pettersson asked the Chairperson whether it would not be better for the DoE to respond to some of the policy questions in another presentation to the Committee or during the afternoon session. There would not be enough time to tackle in great detail all the questions raised by Members.

The Chairperson suggested that the DoE respond to the important questions and answers to the remaining questions could be forwarded to the Committee in writing. He assured the DoE that Members did not have expectations that the DoE would resolve all issues raised during the meeting; as time progressed there would be opportunity for Members to have a follow-through on all the issues they have raised.

Minister Joemat-Pettersson thanked Members for their questions and assured the Committee that they had full support from the Ministry in dealing with all energy issues and concerns. On the question of the vacancy rate she responded that the current Deputy General’s contract would be ending at the end of November 2014 and the process of filling that post was already underway. The post had been advertised and several meetings with individuals have taken place. On gender equity she said a number of senior staff within the DoE were in fact women, especially chief executive officers and chairpersons of state owned entities. At the next meeting the DoE would make a detailed presentation to the Committee with all the relevant figures. The majority of Chief Financial Officers within the DoE were also women.

On the matter between Eskom and the DoE, she said it was one which had always been a discussion point, especially on staffing matters, as a result the DoE was looking to have its members on Eskom’s Board. She agreed that lines of accountability have remained blurred and a clear management structure was being devised. Transversal functions between the DoE and provincial departments would also be determined by clear prescripts. She agreed that there needed to be clear terms of reference between the Department of Public Enterprises and the DoE. The DoE has never had a formal Memorandum of Understanding signed with municipalities even though they receive funds from the DoE.  

She said the concerns raised by Members are mainly policy issues which the DoE has also looked into. Policy certainty needed to take place collectively. The DoE’s Energy Master Plan would be developed in consultation with the Committee; inputs from the Committee would be considered even before the first draft is finalized. Recommendations from Members were therefore very welcome. An Advisory Committee for the Minister would be set up and Members were invited to be involved. On fracking, she said the relevant legislation was currently underway. The Minister of Mineral Resources has been asked to hold back on some legislation which would impact some energy policies and directives. On renewable energy, more time was needed for the DoE to come back and discuss alternatives. The Inter-Ministerial Committee Reports would be made available to the Committee, provided they do not contain any classified information. The ISMO Bill needed some serious amendments and some institutional restructuring also needed to take place before the Bill could be finalized. Short-term solutions to energy problems would come from various departments working together.

Deputy Minister Majola responded and said the piloting was in relation to financial transfers to municipalities; an attempt to assist municipalities especially around their shortages around critical skills. The pilot was for capacitating municipalities. On tariffs, she said Eskom supplied electricity directly and municipalities had their own powers. Greening the economy was a very expensive exercise and all costs and benefits need to be considered. The DoE has a responsibility to protect the environment while also moving the country’s goals forward. IPPs have been very useful and it would therefore be useful to also consider the long term implications of these programmes. A sustainable energy mix was under consideration. The Committee would be a key partner in assisting communities in their understanding of the various DoE entities and directing people on where to go for assistance.

The Chairperson suggested that all other matters be responded to in writing.

Mr Maqubela said the vacancy rate within the DoE was at 8.4% and the DoE was working towards a 50/50 representation of women at senior management level. The DoE was currently at 43%, the staff complement was 42% women and 48% male. He agreed that there was a need for the DoE to come back and give a more comprehensive response to the Committee around the volatility of prices and how the DoE plans to tackle the matter. He said levies were a National Treasury competence. However the Carbon Emissions Tax was initiated for behavioral change among motorists. All funds were used for the benefit of all citizens.

Mr Aphane agreed that a lot of the question could be answered by a presentation to the Committee. In addition, the afternoon session of the meeting, where entities would be making presentations, would answer some of the questions raised by Members.

Dr Barnard responded to the question on illegal connections and said the combined channels between municipalities, Eskom and the DoE were essential to addressing the problem. Communities also needed to play an active role in this regard because reaching informal areas was still a major challenge for the DoE. Backyard dwellers were also a concern. The DoE had a Free Basic Electricity (FBE) programme which supplied free electricity to people who could not afford electricity, in addition tariffs were designed in blocks so upper and lower tariff users pay different tariffs.

Mr Mbambo responded that Koeberg has been successfully producing electricity for the last 30 years and the plan was to ensure that the plant continues to do so for the next 30 years.

The Chairperson thanked Members and the DoE for their contributions and the DoE for their presentations.

Meeting was adjourned.

Apologies: Mr A Plouamma (EFF)

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