Department of Energy Strategic Plan 2015

Energy

17 March 2015
Chairperson: Mr F Majola (ANC)
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Meeting Summary

The Department of Energy delegation was led by the Minister of Energy, Ms Tina Joemat-Pettersson, with the Deputy Minister of Energy, Ms Thembi Majola, in attendance.

DoE consisted of seven branches: Energy Policy, Planning and Clean Energy; Petroleum and Petroleum Products Regulation; Energy Programme and Project Management; Nuclear Energy; Corporate Services; Governance and Compliance and Financial Management Services. The DoE had 847 posts approved, of these 630 were funded posts, 227 were unfunded. Some of the identified challenges within the energy space were: generation capacity, distribution Infrastructure, cost of energy, volatility of petroleum product prices, aging infrastructure, barriers for new technology entrance, Energy Efficiency/Demand Side Management measures, and access to energy, economic transformation and budget Baseline Reductions.

Legislation currently under review included:
- Electricity Regulation Amendment Bill
- Energy Regulator Amendment Bill
- Gas Amendment Bill
- Electricity Industry Structure Bill (NESMO), previously Independent System and Market Operator Bill (ISMO)
- Strategic Fuel Fund (SFF) Bill.

The Department identified seven key priority areas to focus on in the implementation of the Strategic Plan and Annual Performance Plan (APP): electricity supply, petroleum and gas infrastructure, effective and efficient energy utilisation, policy and legislation, State Owned Entity (SOE) oversight, targeted training and communication.

Some of the questions raised by Members were: How could Nersa sustain its special pricing agreement with Billiton if it was leading South Africa to the brink of total blackout? What was Eskom paying for diesel per litre? Who was getting the rebate? Why was diesel not being regulated? What mechanisms were in place to prevent a terrorist attack at Pelindaba? When would the post of Director General be filled permanently? Why did Independent Power Producers still have no access to the grid? Why was there a lack of transparency around the country’s nuclear deals? What mechanisms were in place to ensure that filling stations in rural areas used prices which were regulated? When would the DoE return with a full report? When would the DoE deliver on the nuclear framework report? What were some of the updates on the Grand Inga Project, and how would these resolve the country’s electricity challenges? When would the DoE provide the updated Integrated Resource Plan (IRP) 2015 to the Committee? What was the difference between the ISMO Bill and the NESMO Bill? What were the strategic plans around utilizing PetroSA to its full capacity as an agent of transformation in the energy sector?

Meeting report

Chairperson’s opening remarks
Chairperson Majola welcomed the Minister and the Deputy Minister of Energy. At its previous meeting the Committee had received a briefing on the 5-Point Plan, there was agreement to meet and finalise discussions on the plan. However by Friday 20 March 2015, it was clear that a follow-up briefing would not be feasible. The Committee decided to continue with the briefing by the Department of Energy on the Strategic Plan, Annual Performance Plan and Budget Vote 2015/16.

Presentation: Strategic Plan, Annual Performance Plan
Minister of Energy, Ms Tina Joemat-Pettersson, indicated that the presentation was quite detailed.

Dr Wolsey Barnard, Acting Director General, said that the Department operated within the policies defined in the Energy White Paper of 1998, as well as legislative direction given in the National Energy Act which mandated the Department to ensure that diverse energy resources were available, in sustainable quantities and at affordable prices, to the  South African economy in support of economic growth and poverty alleviation, while taking into account environmental management requirements  and interactions amongst economic sectors.

He indicated that legislation currently under review included:
- Electricity Regulation Amendment Bill
- Energy Regulator Amendment Bill
- Gas Amendment Bill
- Electricity Industry Structure Bill (NESMO), previously Independent System and Market Operator Bill (ISMO)
- Strategic Fuel Fund (SFF) Bill.

The DoE had seven branches: Energy Policy, Planning and Clean Energy; Petroleum and Petroleum Products Regulation; Energy Programme and Project Management; Nuclear Energy; Corporate Services; Governance and Compliance and Financial Management Services. The DoE had 847 posts approved, of these 630 were funded posts, 227 were unfunded posts.

Some of the challenges within the energy space were:
- Generation capacity;
- Distribution Infrastructure;
- Cost of energy;
- Volatility of petroleum product prices;
- Aging infrastructure;
- Barriers for new technology entrance;
- Energy Efficiency/Demand Side Management measures;
- Access to energy;
- Economic transformation; and
- Budget Baseline Reductions.

The Department has identified seven key priority areas to focus on in the implementation of the Strategic Plan and Annual Performance Plan (APP): electricity supply, petroleum and gas infrastructure, effective and efficient energy utilisation, policy and legislation, State Owned Entity (SOE) oversight, targeted training and communication.

Programme 2 – Energy Policy and Planning
Mr Jacob Mbele, Acting Deputy Director-General: Policy Planning and Clean Energy, said the purpose of the branch was to ensure evidence-based planning, policy setting and investment decisions in the energy sector to improve energy security through supply- and demand-side management options and increase competition through regulation. Some of the branch’s strategic objectives included improving energy security, improving liquid fuels energy security by developing and implementing the Liquid Fuels 20-Year Infrastructure Plan, establishing mechanisms to prefund capital and create smooth price path over the long term and to review policy and regulations to ensure security of supply, to name a few.

Programme 3 – Petroleum and Petroleum Products Regulation
Mr Tseliso Maqubela, Deputy Director-General: Petroleum Regulation, said the purpose of the branch was to manage the regulation of petroleum products to ensure optimum and orderly functioning of the petroleum industry to achieve government's developmental goals. The sub-programmes in this branch were:
Petroleum Compliance, Monitoring and Enforcement
Petroleum Licensing and Fuel Supply
Fuel Price Regulation
Regional Petroleum Regulation Offices
Some of the strategic objectives within the branch were to ensure compliance monitoring and enforcement in the petroleum sector, promoting the transformation of the South African Petroleum and Liquid Fuels Industry through issuing of licenses, ensuring transparent fuel pricing of petroleum products.

Programme 4 – Energy Programme and Project Management 
Mr Mthokozisi Mpofu, Acting Deputy Director-General: Energy Programme and Project Management, DoE explained that the purpose of the branch was to manage, coordinate and monitor programmes and projects focused on access to energy. Sub-Programmes were:
Integrated National Electrification Programme
Energy Regional Offices
Programmes and Project Management Offices
Energy Infrastructure
Some of the strategic objectives for the branch were to ensure access to electricity by households, to enhance programmes and project management, to monitor energy infrastructure development and ensuring effective renewable energy.

Programme 5 – Nuclear Energy
Mr Zizamele Mbambo, Deputy Director-General: Nuclear, DoE said the purpose of the branch was to manage the South African nuclear energy industry and control nuclear material in terms of international obligations, nuclear legislation and policies to ensure the safe and peaceful use of nuclear energy. Sub-Programmes were:
Integrated National Electrification Programme
Energy Regional Offices
Programmes and Project Management Office
Energy Infrastructure
Some of the branch’s strategic objectives were to improve nuclear security, to strengthen the Control Nuclear Material and Equipment, to improve security of energy supply and to increase nuclear awareness.

Programme 6 – Clean Energy
Mr Lucas Mulaudzi, Chief Director, DoE said the purpose of the branch was to manage and facilitate the development and implementation of clean and renewable energy initiatives, Energy Efficiency/Demand Side Management EEDSM initiatives as well as coordinate climate change initiatives within the energy sector. Sub-Programmes were:
Energy Efficiency
Renewable Energy
Climate Change and Designated National Authority

Some of the strategic objectives within the branch were to coordinate and monitor the implementation of energy-related climate change response measures and environmental compliance, to coordinate and monitor the implementation of the EEDSM measures across all sectors and to ensure effective renewable energy.

Chairperson Majola thanked the DoE for the presentation. Due to time constraints, he suggested that both the Annual Performance Plan (APP) and the Budget Vote be presented on the 24 March 2015. Members needed to be given a chance to engage the DoE’s strategic plan.

Discussion
Mr P van Dalen (DA) thanked the DoE for the presentation. On the “user-pay” tariffs, he referred to the BHP Billiton special pricing agreements which the South African National Energy Regulator (Nersa) had no control over. BHP Biliton used about 10% of South Africa’s electricity and they needed to be shut down. What would happen when the country experienced a blackout? It would take about two weeks for the grid to start up again. Drastic measures needed to be taken by the DoE to improve the country’s electricity problems. Diesel was being procured for gas turbines at R16 per litre; however the price of diesel was not regulated, unlike petrol. The price of diesel was exorbitant, and these were the unintended consequences of policies such as Black Economic Empowerment (BEE). What was Eskom paying for diesel per litre? Who was getting the rebate? Why was diesel not being regulated?

On risk management of the nuclear pipeline, he said South Africa had plans to improve nuclear security however the DoE still could not account for nuclear materials due to international sanctions. What mechanisms were in place to prevent a terrorist attack at Pelindaba? He asked the Minister whether she was aware of the Harris, Nupen and Molebatsi Report of 2012 which dealt with the fishing disaster around fishing rights allocation, which the Minister presided on. The collapse was primarily as a result of a lack of leadership within the Department of Agriculture, Forestry and Fisheries at the time.

Ms L Makhubele-Mashele (ANC) urged the Chairperson to provide guidance; Mr van Dalen was raising issues which were not related to energy. The Chairperson was asked to provide direction on the number of questions a Member could ask.

Chairperson Majola asked that Mr van Dalen ask questions which were relevant to the meeting.

Mr van Dalen asked how it would be ensured that the DoE was not run down like the Department of Agriculture, Forestry and Fisheries which Minister Joemat-Pettersson had presided over.

Chairperson Majola said the tone of questions being raised would not make the Committee functional. This was a concern and it needed to be addressed.

Mr J Esterhuizen (IFP) thanked the DoE for the presentation. He said the National Energy Regulator of South Africa (NERSA)-approved R12 billion fuel pipeline was still not operational. Why was this the case? Independent Power Producers still had no access to the grid. When would this be addressed? He raised a concern around the use of diesel at Eskom; the Committee needed a detailed explanation about this. He said there was a lack of transparency around the country’s nuclear deals, the Committee and the country as a whole needed to know whether the government was going to be spending trillions of rands on nuclear or not. As a result of this uncertainty around nuclear in the country, the IAEA was unlikely to grant Eskom a nuclear license. South Africa was on the verge of a total blackout.

Mr M Matlala (ANC) asked why the DoE has had an Acting Director-General for the past 12 months. When would this post be filled permanently? On targeted training for sector SOEs; which were these SOEs, could a list be provided to the Committee? With regard to inspectors which oversaw the compliance of petrol stations, he said in most cases in rural areas filling station equipment was old and petrol usually very expensive because they were not regularly monitored. What mechanisms were in place to ensure that these filling stations used prices which were regulated?

Mr M Mackay (DA) welcomed the Minister to the meeting. He asked that the DoE provide clarity on the Integrated Resource Plan (IRP) and the scrapping of IRP 2013, when would the plan be updated? When would the price path of electricity be made available to the Committee? He commended the DoE for the work they were doing with regards to access to electricity, however affordability was still a problem. He asked that the Minister provide a date as to when she would come back to the Committee to address last week’s briefing on the 5-Point Plan. When would the DoE return with a full report? When would the DoE deliver on the nuclear framework report? What were some of the updates on the Grand Inga Project, and how would these resolve the country’s electricity challenges? When would the DoE provide an updated IRP 2015 to the Committee? What was the difference between the ISMO Bill and the NESMO Bill?

Ms Makhubele-Mashele said some of the challenges within the DoE were due to a lack of clear communication from the DoE. The DoE’s work needed to be reflective of the department’s direction. For example, South Africa was the only country operating 10KW fuel cell technology in rural areas. However this work was not being communicated to the general public. South Africa was one of the countries which had achieved great strides in turning coal into fuel; these were some of the positives which the DoE needed to communicate. She asked that the DoE make available its communication strategy to the Committee so that where there were gaps, Members could advise. There was no mention about PetroSA’s viability during the presentation. PetroSA was one of the main agents of transformation within the sector. What were some of the strategic plans around utilizing PetroSA to its full capacity as an agent of transformation?

Ms T Mahambehlala (ANC) said the State of the Nation Address indicated that there was a need for radical transformation of the energy sector, through an energy mix. However the DoE’s petroleum regulation excluded gas and shale gas; DoE needed to be at the centre of radical transformation. The President indicated that there needed to be structural change around state owned companies in addressing some of the challenges within the energy sector; what role was PetroSA playing in this regard?

Chairperson Majola said Members should engage within the boundaries of debate. Members have the right to ask questions however engagement should be done with respect. Members should not make it difficult for the Minister to function.

Minister Joemat-Pettersson replied that the position of Director-General underwent interviews last year, and the matter was currently with state security, after which it would be with the Department of Public Service and Administration. A decision would then be taken by Cabinet.

Deputy Minister Majola apologized for her absence at last week’s meeting. She said the 5 Point Plan was a programme being run from the Union Buildings through the Office of the Deputy President. It includes a number of Departments like the Department of Cooperative Governance and Traditional Affairs, the Department of Public Enterprises, National Treasury and a few others. The main function was to try and coordinate the work of all these departments. The aim was to address the current challenges around the energy space. Once the Deputy President has made announcements about the different roles of the departments, the DoE would be able to come back to the Committee to engage Members on the DoE’s specific role within the War Room.

Dr Barnard responded on the “user-pay” principle, saying in terms of tariffs, it was an acceptable principle. Energy sources and technology needed to be sustainable in the long run; unfortunately this would mean the DoE needed to consider the tariff path from time to time. On Nersa and the sustainability of the special pricing agreements, he said the DoE has taken note of the concern and Nersa would have to come and answer to the Committee. On fuel price and regulation, specifically around diesel to Eskom he said Eskom responded to the Department of Public Enterprises, and that was outside of the DoE’s mandate. On SOEs training, he said the DoE was currently training six SOEs.

On the IRP 2013 being scrapped, he said this was not the case, the updating of the IRP was a rolling process. The DoE was looking at finalizing the IRP 2015. On Grand Inga, he indicated that the treaty was signed by Parliament at the end of November 2014; the project was broken down into different phases. The first phase was about establishing a technical work force between the two countries; transmission lines needed to follow specific routes. The visit to the DRC the previous week was a follow up meeting between the South African government and the DRC. This was a project the DoE was very excited about as it would open up the continent. He said the ISMO Bill would be brought back to Parliament in a different format. The DoE’s communication plan would be presented to the Committee in the coming week’s meeting.

Mr Maqubela responded about the regulation of diesel and said in terms of the White Paper on Energy Policy, the aspiration was to move towards liberalization of the pricing framework. Diesel was used mainly in industry and, through bulk buying, industries were able to negotiate better pricing. Ideally the DoE would like to encourage more competition among diesel dealers, rather than to regulate. On the pipeline, he said it was operational, what has not happened was to introduce other products into the pipeline. On service providers charging exorbitant prices, especially in rural areas, he said DoE inspectors tried to reach every corner of the country. They had a dispensation allowed by the Director General and the Chief Financial Officer to use vehicles which would be able to reach deep into the most rural of areas. He said the PetroSA matter was a fundamental issue which the DoE would like to invite PetroSA to be part of in the coming week’s discussions. A list of SOEs which have undertaken targeted training would be provided to the Committee. On the regulation of shale gas, and the DoE’s involvement, he said this was a matter which needed more time for discussion.

Chairperson Majola said all outstanding issues around Nersa and PetroSA would be discussed the coming week. Eskom did not report to the DoE, however because of the money the DoE allocated to Eskom, the Committee would call Eskom to brief it. Therefore if there were specific issues which Members wanted to raise with Eskom, the entity should be called in.

Mr Mackay said he was happy to have the conversation about the pricing path at the Committee’s breakaway, however the question to the Minister around the scrapping of the IRP 2013, and when the Committee would be getting the nuclear framework agreements, were two questions which should be responded to at the meeting.

Mr Esterhuizen said Eskom indicated that it needs about R50 billion to sustain itself. He said it was a concern that Eskom’s current rating was based on financial support from government.

Ms Mahambehlala relayed a message to the Minister and said the Minister needed to be a conveyer belt to the Committee. The discussions between the 5-Point Plan and the War Room needed to be integrated into the work of the Committee; if this did not take place the Minister would have problems. The Minister could not sit in Cabinet coordinating programmes around what the Committee ought to be doing. The announcement on the specific roles of Committees indicates that the Committee supposedly did not know what its role was. The Committee knew exactly what its role was. The Minister needed to take that message to the Deputy President; Members were not going to be run amok, they needed to be afforded opportunities to contribute to the War Room, even if it meant the Chairperson was part of those discussions.

The meeting was adjourned.

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