Department of Energy 2014/15 performance: Auditor-General & Department of Performance Monitoring & Evaluation briefings

Energy

13 October 2015
Chairperson: Mr F Majola (ANC)
Share this page:

Meeting Summary

The Auditor General of South Africa indicated that for the 2014/15 financial year the DoE, the National Nuclear Regulator (NNR), National Energy Regulator of South Africa (NERSA) received an unqualified audit with no findings. The Central Energy Fund (CEF), Equalisation Fund (EQF) and Sanedi received unqualified outcomes with findings. South African Nuclear Energy Corporation (NECSA) audit report had not yet been finalised and the National Radioactive Waste Disposal Institute (NRWDI) and the Electricity Distribution Industry (EDI) audit reports were outstanding. The Auditor General focused on six key areas: financial health, human resources and consequence management, information technology, quality of submitted financial statements, quality of submitted performance reports and compliance with legislation.

With regard to financial health of the portfolio, AGSA indicated that the Central Energy Fund (CEF) and PetroSA in particular were very concerning. PetroSA had an obligation to rehabilitate the abandoned offshore and onshore operations valued at R9.3 billion which was currently only partially funded. Irregular expenditure in the portfolio was significantly increased from the R1 592 million in 2013/14. Fruitless and wasteful expenditure of R1.3 million was identified by auditors and R3.4 million by the auditee. AGSA indicated that it struggled to meet with the Minister throughout the year which was why the slide on Minister’s commitments to address root causes for the audit findings was blank. The Ministry of Energy according to AGSA was the most difficult to work with.

Members were concerned about whether CEF has a strong enough balance sheet to cover the rehabilitation costs at PetroSA. From where would this money come? When would the shareholder compact be brought before the Committee? What was AGSA’s overall opinion about the entities they were reporting on? Could AGSA advise the Committee on how it could best do its oversight work and how it could contribute to fixing such problems? What tools did Members of Parliament have to help in turning such cases around? What measures were in place to ensure that funds were ring-fenced for rehabilitation? How were the outstanding audits progressing and when would the audit opinions be concluded? When would the information be made available to the Committee and to the public? What was the funding gap for rehabilitation at PetroSA? What impact would this have on CEF if it were to cover this amount?

The Department of Planning Monitoring and Evaluation (DPME) provided a progress report on DoE’s Medium-Term Strategic Framework 2014-2019 implementation. DPME used the Management Performance Assessment Tool (MPAT) to evaluate all national departments. Using its performance rating system, the presentation highlighted progress in key targets and challenges and what was being done to address these challenges. Where appropriate, links were drawn to the Nine Point Plan.

The following targets were achieved by the DoE:
- Amendment of the National Energy Regulator Act and the Electricity Regulation Act
- Concluding the Renewable Energy Independent Power Producer Programme (REIPPP)
- The procurement process for Base load Coal fired power generation has been started and RFP issued. As at 31 December 2014, a total of 1 795 MW of energy from IPPS was connected to the national grid.
- Inga Project treaty signed September 2014 and ratified by Parliament in November 2014
- 10% reduction in electricity cable theft each year of MTSF. An Inter-Ministerial Committee has been established to develop interventions to address the illegal use of electricity including copper theft.
- All projects (Medupi, Ingula and Kusile) in the current build programme in the Constructions phase.
- The construction of the 100 MW Sere Wind Farm is on track for full commissioning by end of March 2015. All 46 turbines have been installed

The following targets were not achieved by the DoE:
 No appropriate mechanism was in place to prefund capital and create a smooth price path over the longer-term for Eskom. The target to establish an independent system operator was not met; the Independent Systems and Market Operator (ISMO) Bill was submitted to the Committee and processed but the Bill was rejected. The Electricity Industry Structures Bill was being developed to replace the ISMO Bill. This Bill would ensure that the structure was appropriate to deliver the electricity required by the economy. The ring-fencing of electricity distribution of 12 of the largest municipalities has been partly achieved. No funding mechanism was in place for the upgrading of existing refineries to ensure they meet new fuel-quality standards. Some of the key challenges faced by the DoE were that: electricity supply constraints were a significant impediment to economic growth, load shedding which was a high cost to the economy, delays in building Medupi and Kusile, and the mounting costs of using diesel.

Questions asked by Members included: Why was there no mention of nuclear or nuclear development? What has the Minister been doing these last two years if no mention was made of nuclear in the MTSF? Whose idea was nuclear if it is not in the government programme? What were the reasons for replacing the ISMO Bill when the process on the Bill was completed and finalised during the Fourth Parliament? What was DPME’s view on Eskom; was Eskom properly located under the Department of Public Enterprises? Members were unhappy with the content of the report from DPME; there were also proposals that nuclear needed to be ring-fenced and that there need to be a nuclear entity for government, yet this was not on the DPME report. What was the completion date for the Medupi, Ingula and Kusile construction phases? When would these come online? The DPME was an independent assessor of the DoE; how could the DPME be located in the Presidency and still remain independent?

Meeting report

The Chairperson indicated that the Committee would be faced with a very hectic schedule these next couple of days because in the coming week the Committee would need to finalise its Budgetary Review and Recommendations Report (BRRR).  

Auditor-General South Africa (AGSA) on 2014/15 audit outcomes of Department of Energy

Ms Zolisa Zwakala, Business Executive, AGSA, indicated that the role of AGSA was to reflect on the audit to assist the Committee in its oversight role in assessing the performance of the department.  The Committee would take this into consideration when producing its Budgetary Review and Recommendations Report (BRRR).

Ms Lufuno Mmbadi, Senior Manager, AGSA, indicated that for the 2014/15 financial year the DoE, the National Nuclear Regulator (NNR), the National Energy Regulator of South Africa (NERSA) received an unqualified audit opinion with no findings. The Central Energy Fund (CEF), Equalisation Fund (EQF) and Sanedi received unqualified audit opinion with findings. South African Nuclear Energy Corporation (NECSA) audit report had not yet been finalised and National Radioactive Waste Disposal Institute (NRWDI) and the Electricity Distribution Industry (EDI) audit reports were outstanding. The Auditor General focused on six key areas: financial health, human resources and consequence management, information technology, quality of submitted financial statements, quality of submitted performance reports and compliance with legislation. The DoE had good ratings for financial health and human resource and consequence management. However information technology was concerning and intervention was required for CEF, EQF and Sanedi on the quality of the submitted financial statements, the quality of submitted performance reports and on their compliance with legislation.

The annual performance reports of six entities were audited; 67% of them were reliable and useful compared to 57% in the previous financial year. The Equalisation Fund (EQF) did not prepare an annual performance report and Sanedi obtained a disclaimer on one programme and an adverse on another. With regard to financial health of the portfolio she said CEF, specifically PetroSA were concerning. PetroSA had an obligation to rehabilitate and abandon its offshore and onshore operations valued at R9.3 billion which were currently not fully funded. Irregular expenditure in the portfolio was at R3.9 million identified by auditors and R18.6 million identified by the auditee, a significant increase from the R1 592 million in the 2013/14 financial year. With regard to fruitless and wasteful expenditure she said R1.3 million was identified by auditors and R3.4 million by the auditee. Some of the root causes to be addressed were that management was slow to respond in addressing the root causes of poor audit outcomes, together with the lack of consequences for poor performance and transgressions and with compliance with legislation not reviewed and monitored. With regard to the status of key commitments by the Minister to address root causes for the audit findings, she indicated that there were no commitments from the Minister of Energy.

Discussion
The Chairperson asked that further explanation be given on NECSA, CEF/ PetroSA. What was meant by condonation?

Ms Zwakala replied that EDI was in the process of being closed down, because it has not been closed down by law it still existed as an entity. EDI was therefore still required to submit financial statements annually. The audit has not been done. NECSA’s audit was not yet finalised, they have submitted the annual financial statements and they were being audited, however the process has not yet been finalised.

Ms Zwakala indicated that NECSA has been exempted from submitting an Annual Report by the 30 September deadline through a letter submitted by the Minister of Energy, requesting an extension for the tabling of the Annual Report, pending the finalisation of the audit

Chairperson Majola said the Committee was not aware of the letter.

Ms Mmbadi replied to the questions on PetroSA that as at 31 March 2015, there was a provision for the rehabilitation costing R9.3 billion. This provision included some wells; however some wells were very remote when considering the cost of rehabilitating them. There was a disclosure in the financial statements that in the incoming financial year AGSA was not able to quantify this amount. With regard to the funding gap she said in terms of the NEMA there needed to be some kind of funding to show the provision of R9.3 billion. As at 31 March 2015 PetroSA did not have the cash to back this R9.3 billion. The rationale was that if PetroSA was required to rehabilitate the environment they should have the funds to do this. PetroSA therefore approach CEF and CEF was able to provide a letter of support indicating that should the need arise they would back PetroSA to be able to fulfil their obligations of rehabilitation.

On the question on condonation, Ms Mmbadi replied that in terms of the Act, after irregular expenditure has been identified the entities need to investigate to see if anybody was liable for the fruitless and wasteful expenditure. After the investigation, if there was no one liable the entity could request condonation of the expenditure because no one was negligent.

Chairperson Majola clarified and said for record purposes the letter from the Minister was recorded in the ATC (Announcements, Tablings, Committee Reports) of 29 September 2015.

Mr P van Dalen (DA) said one of the Auditor General’s reports indicated that there was no shareholder compact in place and the key performance measures and indicators included were not agreed upon by the executive authority of the Department of Energy (DoE) as required by Treasury regulations. Could AGSA explain what was going on there? The Committee has been asking for the shareholder compact for all the State Owned Companies (SOCs) which fell under DoE so that Members could fulfill their oversight responsibilities. The shareholder compact was the agreement between the Minister and the entities on key performance indicators. AGSA was a tool which assisted Parliament to evaluate the work of the department. What was AGSA’s overall feeling about the entities which they were currently reporting on?

According to the AGSA report there was a big leadership problem within these entities; this was of serious concern, together with the skills shortages highlighted. Some accounting officers were cited as not having put in place enough measures to ensure there was no fruitless and wasteful expenditure; this seemed like a trend throughout the entities under DoE. Could AGSA advise the Committee on how it could do its oversight work and how it could contribute to fixing such problems? What tools did Members of Parliament have to help in turning such cases around? AGSA also indicated that the Minister did not make any commitments; could AGSA explain this? What informed this finding? According to AGSA the new NEMA Act made provision for the rehabilitation of wells provided that this work was budgeted for in advance. Why was there not more money put aside for these projects? What measures were in place to ensure that funds were ring-fenced for rehabilitation? According to the presentation, CEF has committed to cover the money needed by PetroSA; was CEF’s balance sheet strong enough to cover those costs? Where was this money going to come from?

Mr M Mackay (DA) said it was fairly inexplicable that NECSA had not submitted its Annual Report. The entity was in deep trouble; it did not have a functioning board, it was currently under investigation by the DoE, according to media reports NECSA was currently being audited by the Auditor General and an audit opinion has been finalised. How was the audit progressing and when would the audit opinion be concluded? When would the information be made available to the Committee and to the public? What was the exact figure of the funding gap for rehabilitation at PetroSA? What impact would this have on CEF if it were to cover this amount? It was unlikely that PetroSA would be able to raise commercial funds on this quoted amount; the taxpayer would then have to cover some of these costs.

Ms T Mahambehlala (ANC) said the report was not very clear and AGSA’s findings were that the CEF and Sanedi were a cause for concern. Most of the questions which Members were asking should be directed to the DoE and not to AGSA; she suggested that AGSA be excused from the meeting so that Members could interrogate the DoE. With regard to PetroSA and the rehabilitation of wells and the cost implications thereof, she asked whether the information was tabled to the Auditor General; if so, why was the information not included in the report? The drilling of wells had serious cost implications. She asked about the blank slide about the Minister’s commitments to address root causes for the audit findings; was there information which was omitted from the report; information which was supposed to have been presented to the Committee?

Chairperson Majola agreed that AGSA has provided the Committee with all the information they had and they would respond to questions which they were competent to respond to. However there were still fundamental questions which needed to be responded to by DoE and the entities concerned. There were meetings scheduled for this in the next two days. He agreed that it was difficult to get a comprehensive understanding of what was going on within the DoE and its entities from the report given by AGSA.

Ms Mmbadi responded to the question on the shareholder compact, saying in terms of Treasury Regulation 29.2.2, on an annual basis the entities should give the executive authority a shareholder compact. A shareholder compact was given to the DoE, however when the document was submitted there was a covering letter indicating that there were some entities which had not been finalised. In terms of the legislated timelines, PetroSA was not finalised when the shareholder compact was submitted to the DoE.

Ms Zwakala responded to the question on which entities within the DoE were giving signs of growing concern and problems. She said one was definitely PetroSA because of the huge impairment. These calculations were as at 31 March 2015, and as new information became known, new adjustments needed to be factored in within the year. PetroSA had projected certain numbers for the amount of the gas which could be extracted from the wells and so on; however during 2015 this outlook changed very drastically and very quickly. There were less reserves than anticipated. Oil prices were also not favorable during the year under review. On the question of how Members of Parliament could assist in terms of oversight, she said this was a difficult question to answer, but from the planning stage rigour needs to be applied straight away. The figures presented needed to be read in line with the bigger picture. There were growing concerns about the finances of some of these entities and these have been highlighted in the audit report. On the question about no commitments being made by the Minister, she said the DoE was one of the ministries where AGSA really struggled to get hold of the Minister to set a date for it to sit with the executive authority. AGSA in this particular portfolio has not had much luck which was why the slide on the Minister’s commitment was empty. On NECSA’s audit process, she said AGSA received financial statements from NECSA but the office was not at liberty to divulge more information because the issue was being handled internally first. She agreed that the Committee needed to hear directly from the entities about what was going on.

Mr Carl Wessels, Senior Manager, AGSA said they were prepared to come back and brief the Committee once the audit process for NECSA has been completed.

Chairperson Majola asked was the NECSA Annual Report going to be tabled and when?

Mr Wessels said the tabling of the Annual Report was not in AGSA’s hands.

Ms Irene Ramafola, AGSA Manager, responded to the question on what tools Members had to help deal with irregular expenditure, saying the important issue was consequence management. The Committee could emphasize this during their oversight to prevent recurring irregularities.

Mr Wessels added that there were processes and legislation set out to deal with irregular expenditure. Therefore during big procurement processes, internal audit could be asked to go through the compliance process to make sure that all was in order through an independent review. The entities also needed to be very careful when setting specifications for tenders, that they were clear upfront. Pockets of noncompliance also need to be ironed out before a contract and/or tender was awarded. Irregular expenditure was a very manageable process. He indicated that irregular expenditure within government has gone down, with the exception of PetroSA however.

Mr Mackay indicated that he was struggling with AGSA’s report on NECSA. The Committee was unable to fulfill its oversight role if they did not get any input from AGSA on NECSA. AGSA has given the Committee nothing to approach NECSA with when they meet; there was no Annual Report and there was no audit opinion. He suggested that if AGSA was sensitive about giving information because it was a public meeting, members of the public could be excused and AGSA could brief the Committee in a closed meeting. NECSA was a very important entity, especially regarding the nuclear deal.

Chairperson Majola said a suggestion was made earlier that AGSA be released so that Members could have their own discussion about how to approach the matter of NECSA. If necessary, AGSA would be asked to come back to the Committee.

Ms Ramafola responded to the question about how much the PetroSA shortfall was, saying funding for rehabilitation was approximately R4.6 billion. With regard to the letter from CEF, she indicated that PetroSA has contacted CEF and processes for the funding model were being evaluated. There were financial instruments which PetroSA could explore such as bank guarantees to help with funding. It would be difficult for the CEF Group to cover this shortfall. An evaluation would therefore need to be done to see how this shortfall would be covered.

Ms Mahambehlala said AGSA has acknowledged that there were huge impairments at PetroSA; how were these packaged in the AGSA report?

Ms Zwakala said the PetroSA audit report made mention of the impairments, especially Note 13. The impairments were valued at R9.3 billion. The Annual Report needed to be looked at in totality.

The Chairperson thanked AGSA for the presentation.

Department of Planning Monitoring and Evaluation (DPME) progress report on Department of Energy
Mr Rudi Dicks, DPME Deputy Director General: Outcome Four, indicated the Medium-Term Strategic Framework (MTSF) 2014-2019 was government’s first five year implementation plan of the National Development Plan (NDP). DPME used the Management Performance Assessment Tool (MPAT) to evaluate all national departments. The progress report reviewed overall progress against the targets in the MTSF for the 14 outcomes over the financial period 2014/15. Using the NDP as the blueprint, DPME and Statistics South Africa were working with departments to ensure that indicators were refined so they were always measurable, accurate, reliable and time-bound. Using the performance rating system, the presentation highlighted progress in key targets, key challenges and what was being done to address these challenges. Where appropriate, links were drawn to the Nine Point Plan.

The MTSF focused on achieving radical socio-economic transformation through ensuring a stable macroeconomic and financial framework to support employment-creating growth, reducing workplace conflict and improving cooperation between government, business and labour, enhancing opportunities for small businesses and historically excluded vulnerable groups and expanding public employment schemes, among other initiatives.

The following targets were achieved by the DoE:
- Amendment of the National Energy Regulator Act and the Electricity Regulation Act
- Concluding the Renewable Energy Independent Power Producer Programme (REIPPP)
- The procurement process for Base load Coal fired power generation has been started and RFP issued. As at 31 December 2014, a total of 1 795 MW of energy from IPPS was connected to the national grid.
- Inga Project treaty signed September 2014 and ratified by Parliament in November 2014
- 10% reduction in electricity cable theft each year of MTSF. An Inter-Ministerial Committee has been established to develop interventions to address the illegal use of electricity including copper theft.
- All projects (Medupi, Ingula and Kusile) in the current build programme in the Constructions phase.
- The construction of the 100 MW Sere Wind Farm is on track for full commissioning by end of March 2015. All 46 turbines have been installed

The Renewable Energy Independent Power Producer Programme (REIPPP) was the first large scale private sector procurement in the electricity generation industry in South Africa and one of the largest renewable energy programmes in the world. South Africa was now considered amongst the top 10 country leaders in investing in renewable energy independent power producer (IPP). These REIPP projects translate into approximately R193bn in private sector investment. To date, projects totalling approximately 6 300 MW have already been commissioned under the four bid windows and are selling power to the grid, helping to reduce the current supply shortfall.

The following targets were not achieved by the DoE:
No appropriate mechanism was in place to prefund capital and create a smooth price path over the longer-term for Eskom. The target to establish an independent system operator was not met; the Independent System and Market Operator (ISMO) Bill was submitted to the Committee and processed but the Bill was rejected. The Electricity Industry Structures Bill was being developed to replace the ISMO Bill. This Bill would ensure that the structure was appropriate to deliver the electricity required by the economy. The ring-fencing of electricity distribution of 12 of the largest municipalities has been partly achieved. No funding mechanism was in place for the upgrading of existing refineries to ensure they meet new fuel-quality standards. Some of the key challenges faced by the DoE were that: electricity supply constraints were a significant impediment to economic growth, load shedding which was a high cost to the economy, delays in building Medupi and Kusile, and the mounting costs of using diesel.

He indicated that not all the elements of the energy mix have been fully explored; gas, biofuels and co-generation need to be accelerated. Priority must be given to those projects that can bring energy into the grid within the shortest period possible, while considering medium to long term issues. A supportive regulatory environment was needed to promote other private sector initiatives to support co generation for economic development. There needed to be a move towards cost-reflective tariffs while continued efforts were put in place to mobilise society to use electricity sparingly. Water usage applications for hydro-power generation such as Nu Planet Boston Hydro, Donora Farm Hydro, Karino Power and uThukela Hydro need to be finalised. With regard to management performance, governance and accountability within the DoE were dropping.

Discussion
Mr Mackay said the document was very intriguing. Why was there no mention of nuclear or nuclear development? What has the Minister been doing these last two years if no mention was made of nuclear in the MTSF? Whose idea was nuclear if it is not in the government programme? This report further raised concerns about the nuclear procurement deal. When would information on nuclear be brought before the Committee?

Ms Mahambehlala said the presentation was not clear as no objectives mentioned. This made it difficult for Members to measure the work of the DPME. With regard to consultations on the Amended National Energy Regulator Act and the Electricity Regulation Act; when did these consultations take place and who was consulted; why was the Committee not informed about this? The presentation indicated that the ISMO Bill would be replaced by another Bill; what were the reasons for this? The Bill was completed and submitted for approval during the Fourth Parliament, why was it going to be replaced? What was DPME’s view on Eskom; was Eskom properly located under the Department of Public Enterprises? The DoE was responsible for the nuclear build programme yet the country’s nuclear power plant was housed in a different department. On the fragmentation of energy in the country, she said petroleum regulation did not include gas and shale gas.

On the synchronization of Medupi Unit 6; was the DPME being realistic with the target set? She agreed with Mr Mackay that the report was not complete without including the nuclear build programme. The DoE was busy with the funding model yet DPME was not involved. She said the report focused on Eskom and not on the work of the DPME. The DPME made mention of considering relocating Eskom from the DPE to the DoE, how far was this process? Cabinet took a decision that 30% should be given to the private sector, how was this being implemented? With regard to the interventions required at DoE on the energy mix, fragmentation within the energy sector needed to be addressed. There were many renewable energy projects which were funded by the Industrial Development Cooperation (IDC); were these connected to the grid? She said the DPME report did not reflect that there was no energy master plan in place. There were proposals that PetroSA be designated as a national oil company; what was DPME’s views on this? There were also proposals that nuclear needed to be ring-fenced and that there need to be a nuclear entity for government, yet this was not in DPME’s report. She proposed that DPME come back to the Committee with the relevant information. Eskom had withdrawn from participating in the nuclear build programme because of capacity constraints yet this was also not included in the report. The Committee was also interested to hear DPME’s views on the Mineral and Petroleum Resources Development Act (MPRDA); oil and shale gas were competencies of the DoE, and they should not be dealt with by the Department of Mineral Resources (DMR). There were many issues which should have been included in the report and they were not.

Mr J Esterhuizen (IFP) agreed that the report lacked a lot of depth. He said the DMPE was formed as a result of market failure. The National Development Plan (NDP) was a very good idea but it was unfortunately being changed on a daily basis. The Integrated Energy Plan (IEP) has not been approved by Cabinet. The implications on nuclear costs, especially those pertaining to the environment were high and should have been included in DPME’s report. The solar water heater programme should have also been included in the report. On the monitoring of municipalities and the illegal use of electricity, a lot of money was being lost through illegal connections; what was DPME’s view on this?

Mr van Dalen said the MTSF target under reliable generation was a 10% reduction in electricity cable theft at the end of each MTSF year and, according to the report given, this target was achieved yet the South African Chamber of Commerce and Industry (SACCI) which monitored cable theft in South Africa show the theft statistics have increased. Where did the 10% decrease come from? What was the completion date for the Medupi, Ingula and Kusile construction phases? When would these come online? With regard to renewable energy, the Board at Eskom recently took a decision to suspend all IPP budget quotes on any renewable energy, putting a stop to the whole process until March 2018. Eskom had a natural opposition to renewables. This had the possibility to undo all the good work which the DoE has done. This was worrisome. It was also concerning that there was no mention of the nuclear build programme in the DPME report; was there even a nuclear programme? Performance management within the DoE did not look very good, according to DPME this seemed to be in decline.

Mr R Mavunda (ANC) asked where was Free Basic Electricity (FBE) in the DPME report. Government had a policy indicating that by 2012 FBE would have greatly assisted in dealing with poverty; how far had the DoE gone in meeting the target?

Chairperson Majola agreed that there needed to be a sizeable delegation from DPME so that there could be proper discussion on the matters and concerns raised by Members. The DPME was an independent assessor of the DoE; how could DPME be located in the Presidency and still remain independent? National security of supply should be the overriding principle which DPME focused on when dealing with the DoE. However the report did not give the impression that the DoE was being placed at a strategic level to assess all implications around security of supply; what was DPME saying about gas and nuclear? The Presidency should be playing a different role in ensuring that departments could focus on the things that mattered for the country.

Mr Dicks agreed with the Chairperson that the Director-General needed to be called in to have proper discussions together with other DPME colleagues. Timing has been awkward because there were so many other portfolio committee meetings currently taking place in Parliament. He clarified that DPME was not entirely independent; DPME had a reporting tool evaluating departments on their targets, working with the departments. DPME was reporting on the 2014/15 period, the significance of the nuclear build programme would still be reported on in the next period. The significance of the Gas Utilisation Master Plan (GUMP) and of gas as a baseload has become quite an important discussion within the Department of Energy. DPME has been working with DoE to look through the social economic impact of GUMP. Nuclear has also come as a very important baseload. DPME has called for a significant mix of energy resources and nuclear has been cited as part of the mix.

Some of the targets have been refined and have found their way to the MTSF. There was some degree of shifting with regards to targets. The two Bills were put to the Economic and Infrastructure Cluster and they were discussed there, recommendations were made there and those changes were effected by the DoE and processed through Cabinet for public consultation. That process was ongoing and it would be for DoE officials to indicate how far the process was. Some of the questions may require political intervention and it was difficult for him to say where Eskom should be located. What DPME has tried to do through the intervention of the Executive was to establish the War Room to try and bring together all those who were important players in the energy supply sector; and the War Room has achieved this objective. Engagements were intense and robust, and the issue of Eskom; where it should reside and what its mandate was, were part of those discussions. He said it would be useful for the Committee to discuss Eskom; even though the shareholding department was the DPE. Eskom in itself was a corporate entity and it has a board. Eskom had to take prudent financial decisions, however these decisions needed to be in line with the country’s objectives. He said there were discussions which took place outside of the parliamentary committees and DPME was committed to ensuring that these were always communicated to the Committees. He said the Department should be the one to respond to the ISMO Bill because that was a significant discussion. Any decision about the restructuring of Eskom would have significant impacts.

With regard to fragmentation, he said the regulatory environment needed to be looked at. The DoE needed to create a flexible regulatory environment that allows for more options to be managed such as greater participation from Independent Power Producers (IPPs). There was never an oversupply of generation capacity. With regard to Medupi and Kusile commissioning, this was a different challenge all together and further discussion was needed. On the 30% for IPP supply, he said the DoE has achieved this quite significantly. The Renewable Independent Power Producer Programme (REIPPP) was the largest private sector energy programme and it was therefore fairly significant. Most of the investment was driven by the private sector, with over R193 billion worth of investments. This was an important initiative and it was very successful. On the MPRDA question, he said this was one of those he would not be able to comment on. The MRPDA was to regulate minerals and other natural resources; there may be an argument from the DMR that the Department of Environmental Affairs should not interfere on environmental issues when DMR had the mandate. The DMR was busy with shale gas and was arguing that it was in their domain. On the solar water heater programme, he indicated that Cabinet has taken a decision to move the programme from Eskom to the DoE. This was one of the successful programmes which was initially run by Eskom and its functions were simply transferred to the DoE which would develop an implementation plan.

On FBE, he said this was quite a significant area; many of the municipalities have interpreted this in many different ways over the years. If there was a price path, electricity would become more expensive and there would need to be social interventions to make electricity more affordable for low income houses. There needed to be a way to deal with municipalities to ensure that they all interpret the FBE policy the same way and that there was consistency in implementation. He noted that Members had made many interesting inputs on the role of DPME and its partnerships with different departments.

Ms Mahambehlala asked about the cluster mentioned; was it a Cabinet cluster? If the Cabinet Cluster was consulted, it did not mean that the parliamentary committee was consulted.

Mr Dicks said it was the Economic Cluster for Directors General and Ministers.

Ms Z Faku (ANC) said the report was misleading. DPME should not try to justify things which were unjustifiable.

Chairperson thanked AGSA and DPME for the presentations and the Members for their engagement. All questions not responded to would be discussed in the following meetings. The meeting was adjourned.

Share this page: