Committee Report on Energy Budget

Energy

16 May 2017
Chairperson: Mr F Majola (ANC)
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Meeting Summary

The Committee met for recommendation and approval of the second draft Report of the Portfolio Committee on Energy, Budget Vote No 26 of the Department of Energy. The Committee’s recommendations were summarised on seven specific issues the Department should prioritise during the current financial year.

After the Committee’s first draft considerations, the proposed topics covered matters related to the Central Energy Fund strategy and governance; the hiving-off the Petroleum Agency of South Africa and African Exploration Mining and Finance Corporation. The Department’s overview of PetroSA’s viability and sustainability; the illegal sale of strategic fuel stock by the Strategic Fuel Fund; the installation of solar water heaters across the country (focusing on addressing maintenance and repairs thereof); the development of mechanisms to address irregularities in the Liquefied Petroleum Gas sector; the state of electricity distribution in South Africa;  holding hearings and promoting participation regarding the Nuclear New Build Programme, in order to demystify nuclear energy; to prioritise the finalisation of the Integrated Energy Plan and the Integrated Resource Plan; and to develop legislation regarding to the “end state” of the electricity supply industry.

The Committee engaged in extensive discussions on the different recommendations, ending with disagreement and not approving the Budget Report, in a session where most Members were absent.  

Meeting report

The Chairperson reminded the Portfolio Committee on Energy that during the previous session it had agreed that it would correct the first draft of the Budget Report and summarise those recommendations that were more relevant in 7 points. Thus, the Committee would focus on new recommendations and approving the Report. He also welcomed a new member of the ANC to the Committee.

The Committee Secretary, Mr Arico Kotze, took the Committee through the seven specific recommendations debated from the first draft, which were:                 

  1. Prioritise matters relating to the Central Energy Fund, with specific reference to:
  2. The turnaround strategy of the CEF, in the 2nd Quarter of 2017/18.
  3. Governance challenges between CEF and its subsidiaries, in the 2nd Quarter of 2017/18.
  4. Hiving-off of the Petroleum Agency of South Africa (PASA) and African Exploration Mining and Finance Corporation (AEMFC), in the 2nd Quarter of 2017/18.
  5. Address the challenges at the National Oil Company, PetroSA, focusing on its viability and sustainability, in the 2nd Quarter of 2017/18. Subsequent to the presentation of the report the Committee will consider taking further appropriate measures.
  6. Submit and present the report to the Committee on the sale of strategic fuel stock by the Strategic Fuel Fund (SFF), in the 2nd Quarter of 2017/18.
  7. Prioritise the solar water heater programme, focusing on developing plans and/or programmes to address and prioritise challenges relating to the current installed solar water heaters (focusing on addressing maintenance and repairs thereof).
  8. Develop mechanisms to address irregularities in the LPG sector, as highlighted in the enquiry into the LPG sector by the Competition Commission of South Africa.
  9. Brief the Committee on the state of electricity distribution in South Africa, in the 3rd Quarter of 2017/18.
  10. Wide public engagement and participation should be held across the country regarding nuclear and develop advocacy campaigns focusing on the Nuclear New Build Programme, in order to demystify nuclear energy.
  11. Prioritise the finalisation of the IEP and the IRP and present to the Committee in the 3rd Quarter of 2017/18 prior the submission thereof to Cabinet and develop advocacy campaigns focusing on the energy mix.
  12. Develop and/or amend legislation and/or policies to address issues relating to the “end state” of the electricity supply industry.

Discussion

The Chairperson pointed out that though reference was made in the report to the completion of these recommendations within the financial year, it was possible to establish more specific timelines for action. Recommendations 4 and 5 could be improved, particularly in understanding recommendation 5 as a broader engagement with the Committee. This would include a public hearing, with the purpose of allowing a greater inclusive debate on whether Nuclear Energy is the best option for the country.

Mr M Matlala (ANC) stated that including more concrete timeframes was necessary for accountability purposes though he mentioned it could extend the process of approving the Budget Report.

Mr J Esterhuizen (IFP) stated that on recommendation 1.d reference needs to be included regarding further accountability on PetroSA, as the Board of this entity had stolen R3 billion from the tax-payers. On recommendation 5, the DoE is failing on granting the constitutional rights of all South Africans to enjoy transparency and accountability as per the Constitution.

Mr G Mackay (DA) pointed out that most of the recommendations were very similar to last year’s recommendations. The recommendations needed to be stronger and backed with potential sanctions.
Regarding the proposed call for inquiry on PetroSA he would prefer a common proposition as a Portfolio Committee, but if this was not the case the DA would move alone and present it.
On the sale of South African resources to a foreign enterprise, this was not a challenge anymore as the issue is already facing court, and that what needs to be dealt with at this stage is an investigation and prosecution of the responsible parties. The Report did not reflect what the whole committee senses.

On the issue of the solar heaters, Mr MacKay argued that the recommendation was inadequate and even more permissive that last year’s recommendation. Also, recommendation 4 needed to be changed as in his opinion it was time to clearly ask the DoE how are they going to take the country out of the problem.

He suggested recommendation 5 should be deleted, as it is not the role of Parliament to advocate for Nuclear and that that is the job of Eskom. Given that the national plans for energy development had not been finalised on the Integrated Energy Plan and Integrated Resource Plan, the promotion or advocacy of an energy source that has not been properly integrated is irrelevant.

On recommendation 6, the IPP programme might be rated illegal, so again the fact of the matter is that no procurement should be processed without finalisation of the IEP and IRP as they constitute the framework of national energy planning. The stipulation of this requirement before any further steps is crucial. Finally, he asked for clarity on what the DoE meant by the end state” of the electricity supply industry. The Committee needs to be stronger and speak with one voice given that the DoE has not been responsive during the past three years.

Mr Esterhuizen agreed with Mr Mackay in that much of the recommendations seemed to be taken from previous years.

The Chairperson said the Committee generally agrees on the different concerns raised by Members, but it should focus on what is urgent and doable for the Committee, to later enforce these recommendations. At this stage, the timeframes need to be realistic given the circumstance of having new Management in the DoE.

Regarding the so-called turnaround strategy, the DoE committed to bring a detailed report to the Committee when it is ready. The issue is generally of timing. However, the Committee should expect the DoE to clarify how it is going to deal with the matter and if they are finally carrying legal prosecution over those that were responsible for the transaction.

Addressing Mr Mackay’s proposition of presenting an inquiry on the state of PetroSA, the Committee is expecting a report from the Competition Commission next week, and if this does not happen then the Committee could go ahead with the call for an inquiry. The Chairperson agreed on explaining what the Committee meant by the “end state”. Regarding recommendation 6, the DoE committed to come to the PCE before going ahead with any process.

Mr Mackay disagreed with The Chairperson on the approach and the assumption regarding the necessity of approving the IEP and IRP before any further actions are taken in the energy sector, based on page 9 of the Budget Report. The specific request regarding the finalization of the IRP is to elaborate new case scenarios with the new factors and public comments included before bringing the document to the Committee and Parliament. Both actions should be before starting Cabinet processes, otherwise the IRP would go straight to the Executive with no possible oversight from the Committee or the House. This amendment would be non-negotiable for the DA as both the IRP and IEP are the most important documents for the planning of electricity in the country. If the documents do not follow this process the DA will interdict the Nuclear process.

The Chairperson did not understand what M Mackay disagreed with, and that the goal of the Committee was to pass the Budget Report.

Mr Mackay said he was not looking for disagreement, he would simply like to ensure the DoE commits to this process and that it does not repeat past situations; if this could be rephrased the DA would support sections 1.d and 1.e, as both entities had been highly problematic. He exemplified the DoE’s lack of commitment to real responsiveness with the lack of a presentation with evidences about Project Apollo. This was one more example of the multiple opportunities given to the DoE, and thus a clear mention to potential reprisals if they failed to do their job is needed.

The Chairperson was not comfortable with going ahead and presenting a call for an inquiry into PetroSA.

Mr Esterhuizen, on the IRP, said separation of powers stated clearly that policy-making and decision making should be a produced in Committees. He felt very strongly about the lack of accountability in PetroSA’s expenditure, as well as for Eskom, which had not created extra production yet was continuously assisted financially.

The Chairperson said the only topic to be discussed is the proposed call for an inquiry on PetroSA. This could be included as a statement of intention to take further action.

Mr R Mavunda (ANC) asked whether the Committee had the power to call for an inquiry. He reminded the Committee had brought up recommendations during the previous session of discussion, thus he did not expect new points would be added.

The Chairperson insisted that only clarification on the issue of the enquiry was required to approve the Budget Report, therefore the intentions from the PCE were clear. He considered it unfair to put the Minister in such a situation without giving her the benefit of the doubt after she had expressed discontent with the state of the Department. He also mentioned that the DoE had to bring a Report on the status of the electricity network system in addition to the related national programme. He opened the floor to discuss whether the recommendation on the “end state” of the energy system should be amended.

Mr Mackay said it was not necessary to remove the entire recommendation, instead the Report should explain the “electricity supply system” and that would be sufficient to fully understand its meaning.

The Chairperson said the processes the IRP and IEP had to be presented before further action in the electricity sector anyway, thus the issue was covered as per the Report. The Committee needs to find consensus on this issue, and further discussion would be taken afterwards. He agreed with Mr Esterhuizen that the way Eskom manages supply of electricity without a growing economy is problematic.

Mr Mackay was happy with recommendation 5, as he did not agree on advocating for one single component of the energy mix. Revisiting recommendation 1.e, he insisted that the sale is no longer a challenge for the Department but a pure illegality, thus the DoE needs to specify how it intends to deal with it. In this regard, the Department needs to do more than just provide a report on the matter and explain how is it going to reverse the illegal sale, especially when the DoE promised to bring an assessment from the Office of the Auditor General (AG) since November 2016.

The Chairperson said Mr Mackay was second guessing and doubting the intentions of the Department to provide the agreed.

Mr Mackay insisted he would like to include specific requests given that for the past three years the DoE had failed to be responsive. Particularly in the case of the illegal sale of South African natural resources, the Department, including the current Deputy Minister, misled the Committee even when they were questioned about this matter. The Department had not specified which report they should bring to the Committee, and thus the Committee should state specifically which one it wants, otherwise the DoE would provide the less damaging to their past actions. By not being specific the Committee is failing on its oversight mandate.

The Chairperson and Mr G Mackay engaged in an off the record discussion about their disagreement.

Ms Z Faku (ANC) disagreed with Mr G Mackay, stating that advocacy of Nuclear Energy was not necessarily problematic as it is a source of energy that has been accepted by the DoE, thus the action is oriented towards giving more information to the public.

The Chairperson said that by not including this advocacy and promotion of Nuclear Energy, the Committee would be denying an open discussion on this energy source.

Mr Mackay said he did not have a problem with talking and informing about Nuclear Energy, but by recommending that the DoE advocates for Nuclear, the Committee promotes one single component of the energy mix above the rest. This would happen in a context where the IRP had not been finalised and the directorate for energy development had not been established. IPPs and the rest of the energies are also part of the DoE energy planning and are not advocated individually. He was happy with including an entire separate point recommending a broader advocacy programme following the approval of the IRP.

The Chairperson suggested Mr Mackay should be more democratic with other opinions.

M Mackay reiterated he did not understand why prioritising advocacy for nuclear energy, particularly when its procurement is being challenged in court.

The Chairperson continued stating that the country is facing a debate on introducing nuclear procurement, which was the reason for paying attention to it. He counter argued that the introduction of Nuclear Energy was not being challenged itself, but its processing.

Ms Faku suggested including a new recommendation regarding the whole of the energy mix to accommodate Mr Mackay’s concern.

The Chairperson compromised to introduce such reference for the final version. He emphasised that the important aspect to focus on at this stage is improving public participation.

The Chairperson called on Mr Mackay to find consensus for the approval of the Budget Report.

Mr Mackay clarified that there were too many issues his party could not support from the Report, and that the consideration of a new draft would have to go through the DA’s caucus. He stated this decision is based on the lack of trust he had on the DoE. He said to be happy to adjourned the meeting.

The Chairperson asked Mr Mackay to support the approval of the Report.

Mr Mackay stated he would not be able to support the document without authorisation of his caucus.

The Chairperson and Mr Mackay engaged in a discussion on whether Mr Mackay could preserve his right not to decide before consulting with his caucus.

Mr Mackay committed to personally write the Chairperson once a decision has been made.

The Chairperson asked for a mover and a seconder to pass the Budget Report.

Mr Mackay reminded that the ANC had only 5 members and the rest of the parties were not present, thus the Report could not be approved.

Mr Matlala suggested not to include the DA’s amendments in response to Mr Mackay’s position.

Ms Faku disagreed with Mr M Matlala and moved for the adoption of the report despite of Mr Mackay’s point.

The meeting was adjourned.

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