ATC140711: Report of the Portfolio Committee on Energy on the Strategic Plan 2014/15 – 2019/20, Annual Performance Plan and Budget Vote No. 29 of the Department of Energy, dated 10 July 2014
Electricity and Energy
REPORT OF THE PORTFOLIO COMMITTEE ON ENERGY ON THE STRATEGIC
PLAN 2014/15 2019/20, ANNUAL PERFORMANCE PLAN AND BUDGET VOTE NO.
29 OF THE
DEPARTMENT OF ENERGY, DATED 10 JULY 2014
1.
Introduction
1.1.
Subject of the report
The subject of this report is to report back to the
National Assembly (NA) on the Portfolio Committee on Energys findings after
evaluating the Strategic Plan and assessing the Budget Vote No 29 of the Department
of Energy.
1.2.
Background
Strategic Plans
identify strategically important outcome orientated goals and objectives
against which public institutions medium-term results can be measured and
evaluated by Parliament, provincial legislatures and the public. Annual
performance plans identify the performance indicators and targets that the
institution will seek to achieve in the upcoming budget year. The annual budget
sets out what funds an institution is allocated to deliver services. The Annual
performance plan shows funded service-delivery targets or projections. The
annual budget indicates the resource envelope for the year ahead, and sets
indicative future budgets over the medium term expenditure framework (MTEF).
The budget covers the current financial year and the following two years.
At the beginning of every year, the Minister of Finance
tables before Parliament, amidst great expectation and anticipation by South
Africans, a detailed outline of the States Budget: how much money will be
or ought to be spent, on what, in that financial year.
Thereafter, various government Departments present their
budget votes before Parliament -specifying how they intend reconciling their
resources with service delivery imperatives as outlined by the President of the
Republic of South Africa in the State of the Nation Address. One of the main statutory
functions of Parliament is to discuss, pass and oversee the States Budget. The
Department of Energys Budget (Vote No. 29) was referred to, for consideration
and reporting.
In compliance with the referral by
the National Assembly, the Committee held a Strategic Plan, Annual Performance
Plan and Budget Vote briefing on 01 July 2014 with the Department of Energy
(the Department) to consider its Budget Vote and strategic plan. The Committee
did raise a concern about the time constraints in adopting this budget.
1.3.
Objectives of the report
The objectives of the report are as follows:
-
To describe and analyze the key strategic priority areas of the Department
of Energy over the MTEF;
-
To conclude on implications and make recommendations thereto.
2.
Department of Energy
2.1.
Strategic Plan
The Department of
Energy (DoE) was established
in May 2009 the outcome
was the split of the Department of Minerals and Energy into the Department of
Energy and Department of Mineral Resources
The Department of
Energys
aim
is to f
ormulate energy policies, regulatory frameworks and legislation, and
oversee their implementation to ensure energy security, promotion of
environmentally friendly energy carriers and access to affordable and reliable
energy for all South Africans.
Its
mission
is to regulate and transform the sector for the provision of secure,
sustainable and affordable energy
The core business of the Department is premised amongst others on the
Energy White Paper of 1998 as well as the National Energy Act, 2008 (Act No. 34
of 2008) which, amongst others mandates the Department to ensure that diverse
energy resources are 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.
In carrying out this mandate, the Department develops legislation;
undertakes programmes and projects; and in some instances, transfer resources
to various implementing agencies and state owned entities (SOEs).
Organisational structure
The approved organisational structure consists
of the following seven branches:
-
Energy Policy, Planning & Clean Energy:
Ensure evidence- based
planning, policy setting and investment decisions in the energy sector to
improve energy security, through supply and demand side options, and
increase competition through regulation.
-
Petroleum and Petroleum Regulations:
Manage the regulation of petroleum and petroleum products to ensure
optimum and orderly functioning of the petroleum industry to achieve
governments developmental goals.
-
Energy Programmes and Projects:
Manage, co- ordinate and monitor programmes and projects focused on
access to energy.
-
Nuclear Energy:
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.
-
Corporate Services:
To provide corporate support to the DOE.
-
Governance and Compliance:
To ensure good corporate governance and compliance by the DOE and
its SOEs.
-
Financial Management Services:
To provide financial management, accounting and supply chain
management services to the DOE.
DoE
posts
Total No of Posts on DoEs
approved establishment: 814
Total No of Funded Posts:
569
Total No of Unfunded Posts:
245
A process is underway with National Treasury to
deal with funding issues.
DoE
offices
The Department consists of a national office
that is situated in Gauteng Province
( Matimba
House);
and nine (9) Regional Offices that are situated in various provinces.
DoE is still sharing office space with the Department
of Mineral Resources (DMR) in seven Regional offices except for Cape Town and
Gauteng.
Strategic
outcomes of the DoE
The Department has the following Strategic
Outcomes:
Security of Supply by ensuring that energy supply
is secure and demand well managed;
Infrastructure development by facilitating an
efficient, competitive and responsive energy infrastructure network;
Regulation and Competition certainty by ensuring
that there is improved energy regulation and competition in the energy sector;
Universal Access and Transformation by ensuring
that there is an efficient and diverse energy mix for universal access within a
transformed energy sector;
Environmental Assets that are well protected and
continually enhanced by cleaner energy technologies.
Climate Change response by implementing policies
that adapt to and mitigate the effects of climate change.
Prudent Corporate Governance through implementation
of good governance practices for effective and efficient service delivery.
Align its key policies with the objectives of the
National Development Plan.
Entities
reporting 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.
Key
focus areas for 2014/15
Increase access to
electricity with an additional 265 000 grid connections and 15 000 non-grid
installations;
Increase momentum on the
installation of solar water heating units;
Finalise the Integrated
Energy Plan (IEP) with more detailed infrastructure plans;
Address maintenance and
refurbishment backlogs in the electricity distribution industry;
Strengthen the liquid fuels
industry; and
Facilitate the process
leading to the implementation of decisions taken on the nuclear programme.
2.2.
Budget Vote No 29
The Departmental budget has increased from
R
6.4
billion
in 2013/14
financial year to
7.4 billion
in 2014/15
. When taking inflation into account, the DoEs budget increased by
7.6
percent. It is important to point
out that, in the previous financial year (2013/14), the Departments budget had
decreased by
7.2
percent.
The substantial share of this budget amounting to
R
4.1 billion
is appropriated
to the
Electrification and Energy Programme and Project Management
. This is
followed by the Clean Energy Programme with
R
1.98
billion
. The Nuclear Energy
Programme received an allocation of
R
850.5
million
. Allocation to the administration programme is
R
244.1
million
.
Petroleum and Petroleum
Products Regulation, as well as Energy Policy and Planning programmes received
the lowest Departmental budget allocations of
R82.7 million
and
R52.6
million
respectively.
As can be seen in the table below, allocations to
all Departmental programmes have increased, in nominal terms (when excluding
inflation).
The Departments focus over the medium term will continue to be on
expanding the integrated national electrification programme to increase the
number of households with a connection to the electricity grid and the number
of non-grid connections; provide substation infrastructure; and promote energy
efficiency through the continuation of the solar water geyser programme. As a
result,
93.2
percent of the
Departments budget is expected to be transferred to the implementing
municipalities and agencies, and the state owned company, Eskom. According to
the National Treasury, transfer payments for the integrated national
electrification programme, and the Energy Efficiency and Demand Side Management
(EEDSM) programme, constitute on average
67.4
percent and
15.5
percent of total
expenditure over the medium term.
Table
1: Budget Allocations Energy
Programme
|
Budget
|
|
Nominal Rand change
2014/15
|
Real Rand change
2014/15
|
|||
R million
|
2013/14
|
2014/15
|
Nominal
Increase /Decrease in
2014/15
|
Real Increase /Decrease in
2014/15
|
|||
Administration
|
212.8
|
244.1
|
31.3
|
17.0
|
14.71 per cent
|
8.01 per cent
|
|
Energy Policy & Planning
|
45.0
|
52.6
|
7.6
|
4.5
|
16.89 per cent
|
10.06 per cent
|
|
Petroleum & Petroleum Products Regulation
|
69.3
|
82.7
|
13.4
|
8.6
|
19.34 per cent
|
12.37 per cent
|
|
Electrification & Energy Programme & Project Management
|
3 946.2
|
4 199.2
|
253.0
|
7.8
|
6.41 per cent
|
0.20 per cent
|
|
Nuclear Energy
|
730.8
|
850.5
|
119.7
|
70.0
|
16.38 per cent
|
9.59 per cent
|
|
Clean Energy
|
1 483.3
|
1 986.5
|
503.2
|
387.2
|
33.92 per cent
|
26.11 per cent
|
|
|
|
|
|
|
|
|
|
TOTAL
|
6 487.4
|
7 415.6
|
928.2
|
495.3
|
14.31 per cent
|
7.63 per cent
|
|
Source: National Treasury (2014) Vote
29 Energy
.
5.1
Programme Analysis
The Department has six programme areas: Administration;
Energy Policy and Planning; Petroleum and
Petroleum Products Regulation; Electrification and Energy Programmes and
Project Management, Nuclear Energy and Clean Energy.
Programme 1: Administration
The purpose of programme 1 of the Department
is to provide corporate, executive, financial management and accounting;
information and communication technology; supply chain; asset management
support to the Department; to ensure good corporate governance; and compliance
by Department and/or the Energy Sector.
The budget increased by
R10.2 million
(11.4 percent in real
terms) from
R219.6 million
in
2013/14 to
R244.0 million
in the
2014/15 financial year.
In 2013/14, the programme had 321 filled
posts, the majority of which were in salary levels 7 to 10. Expenditure on
compensation of employees increased significantly over the medium term mainly
due to additional funding of R29.5 million out of a total of R66 million to
improve the human resource capacity of the Departments support service
structure in order to implement these and other objectives. This expansion in human
resources is expected to result in an increase in expenditure on communication,
training and development, and audit fees over the same period. Over the medium
term, it is expected that the establishment will increase to 329 posts, which
also accounts for the strong growth in the compensation of employees budget to
support human resource capacity in the line functions.
The largest share of the budget amounting to
R91.1 million
is appropriated to Corporate Services. The allocation
has increased from the previous year by
11
percent
in real terms.
There is also
an increase in allocation to the Departmental Management sub-programme, an
increase of
6 percent
when taking
inflation into account. Allocation to office accommodation has also increased
by almost
6 percent
in real terms. As
can be seen in the table below, the allocation to other sub-programmes has
increased, although when taking inflation into account a decrease in allocation
on the Ministry, Finance Administration and Audit services sub-programmes can
be seen.
Table 2: Administration
sub-programmes
Programme
|
Budget
|
Nominal Increase / Decrease in 2014/15
|
Real Increase / Decrease in 2014/15
|
Nominal Percent change in 2014/15
|
Real Percent change in 2014/15
|
|
R million
|
2013/14
|
2014/15
|
||||
Ministry
|
24.8
|
25.4
|
0.6
|
-
0.9
|
2.42 per cent
|
-3.56 per cent
|
Departmental Management
|
45.6
|
51.4
|
5.8
|
2.8
|
12.72 per cent
|
6.14 per cent
|
Finance Administration
|
35.3
|
35.4
|
0.1
|
-
2.0
|
0.28 per cent
|
-5.57 per cent
|
Audit services
|
5.3
|
5.5
|
0.2
|
-
0.1
|
3.77 per cent
|
-2.28 per cent
|
Corporate Services
|
77.2
|
91.1
|
13.9
|
8.6
|
18.01 per cent
|
11.12 per cent
|
Office accommodation
|
31.4
|
35.2
|
3.8
|
1.7
|
12.10 per cent
|
5.56 per cent
|
Total
|
219.6
|
244.0
|
24.4
|
10.2
|
49.30
|
11.40
|
Programme 2: Energy Policy
and Planning
The purpose of the programme on Energy Policy
and Planning is to ensure evidence based planning, policy setting and
investment decisions in the energy sector to improve the security of energy
supply, regulation and competition.
The budget for this programme increased by
R
3.2
million
(15.3 percent in real terms) from
R47.2 million
in 2013/14 to
R53.5 million
in the 2014/15
financial year.
The largest share of the budget amounting to
R25.3 million
is appropriated to the Energy Planning sub-programme.
Allocation to other programmes has also increased in the 2014/15 financial year,
except a decrease of
5.3 percent
(in
real terms) on allocations to the
Electricity, Energy
Efficiency and Environmental Policy sub-programme.
Table 3: Energy Policy and
Planning sub-programmes
Programme
|
Budget
|
Nominal Increase / Decrease in 2014/15
|
Real Increase / Decrease in 2014/15
|
Nominal Percent change in 2014/15
|
Real Percent change in 2014/15
|
|
R million
|
2013/14
|
2014/15
|
||||
Policy Analysis and Research
|
3 827.0
|
4 425.0
|
598.0
|
339.7
|
15.63 per cent
|
8.88 per cent
|
Energy Planning
|
21 740.0
|
25 356.0
|
3 616.0
|
2 135.7
|
16.63 per cent
|
9.82 per cent
|
Hydrocarbon Policy
|
13 378.0
|
14 519.0
|
1 141.0
|
293.4
|
8.53 per cent
|
2.19 per cent
|
Electricity, Energy Efficiency & Environmental Policy
|
8 256.0
|
8 283.0
|
27.0
|
-
456.6
|
0.33 per cent
|
-5.53 per cent
|
Total
|
47 201.0
|
52 583.0
|
5 382.0
|
3
212.2
|
41.11
per cent
|
15.36
per cent
|
Programme 3: Petroleum and
Petroleum Products Regulation
The purpose of programme 3 on Petroleum and
Petroleum Products Regulation is to manage the regulation of petroleum and
petroleum products to ensure the optimum and orderly functioning of the
petroleum industry and invariably achieve Governments development goals.
The budget for this programme increased from
R68.8 million
in 2013/14 to
R82.
7 million
in the 2014/15
financial year.
The
Regional Petroleum
Regulation offices
sub-programme received the biggest share of the budget, from
R25.4 million
in 2013/14 to
R30.4 million
in the 2014/15 financial
year. Expenditure in the
Petroleum Compliance, Monitoring and
Enforcement
sub-programme has also increased from
R13.6 million
in 2013/14 to
R16.2
million
in the 2014/15 financial year. Allocation to the Fuel Pricing
sub-programme has decrease by
2 percent
when taking inflation into account.
Table 4: Petroleum and
Petroleum Products Regulation sub-programmes
Programme
|
Budget
|
Nominal Increase / Decrease in 2014/15
|
Real Increase / Decrease in 2014/15
|
Nominal Percent change in 2014/15
|
Real Percent change in 2014/15
|
|
R million
|
2013/14
|
2014/15
|
||||
Petroleum Compliance, Monitoring & Enforcement
|
13 662.0
|
16 277.0
|
2 615.0
|
1 664.7
|
19.14 per cent
|
12.19 per cent
|
Petroleum Licensing and Fuel Supply
|
15 280.0
|
21 051.0
|
5 771.0
|
4 542.0
|
37.77 per cent
|
29.73 per cent
|
Fuel Pricing
|
14 373.0
|
14 920.0
|
547.0
|
-
324.0
|
3.81 per cent
|
-2.25 per cent
|
Regional Petroleum Regulation offices
|
25 491.0
|
30 497.0
|
5 006.0
|
3 225.6
|
19.64 per cent
|
12.65 per cent
|
Total
|
68 806.0
|
82 745.0
|
13 939.0
|
9 108.3
|
80.35
per cent
|
52.31
per cent
|
Programme 4:
Electrification and Energy Programme and Project Management
The purpose of
the above programme is to manage, coordinate and monitor programmes and
projects focused on access to energy.
.
The budget allocation for this programme has increased from
R3.9 billion
in 2013/14 to
R4.1 billion
in the 2014/15 financial
year. The programme is divided into five sub-programmes. As can be seen in the
table below, there is a decrease in budget allocation in two sub-programmes,
namely,
Energy Regional Office Programme and Projects Management Office a
decrease of
38 and 36 percent
respectively. A large amount of the budget (
4.1 million
) is appropriated to the Integrated National
Electrification Programme.
Table 5: Electrification
and Energy Programme and Project Management sub-programmes
Programme
|
Budget
|
Nominal Increase / Decrease in 2014/15
|
Real Increase / Decrease in 2014/15
|
Nominal Percent change in 2014/15
|
Real Percent change in 2014/15
|
|
R million
|
2013/14
|
2014/15
|
||||
Integrated National Electrification Programme
|
3 914 233.0
|
4 165 901.0
|
251 668.0
|
8 461.0
|
6.43 per cent
|
0.22 per cent
|
Energy Regional Office
|
11 881.0
|
7 831.0
|
- 4 050.0
|
- 4 507.2
|
-34.09 per cent
|
-37.94 per cent
|
Programme and Projects Management Office
|
13 273.0
|
8 994.0
|
- 4 279.0
|
- 4 804.1
|
-32.24 per cent
|
-36.19 per cent
|
Electricity Infrastructure/Industry Transformation
|
7 676.0
|
9 798.0
|
2 122.0
|
1 550.0
|
27.64 per cent
|
20.19 per cent
|
Community Upliftment Programmes and Projects
|
5 474.0
|
6 688.0
|
1 214.0
|
823.6
|
22.18 per cent
|
15.04 per cent
|
Total
|
3 952 537.0
|
4 199 212.0
|
246 675.0
|
1
523.0
|
-10.07
per cent
|
-38.68
per cent
|
Programme
5: Nuclear Energy
The purpose of programme 5 is to manage the
South African nuclear energy industry and control nuclear materials in terms of
international obligations, and nuclear energy legislation and policies to
ensure the peaceful use of nuclear energy.
The budget allocation for this programme has increased by
R92 million
(55 percent in real
terms) from
R708.7 million
in 2013/14 to
R850.5 million
in the 2014/15 financial year. As can be seen in the table
below, there is a significant percentage increase in budget allocation in all
sub-programmes.
Table 6: Nuclear Energy
sub-programmes
Programme
|
Budget
|
Nominal Increase / Decrease in 2014/15
|
Real Increase / Decrease in 2014/15
|
Nominal Percent change in 2014/15
|
Real Percent change in 2014/15
|
|
R million
|
2013/14
|
2014/15
|
||||
|
|
|
|
|
|
|
Nuclear Safety and Technology
|
694 456.0
|
832 246.0
|
137 790.0
|
89 203.1
|
19.84 per cent
|
12.85 per cent
|
Nuclear Non-proliferation and Radiation
|
5 504.0
|
7 338.0
|
1 834.0
|
1 405.6
|
33.32 per cent
|
25.54 per cent
|
Nuclear Policy
|
8 838.0
|
10 918.0
|
2 080.0
|
1 442.6
|
23.53 per cent
|
16.32 per cent
|
Total
|
708 798.0
|
850 502.0
|
141 704.0
|
92
051.3
|
76.70
per cent
|
54.71
per cent
|
Programme
6: Clean Energy
The purpose of the programme on Clean Energy is
to manage and facilitate the development and implementation of clean and
renewable energy initiatives, as well as energy efficiency and demand side
management initiatives.
The budget for this programme increased from
R1.5 billion in
2013/14 to
R1.9
billion
in the 2014/15 financial year. Energy Efficiency and Renewable
Energy sub-programmes received a biggest share of the budget,
R1.8 billion
and
R168.4 million
respectively. Climate Change and Designated National
Authorities sub-programme received
R7.6
million
.
Table 7: Clean Energy
sub-programmes
Programme
|
Budget
|
Nominal Increase / Decrease in 2014/15
|
Real Increase / Decrease in 2014/15
|
Nominal Percent change in 2014/15
|
Real Percent change in 2014/15
|
|
R million
|
2013/14
|
2014/15
|
||||
Energy Efficiency
|
1 358 631.0
|
1 810 348.0
|
451 717.0
|
346 028.1
|
33.25 per cent
|
25.47 per cent
|
Renewable Energy
|
140 364.0
|
168 437.0
|
28 073.0
|
18 239.6
|
20.00 per cent
|
12.99 per cent
|
Climate change and Designated National Authority
|
7 279.0
|
7 690.0
|
411.0
|
-
37.9
|
5.65 per cent
|
-0.52 per cent
|
Total
|
1 506 274.0
|
1986
475.0
|
480 201.0
|
364 229.8
|
58.89
per cent
|
37.94
per cent
|
Source: National Treasury (2013) Vote
29 Energy
.
9.
Observations and findings
·
The current Director-Generals term of office is
coming to an end at the end of November 2014 and the Department is already in
the process of filling the post.
·
Members raised concern regarding the Departments
senior management gender representivity.
·
On the issue of accountability and monitoring the
funding which is allocated to ESKOM, the Department acknowledged that the lines
of accountability is blurred and that these need to be addressed, where for
example there need to be clear terms of reference between the Department of
Energy and the Department of Public Enterprises, to whom ESKOM reports.
·
The accountability of funds allocated to
municipalities (from the department) remains a challenge as there are no
mechanisms in place to address these shortcomings,
·
The Minister assured members that the Energy Master
Plan will be developed in consultation with the Committee, and that inputs from
the Committee will be valued and appreciated.
·
The
Inter-Ministerial Committee Reports will be
made available to the Committee, provided they do not contain any classified
information.
·
According to the Department greening the economy is an
expensive exercise and all costs and benefits need to be considered.
·
The current staff compliment of the Department is 42%
women and 58% male.
·
The department indicated that carbon tax levies is the
National Treasurys competence.
·
The Free Basic Electricity (FBE) programme
provides for free electricity to people who are unable to afford electricity.
In addition to FBE, tariffs are designed in blocks so upper and lower tariff
users pay different tariffs.
·
According to the Department of Energy, the
Koeberg Nuclear Power Station has been successfully producing electricity for
the last 30 years and Eskom has plans to ensure the plant has a further active
life.
10.
Conclusion
The Portfolio Committee on Energy will continue to fulfil
its Constitutional mandate. It is guided by the Parliamentary rules in
conducting the oversight on the functioning of the Department of Energy. This
is done to ensure proper and effective functioning and compliance with the
legislation and policy requirements.
11.
Recommendations
Having
considered the Strategic plan and Budget Vote of the Department of Energy, the
Portfolio Committee on Energy (PCE) recommends that the House supports the
Budget Vote 29: Energy and further recommends as follows:
The Minister of Energy is
requested, within the current financial year, to:
1.
Conduct
an overall assessment of funding of the Department of Energy, to establish if
the department is correctly funded to deliver on all the areas that need
attention for energy resource development in SA.
2.
Expedite
the delivery of the various pieces of legislation and policy documents that are
still outstanding. These include the new draft Integrated Energy Plan and
Integrated Resource Plan which are critical for energy planning in South
Africa.
3.
Focus
on the development of key and critical skills in the various sectors of energy
including, amongst others, engineering, nuclear, renewable and electricity
distribution.
4.
Ensures security of electricity supply, in the
short term, is made a priority, with the various stakeholders and Government
departments, to develop a mechanism to prevent load shedding in South Africa.
5.
Place emphasis on the Solar
Water Heater programme. The Department envisaged one million units be rolled
out by 2015 of which only 400 000 have been rolled out thus far.
Challenges include:
local content, the
involvement of all spheres of government, maintenance of units.
6.
Place emphasis on the
roll-out of the National Electrification programme.
7.
Finalise
the proposed Gas Utilisation Master Plan and report regularly on its progress
to the Portfolio Committee on Energy.
8.
Ensure
that the restructuring of the Central Energy Fund (including its subsidiary
companies) are empowered to meet the future demands of South Africa.
9.
Ensure
that the National Energy Regulator (NNR) has the requisite skills and resources
able to manage the new nuclear build programme.
10.
Assess
the legislative framework of the National Energy Regulator of SA (NERSA) to
ensure that they are empowered to execute their duties.
11.
Ensure
that National Energy Regulator of SA (NERSA), in conjunction with the
Department of Energy and the SA Local Government Association (SALGA), ensure
greater compliance of municipalities to NERSAs determinations.
12.
Explore
SANEDIs role as an Energy Efficiency Champion for South Africa.
13.
Develop
an end state vision for the electricity sector.
Report to be considered
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