ATC150623: Report of the Standing Committee on Appropriations on the Eskom Special Appropriations Bill [B16-2015] (National Assembly – Section 77), dated 23 June 2015

Standing Committee on Appropriations

REPORT OF THE STANDING COMMITTEE ON APPROPRIATIONS ON THE ESKOM SPECIAL APPROPRIATIONS BILL [B16-2015] (NATIONAL ASSEMBLY – SECTION 77), DATED 23 JUNE 2015

 

Having considered the ESKOM Special Appropriations Bill [B16 – 2015], referred to in terms of Section 13 of the Money Bills Amendment Procedure and Related Matters, Act No. 9 of 2009, the Standing Committee on Appropriations reports as follows:

 

Introduction

 

Section 213(2) of the Constitution of the Republic of South Africa, provides that money may be withdrawn from the National Revenue Fund only in terms of an appropriation by an Act of Parliament. The Appropriation Act sets out to appropriate money from the National Revenue Fund for the requirements of the State and to prescribe conditions for the spending of funds withdrawn. In executing this mandate, the Standing Committee on Appropriations, hereinafter referred to as the Committee, was established in terms of section 4(3) of the Money Bills Amendment Procedure and Related Matters Act, No. 9 of 2009, and herein referred to as the Act. In line with Section 13 (2) of the Act, the Committee has a responsibility to hold public hearings on any money bills and and report thereon to the National Assembly. To this end, an advertisement was published in national and community newspapers from 12 June to 14 June 2015inviting general public inputs.Furthermore, requests have been made to experts in the field to provide inputs on the Bill and public hearings were held on 19 June 2015 with the following institutions:

 

• Dr ST Bischof-Niemz - Council for Scientific and Industrial Research (CSIR);
• Mr H Trollip - Energy Research Centre of the University of Cape Town; and
• Prof TJ Lloyd - Cape Peninsula University of Technology and Mr RC Jeffrey – Econometrix Pty (Ltd)

 

In addition to the National Treasury which briefed the Committee on the Bill in its entirety, the following stakeholders were invited for comment:

 

• Department of Public Enterprise
• ESKOM
• Parliamentary Budget office
• Financial and Fiscal Commission (FFC)

 

1. Background& Overview of the Eskom Special Appropriation Bill

 

1.1        Background

 

In the 2015 Budget, the Minister of Finance announced that Government would allocate R23 billion of funding to Eskom and that the funds would be appropriated in three tranches: R10 billion in June 2015, R10 billion in December 2015, and R3 billion in 2016/17. It was further highlighted that this allocation would be funded through the sale of non-strategic government assets to ensure that there is no effect on the budget deficit.The Eskom Special Appropriation Bill (B16-2015) was therefore tabled by the Minister of Finance togive effect to this commitment which forms part of a cabinet approved support package to Eskom. The support package was approved by cabinet in September 2014 in response to financial challenges in Eskom. These financial challenges are mainly due to the following factors:

• Delays in infrastructure build programme which have resulted in cost overruns and electricity supply shortfalls;
• Maintenance backlogs which have led to the deterioration and unreliable performance of power plants and distribution centres resulting in high maintenance costs;
• Historic low tariffs which were inadequate to address future and current infrastructure investment; and
• Lower than anticipated electricity demand.

 

Table 1 below reflects the components of the support package which was approved by Cabinet in September 2014

 

Table1: 2014 Eskom Support Package

	Approved support for Eskom in applying for an overall tariff increase as determined by NERSA for the remainder of MYPD3 The support takes into account the R7.8bn already approved by NERSA in terms of the regulatory clearing account
	An equity injection of R23bn will be given to Eskom to help relieve the impact on electricity customers
Subordinated loan and debt	Conversion of the subordinated loan to equity was granted In addition to R200bn debt in MYPD3, Eskom will have to raise additional debt of R52bn
Eskom efficiency	Eskom will implement cost containment program Effective manage the build programme Eskomshould not invest in future coal mines No provision to be made for the additional R50bn Capex requirement Eskom must better manage its working capital Eskom needs to ensure that effective maintenance of its generation plants is carried out and efficient procurement is achieved, amongst others

Source: 2015 Department of Public Enterprise presentation

 

National Treasury reported to the Committee that significant progress has been made in raising funds through the sale of assets for the proposed R23 billion appropriation.

 

1.2Provisions of the Eskom Special Appropriation Bill

 

Clause 1(1) of the Bill set as a prerequisite for the appropriation of R23 billion the payment into the National Revenue Fund of the revenue from the sale of assets during the 2015/16 financial year. Clause 1(1) further provides that the appropriation is for the requirements of the Department of Public Enterprises in the 2015/16 financial year to enhance electricity generation capacity and security of supply. Funds will flow through the budget of the Department of Public Enterprises

In terms of Clause 1(2), the Minister of Finance (MOF) must, after considering the cash requirements of Eskom (as verified by the National Treasury), determine the amount and date of each transfer. The accounting officer of Department of Public Enterprises must transfer the money in terms of the PFMA and determinations of the MOF.

 

Clause 1(3) of the Bill enables the Minister of Finance to impose conditions on any part of the R23 billion appropriation. This is similar to the annual Appropriation Act and current Appropriation Bill for the 2015/16 financial year. The aim of these conditions is to promote and enforce transparency and efficient management in respect of revenue, expenditure, assets and liabilities of public entities as required by section 6(1)(g) of the PFMA. The Minister of Finance may also stop the use of any part of the appropriation until an imposed condition is met. The National Treasury must disclose such stoppage in its next quarterly report to the relevant Parliamentary Committees (i.e. Standing and Select Committees on Appropriations)

 

Clause 2 contains the short title.

 

 

1. Hearings on the Eskom Special Appropriation Bill

 

1. Department of Public Enterprise

 

The Department of Public Enterprises (the Department) indicated that in 2014 Eskom submitted an application to government for a support package highlighting various solution options with the ideal option of an average tariff increase of 19 per cent for 2015, 2016 and 2017. This option would have resulted in no need for state funding contribution.However, taking into consideration the impact thereof on the domestic economic climate, the approved tariff increases were 13 per cent thus necessitating the R23 billion equity injection.The Department highlighted that Eskom will focus on 3 primary issues to address its challenges i.e. strengthening its liquidity position to ensure financial viability, improving operational performance by prioritising critical maintenance and ensuring effective governance. The Department will monitor the implementation of these 3 primary focus areas.

 

The Department of Public Enterprises submitted that a combination of tariff price increases, business efficiency savings through Eskom’s Business Productivity Programme, additional borrowings and equity injection will result in an improvement of financial metrics over the period with favourable ratios being reached in 2017/18.

 

 

1. Eskom

 

In its submission, Eskom Holdings SOC Limited (Eskom) indicated that a strong and sustainable Eskom was required to ensure a sustainable economy. It was reported that there is currently a maintenance backlog and this has led to deteriorating power station availability and subsequent load shedding. In the short term, Eskom will prioritise risk maintenance in order to reduce the amount of unplanned maintenance and ensure sufficient capacity is available for planned maintenance.Eskom reported that it was in the process of finalising a turnaround strategy to address its financial situation, operations, and new-build power supply delivery.

 

Eskom submitted that the period 2006 to 2018 constitutes the electricity supply sector’s investment phase with stringent supply constraints and increasing tariffs to fund the new build programme. The period 2018 onwards is expected to be cash positive for power generation and debt is to be repaid. Eskom reported that it was in the process of undertaking a five year R280 billion Capital Expenditure (Capex) Programme comprising of about 8000 projects and that 32 generating units had been added since 2001 amounting to 121 units in total. The reported main drivers of the Capex programme were as follows:

 

• New-build supply capacity (R159 billion);
• Major capitalized overhauls (R29 billion);
• Refurbishments and replacements (R63 billion);
• Customer connections (R10 billion); and
• Legal, regulatory, safety, and environmental compliance (R19 billion).

 

Eskom’s total capital expenditure for the current year is R60 billion with new builds contributing 40 per cent to expenditure. Eskom indicated that its capital projects programme is on track with one unit from Medupi and two units from Ingula to be completed in the 2015/16 financial year. It was reported that the delays in the new build infrastructure programme have largely been due to Eskom’s contractors through strikes and technical non-performance.Furthermore, it was highlighted that deviations from the planned capital expenditure would have an impact on Eskom’s financial health and sustainability.

 

Eskom reported that at minimum it needed to break-even in the current financial year and that it would remain liquid within the same. This would therefore require a close monitoring of expenditure as well as improved sales and collections from customers in order to minimise impairment of revenue. Eskom indicated that the R23 billion equity injection would be used to fund capital expenditure and that this allocation as well as the conversion of the R60 billion loan into equity would improve Eskom’s gearing from 75 per cent to 67 per cent. Eskom reported that it plans to raise a total of R55 billion of debt securities for the 2016 financial year.

 

Eskom indicated that debt and equity financing is mainly utilised to close the gap where there is a shortfall in revenue funding.In terms of revenue collection, Eskom highlighted the benefits that can be derived from maximising prepayment across all the customer groupings. It was reported that prepayment would improve cash flows as an immediatebenefit as well as most of the balance sheet ratios. This would also be in effect an interest free borrowing mechanism and also result in the reduction of long term debt.

 

1. Parliamentary Budget Office

 

In its presentation, the PBO provided an analysis on the Bill first by giving a background on State Owned Enterprises (SOEs) in the South African context. The PBO reported that although SOEs are established at ‘arms length’ from government to enable them to focus on a special mandate and manage their operations and finances as a private sector company, this creates challenges in terms of monitoring delivery on their mandates and ensuring return on the State’s investment. The PBO highlighted that the reasons why the state mainly funds SOEs includes capitalisation, compensation for non-commercial mandates, and the reduction of public borrowing costs.

 

Furthermore, the PBO indicated that oversight over SOEs requires detailed understanding of the composition of costs and revenue of SOEs as the lack thereof may present difficulties in enforcing conditions on how a cash injection should be spent. This was also key in order to understand how failure in any of the financial and operational aspects of SOEs can result in financial challenges as is the case with Eskom. More specifically, failures in any one factor (e.g. high costs due to inefficiency, inadequate or excessive tariffs, excessive non-commercial mandates, etc) will have consequences for other factors such as the fiscal framework and the state’s policy objectives. 

 

The PBO submitted that it is critical for Eskom to have a sufficient reserve margin in installed capacity so as to allow for breakdowns and ‘unexpected events’. It indicated that the international norm is for a reserve margin of 10-25%, depending on the types of generation capacity and other factors. Therefore, to avoid load-shedding under normal situations, Eskom may need 10-25% more capacity than peak demand though the need may be greater given the maintenance backlog.

 

The PBO indicated that current challenges facing Eskom present a special case for regulation because of the historically low tariffs andthe size of the new build infrastructure programme. The PBO submitted though there is a widespread view that the increases NERSA allowed were not adequate. The Parliamentary Budget Office indicated that a key consideration in the setting of tariffs was determining the equitable contribution that current consumers must make to new build infrastructure costs given that past consumers clearly underpaid and future consumers will also benefit.

In its assessment of the Bill, the PBO presented an analytic framework which assumed the separation of ESKOM’s and Government’s financials. The PBO reported that the R23 billion equity injection would temporarily improve ESKOM’s balance sheet, however this improvement would reverse during the course of the financial year as the cash will be used to maintain Eskom’s going concern througheither debt repayments or interest payments due to ESKOM’s debt holders. With regard to Government’s balance sheet, the PBO was of the view that the sale of the asset for funding ESKOM would reduce the State’s asset base thus weakening the balance sheet.  Furthermore, the PBO gauged whether the sale of the asset was in fact budget deficit neutral, highlighting the possibility that should government sell an asset that earns dividends or interest or rent, this would translate to loss of revenue and thus worsen the budget deficit. It also noted that a key challenge facing government when deciding to sell assets was on prioritizing which assets are to be sold.

 

1. Financial and Fiscal Commission

 

In its submission, the Financial and Fiscal Commission (FFC) assessed the Bill within the context of the relationship between electricity consumption and growth in real Gross Domestic Product.The FFC indicated that South African growth projections over the Medium Term Expenditure Framework assume minimum disruption to electricity output and consumption. The FFC submitted that further deterioration of electricity generation output in 2015 could reduce economic growth rate by 1 percentage point in 2015 and this will have a significant impact on the economy and budget revenue estimates. Better than expected generation of electricity or greater energy efficiency could boost the growth rate in 2015 by 0.4 percentage point. Overall, the likely impact on growth through stable electricity generation will be much more than the equity injections.

 

The FFC was of the view that the R23 billion injection is a prudent business action as it would increase Eskom’s generation capacity and supply security through funding capital expenditure thus helping to relieve the impact on consumers and replenish Eskom’s borrowing authority. The Commission commended government in maintaining the 2015 Budget spending ceilings by funding Eskom through the sale of assets, however it indicated that the State’s balance sheet was still being negatively affected and that the sale of assets was a once-off measure and was not sustainable in the long term.The FFC noted Clause 1 (3) of the Bill as promoting and enforcing transparency and effective management with regard to revenue, expenditure, assets and liabilities of public entities. In addition, the FFC highlighted that the Chief Procurement Office may play a role in ensuring procurement effectiveness in Eskom’s procurement programme.

 

It was stated that Eskom was planning to raise an additional R280 billion to fund its capital infrastructure expansion programme to meet the growing energy demand in South Africa. By 2017/18, Government guarantees to Eskom would have escalated to 67 per cent of total Government guarantees. The FFC submitted that careful consideration should be accorded to the provision of government guarantees to state owned entities vis’-à-vis' operational risks and efficiency. In particular, guarantees are not exposed to the same level of scrutiny in the budget process as regular spending thus the need for oversight mechanisms over guarantees to be further strengthened.

 

The FFC further submitted that it supported the movement towards cost reflective tariffs as an important avenue for funding infrastructure development. It however advised that consideration should be given to the willingness and ability of consumers to pay as well as the likely impact on the economy and poor households.

 

The FFC recommended that further to measures and conditions in the Bill government should ensure the following:

• Policy clarification and implementation on alternative energy supply options and the roll-out of Independent Power Producers.
• Bring in private sector equity partners within policy parameters such as Public-Private Partnerships to inject funding and much needed expertise in Eskom and the infrastructure build program.
• Utilise guarantees sparingly and as a last resort in managing risks.
• Department of Energy and Eskom executives must communicate and consult consumers and interested parties in order to find a solution to ensuring use of prepayment across all customer groupings.

 

 

1. Dr Tobias Bischof-Niemzfrom the Council for Scientific and Industrial Research (CSIR)

 

Dr ST Bischof-Niemz from the Council for Scientific and Industrial Research (CSIR) focused on the financial aspects of the power system expansion. He highlighted the cost-competitiveness of renewable energy by illustrating the benefits that have been derived as part of the Department of Energy’s procurement of renewable energy capacity from Independent Power Producers (IPPs). He indicated that in 2014, renewables generated financial benefits of R5.3 billion through fuel-cost savings and avoidance of unserved energy in comparison to the cost of R4.5 billion which is paid as tariff payments to IPPs. This resulted in R0.8 billion net benefit to the economy.

 

The CSIR indicated that although the costs of new IPP purchases have been approved and Eskom would be able to recover these costs in the next rounds of Multi-Year Price Determination (MYPD), these costs posed a challenge from a liquidity perspective because they are not funded under the current MYPD3 (i.e. price determined for the period from 1 April 2013 to31 March 2018). He indicated that any new power generation capacity is more costly than the current cost of generation and will thus result in an increase in average tariff prices. The CSIRcommented that the R23 billion appropriation would release constrain on Eskom’s liquidity position and would allow the tariff increase to be slower than otherwise necessary.

 

The CSIR submitted that Eskom’s planned infrastructure expenditure on electricity transmission is small when compared to electricity generation’s new-build programme and proposed that spending on new-build infrastructure be balanced with spending on grid infrastructure. He explained that transmission infrastructure was key for grid connections for IPPs, customer connections and the overall security of the network.

 

It was pointed out that whilst the new-build programme was important, spending on grid infrastructure must not be de-prioritised as there will be long-term negative effects on the power system, and these include:

 

• Non-availability of inexpensive additional power (mainly wind power); and
• Suppressed sales due to fewer customer connections to the main electricity grid.

 

 

1. Mr Hilton Trollip from the University of Cape Town

 

In his submission, Mr Trollip commented that the current power constraints and Eskom’s financial challenges have to be contextualised within the current legislative and policy framework which allows for the transparent setting of cost-reflective tariffs through Independent Regulation i.e. National Energy Regulator of South Africa (NERSA). He indicated that although this framework is in place, in practice it is not adhered to because in a number of tariff determinations the set Eskom tariffs were evidently not cost-reflective. This points to a systemic problem in the implementation and governance mechanisms of this framework which has resulted in funding shortfalls for Eskom.

 

Mr. Trollip in his submission acknowledged the urgent necessity to allocate funds to Eskom, however cautioned that the setting of tariffs that are not cost-reflective and funding Eskom shortfalls from the fiscus was equivalentto a non-transparent out of policy subsidy to the energy intensive industries as these were Eskom’s largest customer base.

 

He proposed that conditions should be attached to the R23 billion appropriation in order to address the root cause of the Eskom shortfall and thus implement the respective corrective measures. He recommended that the appropriation should be conditional to the following:

• the re-establishment of policy, practice and institutional capacity for NERSA to implement policy and legislation to effect cost-reflective tariffs;
• the investigation/calculation of the effective subsidy to energy intensive industries and the recovery of this subsidy through a tariff premium; and
• provision for transparent relief mechanisms to poor householdswhen tariffs become unaffordable to them.

 

 

1. Professor P Lloyd from Cape Peninsula University of Technology & Mr R Jeffrey from Econometrix

 

Prof P Lloyd from the Cape Peninsula University of Technology and Mr RC Jeffrey from Econometrix Pty (Ltd) jointly submitted that Eskom must grow in order to achieve economic growth in South Africa. It was further stated that many decisions related to Eskom’s operations in recent years were political rather than commercial which had many unintended consequences such as the following:

 

• Delays in the construction of new power stations led to the current power crisis and resulted in the loss of expertise in the sector;
• Provision of free basic electricity against research recommendation has led to a culture of non-payment;
• Below-inflation tariff increases in the past have led to the current above inflation increases;
• The separation of the renewable energy programme from the Department of Public Enterprises and Eskom has led to unexpected connection costs for Eskom;
• The cost of coal from small coal mining companies was significantly higher than from large mines and also caused quality and transport challenges;

 

The presenters indicated that the cost impact of these policy decisions were negative for fixed investment, growth and employment. It was reported that the shortage of capacity impacts negatively on the  economy, and that every KWh demanded but not supplied costs the economy R85.00. In addition, renewable energy was welcomed as an additional energy source though not recommended for base load.

The presenters were of the view that it is difficult to see the cost impact of policy decisions because of the structure of Eskom.  They cited examples such as the impact of non-payment on Eskom’s cash flow and high gearing and the difficulty in identifying connection costs for renewables and IPPs due to transmission costs being hidden in a controlled tariff. 

 

The following recommendations were made:

 

• That Eskom be divided into three entities as per specific functional areas: base power generation; transmission; and distribution and that these be funded according to functional business requirements. Furthermore base power generation and distribution should be partially privatised.
• Independent Power Producers (IPPs) should be expanded and equal competition in this regard should be fostered.
• Best commercial business procedures should be practised such as independent management and board appointments and tenders should be awarded on strict arms-length basis.
• Supply of electricity generation, transmission and distribution should be maximised and sustainable and efficient operations should be ensured at the lowest possible cost.

 

 

1. Committee Findings and Observations

 

Having considered all the submissions made by the above stakeholders on the Eskom Special Appropriation Bill, the Standing Committee on Appropriations made the following findings andobservations:

 

1. The Committee takes note of the critical role of electricity supply and Eskom in the South African economy and is concerned about the financial and operational challenges currently being experienced by Eskom and theiradverseimpacton the economy. The Committee places emphasis on the need for enhanced transparency in Eskom’s operational and improved financial performance. 

 

1. The Committee notes that Eskom has a generating capacity and maintenance backlog which has led to deteriorating power station availability and subsequent load shedding. The Committee is of the view that the current challenges experienced are temporary rather than systemic in nature. However, Eskom should minimise the negative impact of load shedding on the economy with particular emphasis on social infrastructure such as hospitals, clinics and school.

 

1. The Committee views the availability of sufficient reserve margins in installed capacity as critical in order to allow for breakdowns and unplanned maintenance. The Committee notes the PBO’s submission that the international norm is for a reserve margin of 10-25 per cent, depending on the types of generation capacity and other factors. Therefore, to avoid load-shedding under normal situations, Eskom may need 10-25 per cent more capacity than peak demand though the need may be greater given the maintenance backlog.

 

1. The Committee implores Eskom to communicate more effectively with the public regarding electricity supply issues and related measures needed to address same.

 

1. In its engagement with Eskom, the Committee observed that most of Eskom’s top management positions had acting incumbents. The Committee is of the view that the effective implementation of the Eskom support package should be accompanied by concerted efforts by Eskom to strengthen its management and acquire the requisite skills which includes the filling of all critical vacant posts.

 

1. The Committee notes concerns raised during public hearings regarding the loss of technical expertise due to delays in the implementation of the new build programme. The Committee views the retention of technical skills as well as the transfer of skills as critical in the rollout of Eskom’s significant infrastructure programme.

 

1. The Committee notes that municipal debt owed to Eskom amounted to over R9 billion in 2014. The government has taken active measures to encourage municipal debt repayment. The Committee views it as a policy imperative that all government departments and state entities should settle their debts for electricity and other applicable rates and tariffs timeously with consequences for non-compliance.

 

1. Overall, inputs received from the public and other stakeholders on the Bill agree on the need for immediate financial support for Eskom in the short term. However, there was a general view that state funding to Eskom should be conditional to policy, governance and implementation considerations that encompass alternative energy supply options, transparent cost-reflective tariff adjustments, balancing new build infrastructure with grid infrastructure as well as improving communications on the importance of prepaid electricity.

 

1. The Committee supports interventions aimed at making Eskom a sustainable business which place priority emphasis on Eskom improving efficiency through reducing costs and Eskom applying for tariff adjustments in line with the regulatory processes that are transparent and equitable.

 

1. The Committee supports provisions in the 2015 Eskom Special Appropriation Bill which enable the Minister of Finance to impose conditions on any part of the R23 billion appropriation. The aim of these conditions must be to promote and enforce transparency and efficient management in respect of revenue, expenditure, assets and liabilities of public entities as required by section 6(1)(g) of the PFMA.

 

1. With regard to the funding of the R23 billion allocation through the sale of non-strategic government assets,the Committee views the transparent disclosure of a framework guiding the sale of government’s non-strategic asset as critical. This should include the process followed and the relevant details on the sale of the non-strategic assets.

 

1. The Committee notes the FFC’s submission that careful consideration should be accorded in the provision of government guarantees vis-à-vis’ operational risks and efficiency. In particular, guarantees are not exposed to the same level of scrutiny in the budget process thus the need for oversight mechanisms over guarantees to be further strengthened.

 

1. The Committee notes public inputs from the University of Cape Town that indicate that whilst there are institutions and regulatory processes in place to allow for the setting of cost reflective tariffs, there have been significant differences in tariffs applied for and tariffs agreed to. The primary concern is that this may undermine independent regulation and the general government funding policy framework. The Committee is of the view that tariffs should be differentiated so that energy intensive industries and large users do not unduly benefit from state funding. In particular, poor households; who constitute less than 15 per cent of energy users, should be protected from high energy prices.

 

1. Recommendations

 

The Standing Committee on Appropriations, having considered the briefings and comments by invited stakeholders on the Eskom Special Appropriation Bill, recommends as follows:

 

1. That the Minister of Public Enterprisesand Minister of Finance should ensure the following:
   1. That the Department of Public Enterprises and National Treasury submit quarterly reports on the Eskom’s financial and non-financial performance to Parliament.
   2. That the Department of Public Enterprises and National Treasury developand set explicit targets and submit quarterly reports on Eskom’s cost containment program, working capital management, procurement effectiveness and its business efficiency programme to Parliament. 

 

1. That the Minister of Finance should consider the following:
   1. That funding allocations to Eskom and all other state owned enterprises strictly adhere to the fiscal policy principles and enabling legislation of long-term debt sustainability, counter cyclicality and inter-generational equity.
   2. That National Treasury submit its guidingframework on the sale of government’s non- strategic assets. 
   3. That National Treasury submits a detailed report on the sale of government’s non-strategic assetsto Parliament within the current financial year.
   4. That National Treasury through the Chief Procurement Office assist Eskom in ensuring that its procurement systems are efficient,effective and transparent so as to ensure value for money and the attainment of enterprise targets.
   5. That National Treasury in partnership with the Department of Cooperative Governance develop and implement mechanisms to ensure that inter-governmental debt with emphasis on electricity and water is paid timeously.

 

1. That the Minister of Public Enterprisesshould ensure the following:
   1. That the Department of Public Enterprises and Eskom fills all funded vacant posts within the current financial year.
   2. That the Department of Public Enterprises and Eskomimplement a comprehensive communications and implementation strategy that is transparent and equitable on rolling out pre-paid electricity across all customer groupings. 
   3. That the Department of Public Enterprises monitor and evaluate all governance arrangements in Eskom. In particular, the Department shouldensure the effective functioning of the Internal Audit and Risk Management Units and Independent Audit Committee in Eskom.
   4. That the Department of Public Enterprises ensures that Eskom prioritises and embeds skills transfer in its new build infrastructure programme.
   5. That Eskom communicates clearly and consistently to the public regarding electricity supply issues and Eskom’s related measures needed to address the same.
   6. That Eskom reports to Parliament on their turnaround strategy within 6 months.
   7. That Eskom continues to prioritise the provision of transmission and distribution infrastructure.
   8. That Eskom has a strategic dividend policy in place which takes into account the growth and development objectives of the country.
   9. That Eskom sets a differentiated and appropriate pricing mechanism which will ensure that large and energy intensive users are charged differently from the poor and vulnerable.

 

1. That the Minister of Energy should ensurethat Department of Energy develops clear policy and implementation guidelines on alternative energy supply options and Independent Power Producers.

 

1. That the Minister of Energy and the Minister of Public Enterprises should ensure that the rollout of renewable energy projects remains on track through effective and efficient coordination betweenthe Departments of Energy and Public Enterprises.

 

 

1. Committee Recommendation on the Bill

 

Notwithstanding the recommendations in section 4 above, the Standing Committee on Appropriations recommends that the National Assembly adopts the ESKOM Special Appropriation Bill [B16-2015], without amendments.

 

Conclusion

 

The responses to the recommendations as set out in section 4 above by the relevant Executive Authorities must be sent to Parliament within 60 days of the adoption of this report by the National Assembly.

 

 

The Democratic Alliance indicated that it objected to clause 3 of the Bill and to the lack of information regarding the disposal of the non-strategic assets held by state.

 

Report to be considered.