ATC170516: Report of the Portfolio Committee on Energy on the Budget Vote No, 26 of the Department of Energy, Dated 16 May 2017

National Nuclear Regulator (NNR)

The NNR is established in terms of the National Nuclear Regulator Act, 1999 (Act No. 47 of 1999).The act establishes the regulator as a competent authority for nuclear regulation in South Africa. The purpose of the NNR, as outlined in Section 5 of the National Nuclear Regulator Act, 1999 (Act No. 47 of 1999) is to essentially provide for the protection of persons, property & the environment against nuclear damage through the establishment of safety standards & regulatory practices.

Central Energy Fund (CEF)

To finance and promote the acquisition of research into and exploitation of oil, gas and renewable/clean energy-related products and technology.

South African Nuclear Energy Corporation (NECSA)

NECSA is established in terms of Section 3(1) of the Nuclear Energy Act, 1999 (Act No. 46 of 1999).The act provides for the commercialisation of nuclear and related products and services, and delegates specific responsibilities to the corporation, including the implementation and execution of national safeguards and other international obligations. The Nuclear Energy Policy of 2008 reinforced NECSA's mandate relating to Research and Development (R&D) and Nuclear Fuel Cycle (NFC) responsibilities.

National Radioactive Waste Disposal Institute (NRWDI)

NRWDI is a Nuclear Waste Disposal Institute established in terms of Section 3 of the National Radioactive Waste Disposal Institute Act, 2008 (Act No. 53 of 2008).The act provides for the establishment of an NRWDI in order to manage radioactive waste disposal on a national basis and to provide for its functions and for how it is to be managed. The Institute is not operational as yet.

National Energy Regulator of South Africa (NERSA)

NERSA is a regulatory authority established as a juristic person in terms of Section 3 of the National Energy Regulator Act, 2004 (Act No. 40 of 2004). NERSA's mandate is to regulate the electricity, piped-gas and petroleum pipeline industries in terms of the Electricity Regulation Act, 2006 (Act No. 4 of 2006), Municipal Finance Management Act, 2003 (Act No. 56 of 2003), the Gas Act, 2001 (Act No. 48 of 2001) & the Petroleum Pipelines Act, 2003 (Act No. 60 of 2003).

South African National Energy Development Institute (SANEDI)

SANEDI is an applied energy research institute established in terms of Section 7(1) of the National Energy Act, 2008 (Act No. 34 of 2008).

Name of Bill

Strategic Focus of the Bill

Date for submission of the Bill to Cabinet

Date of submission of the Bill to Parliament

Impact

National Energy Regulator Amendment Bill

To promote efficient regulation of the energy sector

First Quarter of 2017

Final Quarter of 2017

Promotion of administrative justice in the decisions made by the energy regulator

Electricity Regulator Amendment Bill

To provide a regulatory framework that promotes IPP participation

Second Quarter of 2017

Final Quarter of 2017

Increased investment and capacity in power generation

Strategic Outcome-Orientated Goals

Goal Statement

1. Security of Supply

To ensure that energy supply is secure and demand is well managed

2. Infrastructure

To facilitate an efficient, competitive and responsive energy infrastructure network.

3. Regulation and Competition

To ensure that there is improved energy regulation and competition

4. Universal Access and Transformation

To ensure that there is an efficient and diverse energy mix for universal access within a transformed energy sector.

5. Environmental Assets

To ensure that environmental assets and natural resources are protected & continually enhanced by cleaner energy technologies.

6. Climate Change

To implement policies that adapt to and mitigate the effects of climate change.

7. Corporate Governance

To implement good corporate governance for effective and efficient service delivery.

Programme

Budget

Nominal Increase / Decrease in 2017/18

Real Increase / Decrease in 2017/18

Nominal Percent change in 2017/18

Real Percent change in 2017/18

R million

2016/17

2017/18

Administration

  244,8

  239,5

-  5,3

-  19,5

-2,17 %

-7,96 %

Energy Policy & Planning

  43,5

  46,7

  3,2

  0,4

7,36 %

0,99 %

Petroleum & Petroleum Products Regulation

  77,5

  81,8

  4,3

-  0,5

5,55 %

-0,71 %

Electrification and Energy Programmes & Project Management

 5 705,2

 6 184,0

  478,8

  112,3

8,39 %

1,97 %

Nuclear Energy

  880,1

  786,9

-  93,2

-  139,8

-10,59 %

-15,89 %

Clean Energy

  599,4

  774,5

  175,1

  129,2

29,21 %

21,55 %

TOTAL

 7 550,6

 8 113,5

  562,9

  82,0

7,5 %

1,09 %

Economic Classification

2015/16

2016/17

(2015/2016 to 2017/2018)

2017/18

(2016/17 to 2017/18)

Final Appropriation

Percentage Change

Main Appropriation

Percentage Change

R million

R'mil

R'mil

%

R'mil

%

Compensation of Employees

296.2

318.3

7.5%

318.2

0.0%

Goods and Services

215.6

371.3

72.2%

239.7

-35.4%

Transfers and Subsidies

6,751.4

6,845.9

1.4%

7,551.2

10.3%

Payments for Capital Assets

4.4

15.1

241.3%

4.3

-71.7%

Payments for Financial Assets

0.0

0.0

-

-

-

TOTAL

7,267.6

7,550.6

3.9%

8,113.5

7.5%

Percentage Budget Share

Economic Classification

2015/16

2016/17

2017/18

% Share

% Share

% Share

Compensation of Employees

4.1%

4.2%

3.9%

Goods and Services

3.0%

4.9%

3.0%

Transfers and Subsidies

92.9%

90.7%

93.1%

Payments for Capital Assets

0.1%

0.2%

0.1%

Payments for Financial Assets

-

-

-

TOTAL

100.0%

100.0%

100.0%

Entity / Project

2017/18

 Indicative
Baseline

Adjustments

ENE Baseline

% Net-Change

Rand million

R’mil

R’mil

R’mil

%

Households

3.1

 -

3.1

0.0%

SETAs

1.0

 -

1.0

0.0%

International Membership fees

17.2

 -

17.2

0.0%

INEP Non-Grid

189.8

 -

189.8

0.0%

INEP Eskom

3,876.2

-30.0

3,846.2

-0.8%

INEP Municipalities

2,087.0

 -

2,087.0

0.0%

NECSA

671.4

-7.2

664.2

-1.1%

NNR

38.6

 -

38.6

0.0%

NRWDI

 -

30.0

30.0

 -

SANEDI

59.8

 -

59.8

0.0%

SWHP

411.1

 -

411.1

0.0%

EEDSM: Municipalities

203.2

 -

203.2

0.0%

Total

7,558.4

-7.2

7,551.2

-0.1%

1.

Ensure optimal performance of the Department, notwithstanding the current budget constraints.

§  DoE faces extra ordinary challenges to deliver on committed goals, objectives and government’s desired outcomes. We continuously strived for improved productivity and we have:

o    Reviewed our legislation to align them with the changing demands of the economy;

o    Developed policies that provide conditions for fair business practices & economic development in the energy sector;

o    Transformed the energy sector;

o    Increased public and private sector participation in policy formulation and implementation;

o    Improved access to electricity & energy services;

o    Implemented the 9 Point plan to resolve energy challenges;

o    Enforced cost containment measures to reduce wastage, laxity, and limited under spending

o    Despite the initial teething problems, we have improved our oversight; and

o    Reduced the vacancy rate to keep within ceiling for compensation of employees.

§  Through our work with the DPME and other energy stakeholders we have successfully achieved clean audit report from the Auditor General.

2.

Without prejudicing the interests of the country, present the key nuclear procurement documentation including the Integrated Nuclear Infrastructure Review, Finance Options, Models and Solutions for the nuclear build programme and Economic Impact of Localization of the Nuclear Programme, and any other relevant documentation to the PCE and update the Committee on a regular basis regarding the nuclear procurement process.

§  The Department at the request of the committee on 29 November 2016 presented the required nuclear procurement documentation and briefed the Committee on the State of Readiness to Implement Nuclear New Build Programme (NNBP) and progress update on work done to implement Cabinet decisions e.g. the Rescinding Cabinet Decision Designating the South African Nuclear Energy Corporation (NECSA) as the implementing agent for the NNBP.  The Committee was also briefed about Cabinet decision designating Eskom as the owner operator and procurer of the nuclear power plants in accordance with the Nuclear Energy Policy of 2008.  The Committee was further briefed about Cabinet decision to designate NECSA as the owner operator and procurer of the Nuclear Fuel Cycle and Multipurpose Reactor.

3.

Ensure that the scale and pace of the nuclear procurement programme is done in a manner that is affordable to the country as directed by the President.

§  In line with the Cabinet decision of 2 November 2016 Eskom and NECSA have jointly issued the Request for Information (RFI) in December 2016 and closing date of 28 April 2017.  This RFI will be followed by issuing the Request for Proposal (RFP) to test the market and determine the funding model for the programme.  The outcome of the RFP process will be submitted to Cabinet for approval of the pace and scale for the implementation of the NNBP the country can afford.  The Section 34 Determination designating Eskom as the procurer and the associated RFI and planned RFP processes have been reviewed and set aside by the recent Cape Town High Court judgement, therefore the NNBP procurement activities have been suspended for the Department to address issues raised by the court.

4.

Present to the Committee the Integrated Energy Plan (IEP), in the 3rd quarter of 2016/17

§  The Department briefed the Committee on the IEP on the 14th of February 2017.

§  The IEP consultative workshops commenced in December 2016 and are continuing until end of March 2017. Once completed, the updated Plan will be re-tabled in Cabinet in 2017/18 Financial Year for promulgation.

5.

Present to the Committee the Updated Integrated Resource Plan (IRP), in the 3rd quarter of 2016/17

§  The Department briefed the PCE on the IEP on the 14th of February 2017.

§  Similar to the IEP, consultation process commenced in December 2016 and ended in March 2017. Once completed, the updated Plan will be re-tabled in Cabinet by Q3 of the 2017/18 financial year.

6.

Present to the Committee the Gas Utilisation Master Plan (GUMP), in the 3rd quarter of 2016/17

§  The Gas Development Plan is proposed under the Gas Amendment Bill (GAB) and this is under development and will be submitted after the finalization of the Integrated Energy Plan in 2017. The GAB will facilitate the development of infrastructure, including pipelines and storage, for LP Gas, natural gas and other indigenous gases.

7.

Ensure that the South African National Energy Development Institute (SANEDI), as an energy efficiency champion, presents its energy efficiency programme to the Committee, particularly its role in coordinating all energy efficiency activities.

§  The Energy Act provides for SANEDI to play the role of energy efficiency agent, with the mandate as outlined in the legislation. SANEDI is also mandated under the Income Tax Amendment Act to implement the energy efficiency tax incentive scheme, by verifying the savings claimed by various entities. The role of verification cannot be undertaken at the same time as project developer, due to conflict of mandate concerns.  

8.

Ensure that the shareholder compacts for all State Owned Entities (SOEs) are in place in the next six months and present them to the PCE thereafter.

§  CEF and NECSA public entities listed in Schedule 2 on an annual basis submit their corporate plans to their Executive Authority. The corporate plan covers a period of 3 years and include:

•  Strategic objectives and outcomes identified and agreed on by the Executive Authority in the shareholder’s compact;
• Strategic and business initiatives as embodied in business function strategies;
• Key performance measures and indicators for assessing the entity’s performance in delivering the desired outcomes and objectives;
• A risk management plan;
•  A fraud prevention plan;
• A materiality/significant framework, referred to in Treasury Regulation 28.3.1;
• A financial plan addressing-Projections of revenue, expenditure and borrowings; and
•  Asset and Liability Management; - Cash flow projections; - Capital expenditure programmes; and - Dividend policies.

§  In addition to the Corporate Plan, the Minister as the Executive Authority annually concludes a shareholders’ compact with the SOE falling under its control and ensures that within six months of each financial year. “The shareholder’s compact documents the mandated key procedures for quarterly reporting to the Executive Authority in order to facilitate effective performance monitoring, evaluation and corrective action.”

§

§  On a quarterly the Department analyses the performance of the entities against signed shareholder compacts and provide corrective measures where relevant.  The PCE exercises its role through evaluating the performance of SOE’s by interrogating their quarterly performance reports and annual financial statements.

§Even though the Department has not provided the Committee with the shareholders’ compact, but has consistently reported the SOEs performance in line with the   Shareholders compact document.

9.

Present with CEF, the details of the turnaround strategy and any process of restructuring of CEF and its entities not later than three months.

§  On 14 March 2017, the Department together with the CEF Group presented PetroSA‘s turnaround strategy to the Portfolio Committee on Energy and took note of the Committees’ recommendations to CEF that were aimed at improving PetroSA’s turnaround strategy and the overall restructuring of the CEF Group. The CEF Group Board is currently working on finalising the strategy and will provide a progress briefing to the Minister and the Committee during the second term and once the plan is finalised in the third term of 2017/18.

10.

Conduct robust oversight and continuously update the committee on the performance of the entities reporting to the Department.

§  The SOEs Oversight unit is concerned with the reviewing, monitoring and overseeing of the affairs, practices, activities, and financial conduct of the SOEs to ensure that they are conducted in an expected manner and in accordance with all commercial, legislative and other prescribed governance frameworks.

§  This includes the review, monitoring and overseeing of the management of SOEs, their strategic and business planning, and on a quarterly basis provides a report on each SOE’s performance and compliance of the above to the Minister.

§  Given the involvement of Portfolio Committees in the legislative, budget and performance monitoring of Departments and their SOEs, the Department as and when required by the Committee provides an update on its performance as well as those of the entities against their strategic plans and Annual Performance Plans.

11.

Ensure that the Strategic plans of the Entities are aligned to the objectives of the DoE and that the entities are correctly funded and staffed to meet their objectives.

§  In preparing the five year Strategic Plan which sets out key policy priorities to deliver on our mandate, the Departments planning process for the 2014/15 medium term was intensive and included representatives of state owned entities reporting to the Minister. The intention of this approach was to allow the Department’s entities and other relevant agencies to align with our strategic plan and budget when developing their own strategic frameworks and plans.

§  In addition, the Department participates in the strategic planning sessions of the entities and attend board meetings to ensure that the above mentioned objective is realised.

12.

Update the PCE on progress on the implementation of the cleaner fuels II specifications.

§  A proposal to resolve the impasse on cost recovery mechanism (refineries want motorists to pay for the refinery upgrades) is being discussed with the oil industry. This is based on the adjustment of the basic fuel price formula.   

13.

Submit a report on the hiving-off of the entities of the CEF and the implications thereof, to the PCE, by the end of the 3rd quarter for 2016/17.

§  The CEF Board conducted a solvency and liquidity test and passed a final resolution for the transfer of PASA from CEF to DMR during March 2017, the Minister has since approved the Board’s recommendation. PASA has already received MTEF funding allocation from the DMR and is reporting to the DMR with effect from 1 April 2017. There will be dual reporting to DOE during the transitional period while all the formalities are finalised.

§  The CEF Board has requested that the transfer of AEFMC be delayed while the group restructuring plan is finalised and also to ensure that the Board is able to comply with all the legal requirements for the transfer of the entity.

14.

Monitor and update the Committee on developments in the MPRDA and the impact thereof on the Gas Amendment Bill.

§  The DoE is participating in the Project Executive Committee (PEC), which oversees the development of the Strategic Environmental Assessment (SEA) for Shale Gas in South Africa. The PEC is chaired by the Department of Environmental Affairs (DEA).

• In addition, the Department also participates in the Task Team led by the Department of Mineral Resources (DMR).

15.

Facilitate the process leading to the definition of the ‘end state" of the electricity sector and report to the Committee within the next three months.

§  A proposal is being discussed internally with the Minister to ensure political alignment. Once this is completed the concept of the electricity end state will be presented for public consultation within 2017/18 financial year.

16.

Ensure that the National Energy Regulator of South Africa's (NERSA) public hearings are more accessible to ordinary citizens.

§  NERSA values all opportunities to engage with its stakeholders and in respect of  the  public hearings, the Regulatory Support Unit will at the appropriate time be invited to brief the Committee about the rules and procedures of NERSA’s meetings, public participation in NERSA’s activities and the framework and role of NERSA in conducting public hearings.

17.

Update the PCE on the overall transformation in the energy sector especially in the petroleum sector.

§  The Department has commenced with two processes. The first process entails the audit of the state of the transformation in the petroleum retail sector. The audit will be completed in the second quarter of this 2017/18 financial year.

§  The second process is underway and involves the alignment of the Liquid Fuels Charter with the BBBEE Codes of good practice. A Sector Transformation Council will be established during the course of 2017/18 financial year.

18.

Put emphasis on the roll-out of the National Electrification programme, with a particular focus on rural areas and provide the Committee with a comprehensive plan thereof.

§  The Department has managed to connect 301 976 households to grid against the target of 235 000 with over 66 000 households achieved from the targeted households.  Over 16 922 households were connected by non-grid technology against the target of 20 000. In the current financial year 2017/18 the Department will connect 235 000 households to the grid and 15 000 to be connected by non-grid technology.

§  A high level Electrification Master Plan was developed in 2016/17 by the DoE team. The Department is in engagement with National Treasury for funding of a detailed Master Plan with initial focus on three Provinces (KZN, Eastern Cape, and Limpopo) with high level of rural electrification backlogs.

19.

Continuously update the committee on the developments regarding the decision on building a new petroleum refinery

§  Insofar as the recommendation of the National Development Plan (NDP) to conclude a decision on new refinery capacity, the IEP will provide insights regarding the implications of the refinery as against not proceeding with its development.

§  The decision on new refining capacity will be finalised in 2017 when the IEP is finalised. The IEP provides an agenda of energy technology topics; these topics include technologies for storage, biofuels development, fuel cells utilisation exploiting our platinum resource base, PV and Concentrating Solar Power (CSP).

20.

Regularly update the Committee on the Grand Inga Hydro Project

§  The Department is accelerating the implementation of our bilateral and regional agreements to realise the benefits of energy cooperation in the areas of hydro-electricity, coal, gas and renewable energy.

§  The Grand Inga Treaty between SA and the DRC obliges SA to negotiate an off-take agreement for 2 500 MW of hydroelectricity from the Inga Hydro Project.  South Africa is also providing capacity support to the DRC for the project’s management. The Committee will be briefed about developments surrounding this project in June 2017. 

21.

Ensure that electricity distribution challenges are addressed working together with the relevant departments and municipalities.

§  Municipal electricity distribution infrastructure requires urgent refurbishment if it is expected to provide a reliable service and sustainable solution to the current challenges. The estimated backlog of R80 billion needs a funding model that entails revamped institutional, regulatory and structural adjustments to the status quo. In this regard, the Approach to Distribution Asset Management (ADAM) Programme was initiated in 2016, targeting the metropolitan and suburban areas of the country for piloting. The development of norms and standards relating to, amongst others, maintenance and tariff design is necessary for adoption as a regulatory mechanism for municipalities to normalise their electricity distribution businesses. These norms and standards are to be informed by the pilot ADAM Programme.

22.

Expedite the solar water heater (SWH) rollout plan in partnership with the supporting departments in order to meet the set target of 1.75 million by the end of 2018/19.

§  The solar water heater programme will eventually take off, contracts placed for the supply of baseline systems under the social programme have been concluded.  Approximately 9 000 systems have been secured through this programme, in terms of which the local content of these products exceeds 75 percent. 

§  The next step is to commence with the training of local communities in the installation of the solar water systems, with clear objectives set for skills and enterprise development, job creation and the targeting of the youth, women and other designated groups.

§  In the year under review an assessment will be completed in 6 metropolitan municipalities.

23.

Ensure  that issues relating to the National Radioactive Waste Disposal Institute are addressed, and the Institute is made operational as soon as possible

§  The National Radioactive Waste Disposal Institute became operational in the 2013/14 period and all critical positions have since been filled.

§  The Department established a Steering Committee to address transitional arrangements from the South African Nuclear Energy Corporation SOC Limited (NECSA) to the National Radioactive Waste Disposal Institute (NRWDI) as per Section 30 of National Radioactive Waste Disposal Institute Act, 2008 (Act No. 53 of 2008) and the institute’s challenges were addressed.

§  The year 2016/17 experienced delays in the legislative process related to nuclear branch, in particular the amendments of the National Nuclear Regulatory Act and Nuclear Energy Act this include the introduction of the new National Radioactive Waste Management Fund Bill.

§  The committee was briefed about challenges faced by the institute in 28 February 2017.

1.

Subsequent to its finalisation, brief the Committee on the outcomes of the investigations of all the Strategic Fuel Fund contracts from 2014/15 financial year.

§  The investigation has been completed and the Chairperson of CEF has submitted the report to the Minister for consideration.

2.

Conduct robust oversight and continuously update the Committee on the performance of the entities reporting to the Department.

§  The SOEs Oversight unit is concerned with the reviewing, monitoring and overseeing of the affairs, practices, activities, and financial conduct of the SOEs to ensure that they are conducted in an expected manner and in accordance with all commercial, legislative and other prescribed governance frameworks.

§  This includes the review, monitoring and overseeing of the management of SOEs, their strategic and business planning, and on a quarterly basis provides a report on each SOE’s performance and compliance of the above to the Minister.

§  Given the involvement of Portfolio Committees in the legislative, budget and performance monitoring of Departments and their SOEs, the Department as and when required by the Committee provides an update on its performance as well as those of the entities against their strategic plans and Annual Performance Plans.

3.

Ensure that the Department of Energy assists the South African Nuclear Energy Corporation and the South African National Energy Development Institute in receiving unqualified audit reports.

§  All material audit findings raised by the Auditor General related to the South African Nuclear Energy Corporation’s liability for operating past strategic nuclear facilities have been addressed. The Department embarked on a process of assessing nuclear and related liabilities arising from operational past strategic nuclear facilities on the Pelindaba and advised Cabinet of escalating costs to help them determine whether the remaining facilities and the environmental pathways should continue to be monitored.

§  In addition, improvement plans are being implemented to ensure that the South African Nuclear Energy Development Institute’s audit outcomes improve from this financial year onwards.

4.

As a matter of urgency, ensure that all critical posts in the State Owned Entities are filled.

§  On the 6th of April 2017, the Minister was briefed about the status of vacant positions in affected SOEs. All vacancies within SOEs have been filled whilst others are in the process of being filled. A quarterly report will be submitted to the Committee on the status of all vacancies

5.

Update the Committee on the decontamination and decommissioning liability for the operational strategic nuclear liability associated with the operation of the Safari 1 research nuclear reactor, during the 2nd quarter of 2017.

§  The Department of Energy will submit a Cabinet Memorandum on Decommissioning and Decontamination (D&D) for Minister’s Approval. The Cabinet Memorandum is expected to serve in Cabinet within April 2017 and thereafter the Portfolio Committee will be updated accordingly.

6.

Ensure the finalisation by the National Energy Regulator of South Africa on the rules for third party access as well the finalisation of the necessary policy framework related thereto by the Department of Energy.

§  Cabinet approved the National Energy Regulation Amendment in June 2015, subject to amendment to provisions regarding the Review Body proposed under the Bill. The social and economic impact assessment study is currently being finalised by DPME and the Department has submitted all the required information.

7.

Ensure that challenges related to the maximum retail price of liquefied petroleum gas are resolved by 2017/18 financial year.

§  The Gas Amendment Bill has been developed with the intention to address the regulatory model for all gas infrastructures, including liquefied petroleum (LP) gas. A revised model has been developed insofar as the pricing of LP Gas is concerned. It is envisaged that the above framework will resolve the LPG retail price challenges.

8.

Update the Committee on the recommendations submitted to Cabinet regarding the roles and responsibilities of Eskom, South African Nuclear Energy Corporation and the Department of Energy on the new nuclear build programme.

§  On 2 November 2016, Cabinet designated Eskom as the Owner Operator and Procurer of Nuclear Power Plants in accordance with Nuclear Energy Policy of 2008.

§  Cabinet also designated South African Nuclear Energy Corporation (NECSA) as the Owner Operator and Procurer of Nuclear Fuel Cycle and Multipurpose Reactor.

§  The Department of Energy will continue to act on its mandate of policy setting and be a coordinating department for the Nuclear New Build Programme.

9.

Update the Committee on regular bases regarding the nuclear procurement process.

§  Eskom (in conjunction with NECSA) has issued the RFP on 20 December 2016 for responses on 28 Apr 2017. All the expected nuclear vendors have indicated that they will respond within the agreed timeframe.

§  Eskom has developed a final draft Request for Proposals document (including input from NECSA).

§  Eskom is planning (in conjunction with NECSA) to have obtained relevant formal approvals (both internal to Eskom and from relevant government structures) in time to allow the final RFP to be issued to the market at the end of June 2017 for response by the end of September 2017.

10.

Present to the Committee the finalised Integrated Energy Plan, in the 4th quarter of 2016/17.

§  Public consultations on the Integrated Energy Plan (IEP) has been finalised with various external stakeholders and there is on-going consultations with other departments. The Department is in the process of incorporating comments received from various stakeholders. The IEP is also scheduled to be tabled in the Economic Sectors, Employment & Infrastructure Development (ESEID) Cluster in Q2 of 2017 then to Cabinet with the objective of seeking approval to publish the final report.

11.

Present to the Committee the Integrated Resource Plan, in the 1st quarter of 2017/18.

§  The Department is currently updating the Integrated Resource Plan (IRP) base case and scenarios following public consultations that are in progress.

§  The IRP Update is expected to be tabled at the ESEID Cluster in August 2017 which will be followed by the promulgation process, once approved by Cabinet. The Department will present the IRP to the Portfolio Committee on Energy once Cabinet has approved it.

12.

Present to the Committee the Gas Utilisation Master Plan, in the 1st quarter of 2017/18.

§  The Gas Development Plan is proposed under the Gas Amendment Bill (GAB) and this is under development and will be submitted after the finalization of the Integrated Energy Plan in 2017. The GAB will facilitate the development of infrastructure, including pipelines and storage, for LP Gas, natural gas and other indigenous gases.

13.

Ensure that the new energy efficiency target for the remainder of the MTSF is set.

§  The energy efficiency target post 2015 has been determined. This will be presented in Cabinet as part of the IEP Final Report.

14.

Ensure that the Department commits to outcome 10 of the MTSF and comply with the Department of Planning, Monitoring & Evaluation requirements.

§  The IRP and IEP take into consideration the implications of the climate change policy; inherent in the energy mix are technology options that reduce our greenhouse gas emissions due to energy generation.

15.

Subsequent to the adoption of the Integrated Resource Plan and Integrated Energy Plan by Cabinet, the DoE must re-engage the Committee with legislative proposals for the reform and restructuring of the electricity sector.

§  Once the above approval process has been completed, the Department will engage the Portfolio Committee on both policy frameworks.

16

Expedite all outstanding legislation which include the following;

·       The Gas Amendment Bill

·       Electricity Regulation Second Amendment Bill

·       National Energy Regulator Amendment Bill

• The revised Draft Gas Amendment Bill (GAB) received a final precertification from the Office of the State Law Advisor (SLA). It is ready to be submitted for tabling before Cabinet for onward transmission to Parliament. The draft GAB was developed in consultation with NERSA, to ensure that it is aligned with the Gas to Power Procurement Programme that the Department has embarked upon.
• The Electricity Regulation Second Amendment Bill was tabled at the Inter-Ministerial Committee on Energy in June 2015; the Department was requested to provide the end-state of the electricity sector before any deliberations on the Electricity Regulation Act amendments.
• Cabinet approved the National Energy Regulation Amendment in June 2015, subject to amendment to provisions regarding the Review Body proposed under the Bill. The social and economic impact assessment report was completed by March 2016

17

Develop initiatives, in conjunction with other national government departments and entities to ensure security of supply, with regard to electricity (so as to ensure there is no load shedding).

§  The Department developed initiatives for the 5 Point Plan under the War Room, to mitigate against the risk of load shedding. These included:

o   Supporting Eskom during discussions with NERSA to extend the Short Term Power Purchase contracts;

o   Launched the procurement of Coal from IPPs;

o   Expedited the procurement of 1800MW from the renewable IPP programme;

o   Launched expedited procurement of energy from co-generation; and

o   Developed procurement documents for Gas to Power.

18

In conjunction with the Department of Co-operative Governance and Traditional Affairs and National Treasury develop a strategy to address the backlog related to the Distribution Network.

§  The DoE has done an assessment of the asset refurbishment backlog in the electricity distribution sector, covering Eskom and municipalities. The Department is collaborating with National Treasury, CoGTA, Municipal Infrastructure Support Agency, NERSA will develop the norms and standards for municipal asset management. In addition, a funding model for refurbishing the infrastructure is being developed in collaboration with external investors.

19

In conjunction with the Department of Co-operative Governance and Traditional Affairs, assess and develop strategies for the effective implementation of Free Basic Electricity (FBE) and Free Basic Alternative Energy (FBAE) Policies.

§  The Department tracks the extent of FBE rollout in Eskom licensed areas more easily than in municipal licensed areas.

§  The FBE and FBAE implementation framework has critical shortcomings relating to the ability of national government to enforce the rollout of FBE (this is a municipal constitutional mandate).

20

Identify and empower an Energy Efficiency champion for South Africa, who will take ownership of all current initiatives in South Africa, conduct assessments on effectiveness of current initiatives, and develop strategies going forward including recommendations on new technologies and policies that South Africa needs

§  The Energy Act provides for SANEDI to play the role of energy efficiency agent, with the mandate as outlined in the legislation. SANEDI is also mandated under the Income Tax Amendment Act to implement the energy efficiency tax incentive scheme, by verifying the savings claimed by various entities. The role of verification cannot be undertaken at the same time as project developer, due to conflict of mandate concerns.  

21.

Fast track the biofuels strategy and finalize the regulatory instruments that the Department of Energy is working on, to facilitate the introduction of biofuels into the South African liquid fuels market. 

§  A Cabinet Memo has been completed with the Draft Biofuels Regulatory Framework and all relevant annexures, including: the revised Feedstock Protocol, Financing Model; and the Socio-Economic Impact Assessment System (SEIAS) Report, and were tabled in Cabinet. Cabinet has however deemed it prudent to put the biofuels programme on hold due to the prevailing drought in the country as well as the prevailing economic environment.

22

Address the challenges identified regarding the Renewable Energy Independent Power Procurement Programme, which includes ensuring that the transmission grid is available to the programme as and when required, local communities are empowered and benefit from the programme and those aspects of localization of technology and skills transfer is assessed to ensure it is occurrence.

§  The Department is continuously working with the Eskom Transmission and Distribution infrastructure planning teams to address the connection issues in the immediate future. The different IPP procurement windows are continuously adjusted to take into account grid constraints.

§  For the future, Eskom with DEA and in consultation with the Department has developed a Strategic Grid Plan taking into account energy resource locations. Strategic Environmental Assessment is being undertaken with a view of unlocking these corridors for the future.

§  On localisation, the Department is working closely with the DTI in determining the local content threshold for each technology. Each project is required to submit an economic development plan which includes amongst other things, skills transfer, training and local ownership. 

23

Roll out the co-generation independent power procurement programme to ensure South Africa benefits from this programme

§  The Department released the procurement document for brownfield projects in 2015. One project was appointed as a preferred bidder under the first phase. The second phase was also concluded with another additional project but was never taken further due to concerns raised by Eskom. There is currently a process in place to try and address concerns of budget constraints

24

Closely monitor and where necessary, direct developments related to shale gas and other oil and gas exploration ventures in and around South Africa.

§  The DoE is participating in the Project Executive Committee (PEC), which oversees the development of the Strategic Environmental Assessment (SEA) for Shale Gas in South Africa. The PEC is chaired by the Department of Environmental Affairs (DEA).

§  In addition, the Department also participates in the Task Team led by the Department of Mineral Resources (DMR).

25

Assess the legislative mandate of the NERSA and ensure it is comprehensive and robust to fully empower NERSA to execute their duties. This includes ensuring that the NERSA is empowered to audit and investigate regulatory related issues at Eskom and Municipalities

• The Regulator is already empowered under s4(b) and s32 of the Electricity Regulation Act 4 of 2006 to conduct investigations.
• The NER Amendment Bill proposes a new governance model that creates an appeal authority separate from the regulator.