Department of Energy Performance Reports 4th Qt 2014/15 and 1st Qt 2015/16

1. PORTFOLIO COMMITTEE ON ENERGY 4th Qt 2014/15 and 1st Qt 2015/16 PERFORMANCE REPORTS 4 August 2015

2. Background • This presentation reflects the performance information of the Department of Energy (DoE) for the fourth quarter 2014/15 and first quarter of 2015/16. • At the end of the 4th Quarter performance report an overview is given of the 14/15 financial year. • DoE implements its Annual Performance Plan (APP) through six programmes; • Programme 1 – Administration, • Programme 2 – Energy Policy and Planning, • Programme 3 – Petroleum & Petroleum Products Regulation, • Programme 4 – Electrification & Energy Programme and Projects, • Programme 5 – Nuclear Energy and • Programme 6 – Clean Energy. • The APP and Financial performance of the different Programmes are summarized in this presentation, but the complete APP performance targets are presented in Appendix A (4th Q 14/15) and Appendix C (1st Q 15/16), while the detailed Financial Performance per Programme is presented in Appendix B (4th Q 14/15) and Appendix D (1st Q 15/16) respectively.

3. Summary APP 4th Quarter 2014/15

4. Robot Status Legend

5. Inter-Branch Comparison of Progress, 4th Quarter 2014/15

6. 4th QUARTER 2014/15 PERFORMANCE SUMMARY AGAINST THE APP Out of a total of 39 fourth quarter 2014/15 targets, the department achieved 17 (44%) of its targets, partially achieved 13 (33%), and did not achieve 9 (23%).

7. Programme 1: Administration (Corporate Services, 4th Qt 2014/15) Highlights of Targets achieved • 2.2% of people with disabilities, against target of 1.8% • 5 izimbizos/PPP conducted which is 100% achievement Summary of Targets not achieved • 42.5% of women in SMS positions, vs : 38.55% • 10.26% of vacancy rate against the target of 10% Comments • The department will focus on females for vacant positions at SMS level in order to address the target of 42.5% women.

8. Programme 1 (Financial Management Services, 4th Qt 2014/2015) Highlights of Targets achieved • 100% approved invoices paid within 30 days of receipt. Summary of Targets not achieved • None. Comments • The Department has continued to maintain a good record of paying invoices within 30 days.

9. Programme 2 (Energy Policy and Planning , 4th Qt 2014/15) Highlights of Targets achieved • Technical outputs from DOE have been included in the IEP final report. • Draft 20 Year Liquid Fuel Master Plan (20YRLFM) is currently undergoing consultation process with SOCs before it can be submitted to Cabinet for approval. Summary of Targets not achieved • Promulgation of norms and standards for municipal network asset rehabilitation. Comments • The delay in municipal network asset rehabilitation is due to finalization of funding options

10. Programme 3 ( Petroleum and Petroleum Products Regulation , 4th Qt 2014/15) Highlights of Targets achieved • Enforcement notices issued in 85% of cases where non-compliance is identified during routine compliance inspections was achieved. Summary of Targets not achieved • 100 % arbitration requests could not be finalised due to limited cooperation between parties. • 30% of licence applications where BEE ownership is at least 50% could not be achieved. • Implementation and monitoring of the biofuels pricing framework. • 10 published working rules. Comments • Some of the targets could not be achieved as they are dependent on external parties such as the Task Team on Biofuels which comprised of different departments and new issues are continuously being added.

11. Programme 4 ( Electrification and Energy Programme and Project Management, 4th Qt 2014/15) Highlights of Targets achieved • 14 030 non-grid connections achieved against the target of 15 000. • The 11th IPP report on construction has been completed. BW1 is at 99% complete and BW2 is at 47% complete. 25 IPPs have reached COD for Bid Window 1 and 9 IPPs have reached COD for Bid Window 2 and are in full commercial operation. • NgwaabeIeC is completed and was operationalized by the 22nd of May 2015 . Summary of Targets not achieved • 2 new bulk substations built against the target of 14. Comments • The delays of building new bulk substations are due to late start of the project, delays in designs and delivery of ordered materials.

12. Programme 5 (Nuclear Energy, 4th Qt 2014/15) Highlights of Targets achieved • Development of the implementation plan on the Mission Report was finalised and approved. • Nuclear security compliance reports developed and approved. • 2 nuclear safeguards compliance report developed and approved. • 1 nuclear safeguards compliance report developed and approved. • 3 public awareness campaigns conducted. Summary of Targets not achieved • Development of the Fund Bill is in progress and consultations with Chief State Law Adviser is in progress. This target was partially achieved. Comments • Procurement process for new nuclear build programme in progress.

13. Programme 6 (Clean Energy, 4th Qt 2014/15) Highlights of Targets achieved • None. Summary of Targets not achieved • 1.5 TWh of energy savings from EEDSM projects (cumulative). • Development of baseline energy profiles for additional 30 municipalities. • Promulgation of NEE Strategy document. • Solar water heating units in residential and commercial sectors . Comments • The process of developing the templates for Measurement and Verification of energy savings has commenced. • Solar water heater contacting model submitted to Cabinet for moving the programme from Eskom to DOE.

14. 4th Quarter 2014/15Financial Performance

15. PRESENTATION LAYOUT 4th Quarter Financial Performance for 2014/15 - Overview per Economic Classification 4th Quarter - Top 5 Major Cost Drivers (Goods & Services) for 2014/15 4th Quarter Financial Performance for 2014/15 – Overview per Programme 4th Quarter Transfer Payment Schedule for 2014/15

16. 4th QUARTER FINANCIAL PERFORMANCE FOR 2014/15Overview – Economic Classifications

17. 4th QUARTER FINANCIAL PERFORMANCE - 2014/15 VARIANCES • The Department’s 2014/15 adjusted budget was a total of R7.44 billion • As at 31 March 2015, a total of R6.22 billion or 83.6% of this adjusted budget had been disbursed. • This resulted in an unspent budget of R1.22 billion or 16.37% of the adjusted allocation, mainly due to the under spending in the transfer payments economic classification. • Compensation of employees: • The budget under-spending in this economic classification accumulated to R8.98 million by year-end due to the high rate of attrition during the financial year. • Also contributing to the variance was the delays in filling of vacancies, some positions had to undergo lengthy work study processes, which had to be finalized before the position could be filled.

18. 4th QUARTER FINANCIAL PERFORMANCE FOR 2014/15VARIANCES (Continued) • Goods & services: • The under-spending of R34.74 million or 14.23% of the total adjusted budget for goods and services for the 2014/15 financial year. • The under-spending is mainly attributable to the delayed appointment of service providers, delayed commencement of projects resulting in incomplete projects at year-end as well as operational savings brought about by cost reduction measures implemented during 2014/15. • Transfer payments: • The Department disbursed payments totalling R5.74 billion to public entities, municipalities and implementing agents which resulted in a budget under-spending of R1.17 billion (16.96%) at year-end. The under-spend is mainly due to: • INEP Non-grid: R35.53 million (33.7%) below budget attributable to the late start of the programme’s implementation in 2014/15. • EEDSM Eskom (SWHP): R1.14 billion (69.4%) was not transferred to Eskom, as a result of changes to the implementation model.

19. 4th QUARTER (TOP 5) - MAJOR COST DRIVERS: GOODS AND SERVICES • The total budget spent on the procurement of various Goods & services amounted to R157.2m; • The top 5 cost items collectively accounted for 75.1% of the total spend, an increase from 74% reported in 2013/14 • A significant portion of the Department’s goods and services spending, 26.9%, was directed towards travel and subsistence cost, a decrease from 31.2% expended on this item in 2013/14. The decrease is attributable to the implementation of cost containment measures in 2014/15. • Leases is mainly for office accommodation lease rentals for head office regional offices . Spending on consultants increased from 13.6% reported in 2013/14 to 20.91% in 2014/15.

20. 4th QUARTER FINANCIAL PERFORMANCE FOR 2014/15 - per PROGRAMME Please see a detailed breakdown of 4th Quarter Financial Performance for 2014/15 per programme in Appendix B.

21. 4th QUARTER TRANSFER PAYMENT SCHEDULE FOR 2014/15

22. 2014/15 Roll-over application • Quarter 4 - Roll over application • The Department submitted a request to the National Treasury motivating for a portion of the unspent budget to be rolled over into the 2015/16 financial year to enable the completion of some projects which commenced in 2014/15. • The rollover submission included the following: • Transfer Payments –budget balance R1.17 billion • R1.14 billion to implement the SWH programme. Approval of the new implementation model has been received from National Treasury. • R35.5 million to pay service providers for services rendered under the INEP Non-grid project • Goods and services • Costs to the value of R12.16 million met the criteria for a roll over of funds into the 2015/16 financial year. • The roll over confirmation from National Treasury is still outstanding.

23. Conclusion 4th Quarter 14/15 The following can be highlighted from the 4th Q performance: • Out of a total of 39 fourth quarter 2014/15 targets, the department achieved 17 (44%) of its targets, partially achieved 13 (33%), and did not achieve 9 (23%). • The department achieved 2.2% employment of staff with disabilities thus exceeding the target of 1.8%, however has to improve on of women in SMS positions; • SWH, EE and Bio fuels programme did not achieve the outcomes as planned, due to different reasons; • Progress on target with the RE IPP programme:Bid Window (BW) 1 is 99% complete, and BW2 is at 47% complete. 25 IPPs have reached their Commercial Operation Date (COD) for BW 1, and 11 IPPs have reached COD for BW 2 and are in full commercial operation producing about 1871 MW; • The number of electricity connections achieved in the 4thQt 2014/15 stood at 87 664. Cumulative connections for 2014/15 amounted to 233 455; • The draft 20 YR Liquid Fuels Roadmap was completed but is currently undergoing consultation; • A total of 1580 fuel samples were achieved for the financial year 2014/15, due to improved processes in 4thquarter of which 1080 samples were done; • DOE has unspent its budget by R1.22 billion or 16.37% of the adjusted allocation, mainly due to the under spending in the transfer payments economic classification; • All service provider invoices were paid within 30 days of receipt and submitted to NT by the 7th of each month.

24. Overview of 2014/15 Financial year

25. KEY ACHIEVEMENTS FOR 14/15 FINANCIAL YEAR Policy Development: • Integrated Energy Plan (IEP): Since the approval and publication of the first draft during the 2013/14 financial year, we have addressed the public comments and produced a draft report which includes the technical outputs. The final IEP report will be submitted to Cabinet during the third quarter of the 2015/16 financial year. • 20 year Liquid Fuels Framework (20YRLFRM) - The draft 20YRLFRM has been completed but it is currently undergoing consultations process before is submitted to Cabinet for approval, • The Draft Gas Utilization Master Plan was completed and is being considered within the DOE; and • The IRP was implemented according to timeframes set out in IRP 2010.

26. KEY ACHIEVEMENTS FOR 14/15 FINANCIAL YEAR (cont) Electrification Programme • The total household connection target for 2014/15 was 265 000 grid and 15000 non-grid and achieved 247 485 with 233 455 grid and 14 030 non-grid connections. • More than 70% of the funding was allocated to the 24 most deprived District Municipalities. Community Upliftment • One Integrated Energy Centre (IeC) at Ngwabe village in Limpopo province has been completed. • The Thembisile Hani IeC in the Eastern Cape has not been completed due to contractual issues and acquisition of land issues • Learners Focus Week: A leaners focus week was held to disseminate information on energy as well as encouraging students to take science and mathematics subjects to enable them to be eligible to career paths related to the energy sector. More than 300 students participated

27. KEY ACHIEVEMENTS FOR 14/15 FINANCIAL YEAR (cont) Community Upliftment(cont.) • Workshops: Four (4) workshops were conducted on business opportunities in the energy sector for women in Gauteng, Western Cape, KwaZulu-Natal and Mpumalanga Provinces. A total of 350 women from the historically disadvantaged communities participated. The workshops provided information on business opportunities in the energy sector which includes renewables, electricity infrastructure, oil and gas. • Participate in the June 16 Youth day and Nelson Mandela Day. • International Women’s day celebration and launch of terms of reference for the Department’s Women Forum. Petroleum • 2070 site inspections were conducted by Department officials during 2014/15, to ensure regulatory compliance concerning petroleum products’ specifications and standards by all manufacturers, wholesalers, and retailers.

28. KEY ACHIEVEMENTS FOR 14/15 FINANCIAL YEAR (cont) Petroleum (cont.) • 712 out of 1050 (67.8%) licence applications received were finalised within 90 days. • 26 site & retail out of 30 site & retail (86.7%) new to industry licence applications received were finalised within 60 days. • Over 40 PPPs were hosted during the year, focusing, amongst others, on the improvement of the petroleum licencing process and the role of the applicants in improving the turnaround time. • Margin adjustments as part of the implementation of the Regulatory Accounting System (RAS) were effected in December 2014.

29. KEY ACHIEVEMENTS FOR 14/15 FINANCIAL YEAR (cont) Nuclear • Nuclear Build: Two studies were completed in the period under review: (a) Finance Options, Models and Solutions for the nuclear build programme (in conjunction with the National Treasury and Department of Public Enterprises), and (b) Economic Impact of Localisation of the nuclear programme. Recommendations from these two studies will be presented to the Energy Security Committee in order to make an informed decision on financing of the nuclear build programme • 5 Vendor parade workshops have been held; and • 50% authorisation applications were processed and approved within the stipulated turn around time of 8 weeks. Financial • All invoices were paid within 30 days of receipt; and • The AGSA reported that for the 2014/15 financial year, the Department has achieved a Clean Audit.

30. CHALLENGES Background on Challenges facing the Department and the energy sector: • Reduce escalating energy prices of both electricity and petroleum products, to cushion the adverse impact on the poor. • Implement our plans to keep the lights on in the short- medium- to long- term, in the context of Eskom’s balance sheet challenges. This includes finding a solution to finance the various projects in a way that balances steep electricity tariff increases on one hand, and on the other, against blackouts and stunted economic growth due to lack of adequate power generation capacity. • Provide short term/ immediate power solutions that will assist the country to meet the current energy demand, until Medupi, Kusile and Ingula pump storage station are fully operational in the absence of a clear ESI end state. • Filling of positions timeously is a challenge as well as obtaining the requisite skills.

31. CHALLENGES (cont) • Secure liquid fuels supply chainsincluding crude oil supply, refining and distribution. • Improve our Energy Efficiency and Demand Side Management – Implementation of new contracting model for the SWH programme. • Transform the energy sector - bring more historically disadvantaged role players into the economic mainstream and increase access to ordinary South Africans to modern energy services. • The aging electricity distribution infrastructure – its contribution to blackouts, load shedding and investment requirements. • INEP – capacity of Municipalities to deliver on the electrification programme • Growing cost per connection as the programme moves deep into rural areas, and • Network capacity constrains.

32. CHALLENGES AND OUTSTANDING ISSUES –PLANS TO ADDRESS ISSUES • Nuclear – Finalisation of the amendments to the NNR Amendment Bill, National Radioactive Fund Bill and the Draft Nuclear Energy Bill to accommodate further consultation. Proposed submission to Cabinet is 2015/16 financial year. • Consolidated monitoring and evaluation of departmental programmes – challenges of funding were experienced in this area to address the performance of programmes like; INEP, IPPs and energy efficiency initiatives. Requested additional funding for operational budget, as well as “top slicing”. • SWH roll-out – The implementation of the new Contracting model and establishment of the local SWH manufacturing industry took much longer than anticipated. Implementation plan still to be finalised. • Gas – The development of an gas industry is required to ensure the implementation of energy mix policy.

33. CHALLENGES AND OUTSTANDING ISSUES –PLANS TO ADDRESS ISSUES (cont.) • Electricity Distribution backlogs – The DOE received an allocation of R320 mil to run a pilot on addressing the backlog model. Additional funding has been requested from NT to address these issues. Not only infrastructure funding, but also for planning, project management and oversight activities. • Bio-fuels programme – Finalisation of food stock, subsidy and pricing framework to be reached between different departments. • Oversight of SOE’s - Oversight of SOE’s remains a challenge for the Department due to governance challenges experienced by some of the SOE/Cs and capacity challenges within the DOE . Requesting urgent additional funding for improving this function, as well as looking at re-allocation of specific tasks within DOE.

34. Summary APP1st Quarter 2015/16

35. Inter-Branch Comparison of Progress, 1st Quarter 2015/16

36. 1stQUARTER 2015/16 PERFORMANCE SUMMARY AGAINST THE APP For the first quarter 2015/16, out of a total of 61 targets, the department achieved 33 (55%) of its targets, partially achieved 11 (18%), and did not achieve 17 (28%).

37. Programme 1: Administration (Corporate Services , 1stQt 2015/16) Highlights of Targets achieved • Vacancy rate of 9.7% was achieved against the target of 10%. • HR plan was reviewed. • A target of 2% of people with disabilities employed was achieved. • Training of officials in nuclear was partially achieved as only three officials were trained. • Out of 18 bilateral agreements, 13 were entered into. This target was partially achieved Summary of Targets not achieved • 50% of women in SMS positions was not achieved as the figure is currently at 38%. Comments • The process of recruiting more females on SMS positions has commenced for vacant positions.

38. Programme 1:Administration (Financial Management Services, 1stQt 2015/16) Highlights of Targets achieved • 100% approved invoices paid within 30 days of receipt was achieved. Summary of Targets not achieved • None. Comments • None.

39. Programme 2: Policy and Planning, 1stQt 2015/16) Highlights of Targets achieved • Draft Coal, Gas, Petroleum and commodity flows compiled. • A draft GUMP has been developed and being considered for approval. • Gas Amendment Bill – consultation with NEDLAC has taken place. • Consultation and internal engagement on draft 20YLFMP report has taken place with SOCs. • Comments on SA Biofuels Regulatory Framework have been included in the framework and submitted for Ministerial approval. • Consultation on Petroleum Pipelines Act with NERSA has taken place and Amendment Regulations are submitted for Ministerial approval to promulgate. • NERA Bill has been submitted and approved by Cabinet with certain conditions. Summary of Targets not achieved • Revised ADAM Report could not be finalised. • Norms and Standards for municipal assets. • Review and revise the electricity industry structure and propose options. • Development of the SFF legislation could not be achieved this quarter. Comments • The SFF legislation will be prioritised in 2016.

40. Programme 3: Petroleum and Petroleum Products Regulation, 1stQt 2015/16) Highlights of Targets achieved • 607 retail site inspections conducted: January to March 2015. The target was exceeded by 107 new retail site inspections. • Enforcement notices issued in 90% of cases where non-compliance is identified during routine compliance inspections. Summary of Targets not achieved • Enforcement notices issued in 95% of cases where non-compliance is identified during routine fuel sample testing. Comments • None.

41. Programme 4: Electrification and Energy Programme and Project Management, 1stQt 2015/16) Highlights of Targets achieved • All IeCs were monitored during the first quarter. Monthly reports were submitted on the engagements with IeCs. • Provincial reports prepared from the INEP Municipality Programme. • Contracts for locally manufactured products placed. Training & capacity building of installation teams in identified municipalities completed. • The 12th IPP report on construction has been completed. BW1 is at 99% complete and BW2 is at 64% complete. 26 IPPs have reached COD for Bid Window 1 and 11 IPPs have reached COD for Bid Window 2 and are in full commercial operation. Summary of Targets not achieved • Project Management Business Process. • Implement dashboards for monitoring of 3 projects. Comments • None.

42. Programme 5: Nuclear Energy, 1stQt 2015/16) Highlights of Targets achieved • Draft updated National Nuclear Disaster Management Plan – relevant stakeholders consulted on progress regarding the implementation and response of the action plan on the emergency plan. • Draft report for transactional advisor motivation completed. • 70% of authorisation applications processed within the 8 week time period. • Nuclear safeguard compliance reports submitted for approval. • One nuclear safeguard compliance audit submitted and approved. • 1 community outreach event held. Summary of Targets not achieved • Draft revision of the NNR Amendment Act. • Fund Bill. Comments • Additional vendor workshop been held.

43. Programme 6 Clean Energy, 1stQt 2015/16) Highlights of Targets achieved • Energy consumption baseline - Stakeholder engagement process with an additional 20 target municipalities conducted. • Renewable Energy Implementation Report - Developed the Terms of Reference &for the appointment of a service provider. • Appointment of a service provider for the coordination & management of the hosting of SAIREC. Summary of Targets not achieved • There were no SWH units installed this quarter. The Cabinet Memorandum which contains the clarification on the mow of the programme form Eskom to DOE was approved on 26 June 2015. Comments • None.

44. 1st Quarter 2015/16Financial Performance

45. PRESENTATION LAYOUT 1st Quarter Financial Performance for 2015/16 - Overview per Economic Classification 1st Quarter - Top 5 Major Cost Drivers (Goods & Services) for 2015/16 1st Quarter Financial Performance for 2015/16 – Overview per Programme 1st Quarter Transfer Payment Schedule for 2015/16

46. QUARTER 1- FINANCIAL PERFORMANCE FOR 2015/16Overview – Economic Classifications

47. QUARTER 1 - FINANCIAL PERFORMANCE FOR 2015/16 VARIANCES • The Department’s 2014/15 adjusted budget is a total of R7.48 billion • On 30 June 2015, a cumulative budget of R1.92 billion was available from which R1.9 billion or 98.6% was utilized resulting in a budget underspending of R27.19 million or 1.41%. The Transfers category accounted for 37.6% and goods and services for 59.9% of the total under spending. • Compensation of employees: • R2.51 million (3.70%) over budget attributable to the once-off gratuity paid in April 2015 which was funded, however there were unfunded fixed term contract positions which are carried additional to the establishment. • The Department also had a budget reduction of R22.11 million in 2015/16, and this will have an impact on the monthly/quarterly variances.

48. QUARTER 1 - FINANCIAL PERFORMANCE FOR 2015/16 • VARIANCES (continued): • Goods and services: • R22.24 million (43.03%) below budget, major variances being in: • Consultants / business advisory services item (R10.57m) attributable to delays in activating projects carried over from the previous financial year; • Operating leases (R8.54m) due to outstanding office accommodation lease invoices which have not been received from DPW as planned; • Computer services item (R1.40m) attributable to delays in installation of services at new regional office premises. • Transfer payments • R7.87 million (0.44%) below budget due to the non-disbursement of payments in INEP Non-grid: R10.74 million (50%). Some invoices which were returned to service providers for correction as these documents contained some anomalies. • Payments for capital assets • R408 thousand (45.56%) over budget, due to the timing of the procurement of office furniture& equipment

49. QUARTER 1 - TOP 5 MAJOR COST DRIVERS: GOODS AND SERVICES • The total budget spent on the procurements of various Goods & services amounted to R29.4m; • The top 5 cost items collectively accounted for 73.98% of the total spend; • A significant portion of the Department’s goods and services spending, 38.58%, was directed towards travel and subsistence cost.

50. QUARTER 1 - FINANCIAL PERFORMANCE FOR 2015/16 - per PROGRAMME Please see a detailed breakdown of 1st Quarter Financial Performance for 2015/16 per programme in Appendix D.