Presentation to the Parliamentary Committee on Energy – 3 rd Quarter Performance (2013/14)

Presentation to the Parliamentary Committee on Energy – 3rd Quarter

Performance (2013/14)

Nelisiwe Magubane11 February 2014

Department of Energy

CONTENT

2

A. Introduction-2013/14 Midterm Review

B. Highlights for the quarter

C. Financial Report

D. Programme Performance

E. Conclusion

3

INTRODUCTION

• Mid-Term Review conducted November 2013

• Revised 2013/14 APP and Operational Plans

are aligned to the Framework for Strategic

Plans and Annual Performance Plans

• Branch presentations to respond to additional

points raised by the Chairperson of the PCE,

last Friday afternoon.

B. HIGHLIGHTS FOR THE QUARTER

4

1. Announcement of the successful bidders for Window 3

2. Implementation of the Regulatory Accounting System (RAS)

3. Concluded the IEP

4. Finalised the review of the IRP

5. Nuclear -Completed the Self Assessment Report

6. Completed the Leadership Development Management

Programme for Senior Managers

7. Completed and submitted the annual Management Performance

Assessment Tool (MPAT) to DPME

25 November 2012

C. FINANCIAL REPORT

PRESENTATION LAYOUT

3rd Quarter Financial Performance:Overview per Economic ClassificationTop 5 Major Cost Drivers (Goods & Services)Overview per ProgrammeTransfer Payment Schedule for 2013/14

6

2013/14: 3rd QUARTER FINANCIAL PERFORMANCE Overview – per Economic Classification

7

Vote 29: Energy

{A} {B} {C} {D} {E} {F}

2013/14 2013/14 2013/14 2013/14 2013/14 2013/14

Adjusted YTD YTD YTD YTD Budget

Budget Budget Actual VARIANCE VARIANCE Expended

R’000 R’000 R’000 R’000 % %

Total Energy 6,503,244 5,682,345 4,130,920 1,551,425 27.3% 63.52%

Compensation of Employees 242,562 184,440 169,868 14,572 7.9% 70.03%

Goods & Services 214,655 152,502 110,778 41,724 27.4% 51.71%

Transfers & Subsidies 6,034,264 5,339,322 3,846,595 1,492,727 28.0% 63.75%Payments for Capital Assets 11,763 6,081 3,679 2,402 39.5% 30.22%

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3rd QUARTER FINANCIAL PERFORMANCE FOR 2013/14• Total expenditure as at the end of the quarter under review was planned

or estimated at R5.7 billion and the actual amount spent was a total of R4.1 billion or 72.7% resulting in a budget variance of R1.5 billion or 27.3%

• The composition of this budget balance was as follows:

Compensation of employees: R14.6 million (7.9%) below budget mainly attributable to vacancies

Goods & services: R41.7 million (27.4%) below budget due to various projects which could not commence as planned

Transfer payments: R1.49 billion (28%) below budget mainly due the budget under spend in the EEDSM-Eskom programme which is accountable for R1.14 billion or 19% of the total transfer payments’ budget balance.

Payments for Capital Assets: R2.4 million (39.5%) below budget, most of this amount is currently committed in the system.

MAJOR COST DRIVERS (Top 5): GOODS AND SERVICES

9

COST DRIVERS - GOODS AND SERVICES

2013/14

April-DecemberRand thousand R'000Travel and subsistences 40,940Operating leases 15,564Consultants and professional services: Business and advisory services 7,918Computer services 6,015Advertising 5,522TotalQ3 GOODS & SERVICES TOTAL

75,959110,777

• Total spent on Goods & services is R110.8 m• The top 5 costs accounts for 68.6% of the total

spend• Spending on travel and subsistence constituted 37%

of the total Departments goods and services expenditure, 51% still being accounted by the Administration programme

• Operating leases is mainly for office accommodation lease rentals for head office and all regional offices

• More than 50% of total computer costs are incurred on services rendered by SITA

2013/14: 3rd QUARTER FINANCIAL PERFORMANCEper Programme

10

Vote 29: Energy

{A} {B} {C} {D} {E} 13/14

Adjusted Q3 Q3 Q3 Q3

13/14Budget

ExpendedBudget Budget Actual VARIANCE VARIANCER’000 R’000 R’000 R’000 % %

TOTAL: 6,503,244 5,682,345 4,130,920 1,551,425 27.3% 63.52%

Administration 224,116 161,174 157,055 4,119 2.6% 70.08%

Energy Policy & Planning 47,201 30,318 30,413 (95) -0.03% 64.43%

Energy Regulation 40,315 33,558 16,882 16,676 49.7% 41.88%Electrification & Energy Programmes Management

3,977,740 3,305,271 3,077,347 227,924 6.9% 77.36%Nuclear Energy & Regulation 707,598 682,138 664,836 17,302 2.5% 93.96%

Clean Energy 1,506,274 1,469,886 184,387 1,285,499 87.5% 12.24%

Programme 1: Administration

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Vote 29: Energy

{A} {B} {C} {D} {E} 2013/14 2013/14 2013/14 2013/14 2013/14 2013/14 Original YTD YTD YTD YTD Adjusted B.Budget Budget Actual VARIANCE VARIANCE ExpendedR’000 R’000 R’000 R’000 % %

Total

219,628

161,174

157,055 4,119 2.6% 70.08%

Compensation of employees

112,947

85,854

82,804

3,050 3.6% 73.31%

Goods and Services 97,932

69,141

70,358

-1,217 -1.8% 70.12%

Transfers and subsidies

356

286

231

55 19.2% 364.89%

Payments for capital assets

8,393 5,893

3,662

2,231 37.9% 34.97%

• Compensation of employees: Variance is mainly due to vacancies. The recruitment process for these is currently underway.

• Goods & services: Due to a number of engagements undertaken towards the latter part of the year, e.g. nuclear study tour headed by the Minister, the travelling costs came to more that anticipated which resulted in the budget over spend.

• Payments for Capital Assets: The saving is currently committed, awaiting delivery of goods & services.

Programme 2: Energy Policy and Planning

12

Vote 29: Energy


Total 47,201

30,318

30,413

95 03% 64.43%


30,629

23,962

21,128

2,835 11.8% 68.98%


6,356

9,277

-2,921 -46% 58.45%


-

-

8

-8 0.00% 0.00%


-

-

-

- 0.00% 0.00%

• The over spend in Goods and services is attributable to the number of IEP stakeholder engagement workshops which were undertaken. This variance is off-set by the under-spending in compensation of employees.

Programme 3: Energy Regulation

13

Vote 29: Energy


Total 43,315

33,558

16,882

16,679 49.7% 41.88%


20,072

16,325

14,225

2,100 12.9% 70.87%


17,233

2,604

14,629 84.9% 12.86%


-

-

53

-53 0.00% 0.00%


-

-

-

- 0.00% 0.00%

• Compensation of employees: Variance is mainly due to vacancies. The recruitment process for these is currently underway.

• Goods & services: The process of appointing a service providers to undertake the fuel specification testing project and the replacement cost of (4) secondary depot size project is currently underway.

Prog.4: Electrification & Energy Programmes Management

14

Vote 29: Energy


Total

3,978,028

3,305,271

3,007,341

227,924 6.9% 77.36%Compensation of employees

53,660

39,088

34,477

4,611 11.8% 64.25%


20,212

15,800

4,412 21.8% 55.64%


3,895,023

3,245,783

3,027,061

218,722 6.7% 77.72%Payments for capital assets

250 1889

179

-170.0% 0.00%

• Compensation of employees: Variance due to vacancies, the recruitment process is currently underway• Goods and services: Saving is mainly due to the delayed procurement of a reporting tool and its related support, the

procurement process is underway. Part of the saving is earmarked for the marketing of Non-grid technologies in certain areas where backlogs have been identified.

• Transfer payments: The variance is mainly attributable to the performance of the Non-grid electrification project, which is R33.3 million behind in spending. The delay in the finalization of service providers’ contracts contributed to

the variance. The transfers to certain municipalities were also withheld , an application was made to Treasury for the re-directing of these allocations to other municipalities . National

Treasury has since sanctioned the proposed redirection, payments will thus follow.

Programme 5: Nuclear Energy and Regulation

15

Vote 29: Energy


Total

708,798

682,138

664,836

17,302 2.5% 93.96%Compensation of employees

11,772

9,221

7,463

1,758 19.1% 63.40%


21,473

9,888

11,585 54.% 43.14%


673,919

651,444

647,485

3,959 0.6% 96.08%Payments for capital assets

-

-

-

- 0.00% 0.00%

• Compensation of employees: The reported saving is attributable to vacancies, the recruitment process of which was finalized in December 2013.

• Goods and services: Variance is due to delays in projects, i.e. the nuclear awareness campaigns, study on the cost of nuclear power and advisory services on the financing options, models and solutions for the new nuclear build programme. These projects have since commenced.

• Transfer Payments: The transfers to the NRAWDI could not be transferred as the appointment of the board was still not finalized. The board has since been appointed and the operationalization of the Institute has commenced.

Programme 6: Clean Energy

16

Vote 29: Energy


Total

1,506,274

1,469,886

184,387

1,285,499 87.5% 12.24%Compensation of employees

13,482

9,990

9,771

219 2.2% 72.47%


18,087

2,851

15,236 84.2% 10.37%


1,464,966

1,441,809

171,757

1,270,052 88.1% 11.72%Payments for capital assets

30

-

8

-8 0.00% 2.35%

• Goods and services: The planned Clean energy/energy efficiency awareness campaigns could not commence as planned due to conflicting engagements, resulting in the above variance. The saving from this project, which cannot be utilized, will be redirected to the SWH local content verification project, the procurement process of which has commenced.

• Transfers and subsidies: The reported variance mainly emanates from the EEDSM-Eskom programme. No transfers could be processed as the implementation contract with Eskom was not finalized.

3rd QUARTER TRANSFER PAYMENT SCHEDULE FOR 2013/14

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Programme Projects & Entities

{A} {B} {C} {D} {E}2013/14 2013/14 2013/14 2013/14 2013/14

Adjusted YTD YTD YTD YTDBudget Budget Actual Variance Variance R’000 R’000 R’000 R’000 %

Programme 6 EEDSM - Municipalities 180,722 102,651 70,999 31,652 30.83%EEDSM – Eskom 1,149,900 1,238,400 - 1,238,400 100.00%

SANEDI 134,344 100,758 100,758

- 0.00%Programme 4 INEP - Municipalities 1,634,772 1,414,387 1,220,991 193,396 74.69%

INEP - Eskom 2,141,027 1,771,972 1771,972 - 0.00%INEP – Non-grid 119,224 59,424 33,956 25,468 42.9%

Dept Agencies - gifts - - 104

(104) 0.00%

Programme 5 NNR 48,360 43,348 43,348

- 89.64%

NECSA 592,182 592,182 592,182

- 100.00%

IAEA- Int. fees 13,577 - 11,955 (11,955) 0.00% Waste Disposal Ins 19,800 15,914 - 15,914 100.00%Programme 1,2,3 Households 356 286 330 -44 15.4%

Total Transfers 6,034,264 5,339,322 3,846,595 1,492,727 28.0%


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YTD, the transfer payments category reflected a budget under spend of R1.49 billion (28%) mainly due to the following:

•EEDSM Municipalities: R31.65 million (30.8%) under budget as a result of the withholding of transfers from certain municipalities in terms of the provisions of DoRA. Through regazetting, these transfers will be directed towards other municipalities before year end

•EEDSM –Eskom: R1.24 billion or 100% under budget, due to the delayed finalization of the implementation contract with Eskom

•INEP Municipalities: R193.40 million (13.7%) million under budget mainly due to the late submission of payment requests from municipalities. Expenditure is expected to increase during last quarter of 2013/14 financial year following the re-gazetting of some withheld allocations.

•INEP Non-grid: R25.5 million (42.9%) under budget. Work already undertaken by service providers must first be verified before payments can be processed. This will be done during last quarter of 2013/14• financial year.


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•NWRDI: R15.9 million (100%) under budget due to the delay in the establishment of the institute and its board of directors . The appointment of the board was finalized in November 2013. Interim arrangements has been instituted to ensure a transfer before 31 March 2014

PROJECTED SPENDING TO 31 MARCH 2014

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• As at the end of the quarter under review, the Department had utilized a total of R4.13 billion or 63.5% of its total 2013/14 budget of R6.50 billion.

• The above resulted in the available budget balance of R2.37 billion to be utilized in the 4th quarter of 2013/14 financial year.

• The Forecast, based on information in the system, is that a total of R2.32 billion will be spent in the 4th quarter as follows:

Compensation of employees: R56.6 million Goods & services: R60.9 million Transfer payments: R2.2 billion Payments for Capital Assets: R7.7 million

• Based on the estimates available it is forecasted that 56 million will be unspent, However plans are in place to utilize a total of R40 million.

CONCLUSION

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•In the 2012/13 financial year, the Department spent 98.9% of its allocated budget (99.6% of the allocated budget was spent in 2011/12).

•Based on the best available information to date, it is anticipated that in the 2013/14 financial year, the Department will spend 99% of its allocated budget .

25 November 2012

D. PROGRAMME PERFORMANCE

PROGRAMME 1 (ADMINISTRATION) (1)

23


24

KPI 3rd Quarter Target

Performance Result

Reason for variance and corrective action (if needed)

Result of annual audit N/A - Target reported during the 2nd quarter

Average score on the Management Performance Assessment Tool (MPAT)

Average MPAT score of at least 2.8 for the moderated score of 2012/13

Partially Achieved

Awaiting response from DPME

Percentage of approved invoices paid within 30 days of receipt

100% Achieved -


25


Performance Result


Percentage of vacancy rate

Reduced to 11%.

Achieved (8.33%)

-

Percentage of employment of people with disabilities

No quarterly target

- Measure reported annually

Percentage of women in SMS positions

No quarterly target

44% SMS & 39% MM

Year-to-date

Number of Izimbizo (Public Participation Programmes) conducted (PPP).

5 Partially Achieved (3)

Events were postponed due to other commitments by political principals

PROGRAMME 2 (ENERGY PLANNING AND POLICY)

26

PROGRAMME 2 (ENERGY PLANNING AND POLICY) (2)

27


Performance Result


Finalised Integrated Energy Plan submitted to Cabinet for approval

Public Consultation completed

Achieved

Finalised Gas infrastructure development options report submitted to the Minister for approval

No target set for the quarter, (2nd qtr target)

Not Achieved Collective consultation was done, still awaiting further inputs from stakeholders

Finalised Liquid fuels roadmap report submitted to the Minister for approval

No target set for the quarter (2nd qrtr target)

Partially Achieved

Draft report in place but not yet submitted to the minister


28

KPI 3rd Quarter Target Performance Result


LPG pricing policy framework submitted to Minister for approval

Public consultation on the draft LPG pricing policy framework concluded

Achieved

Legislative amendments to the Petroleum Products Act submitted to Minister for approval.

Target to be reported in Q4

- Draft is in place, Ministerial submission for approval by SOE &State Law Advisor Consultation will be made in Q4


29



Legislative amendments to the Gas Act submitted to Minister for approval

To be reported during the 4th Quarter

- Gazetted the Amendment bill, 9 prov consultedConclude NEDLAC Consultations.


30



IRP updated with transmission and distribution infrastructure requirements

No target for the quarter

Achieved Draft IRP update published for public comment

Amendments to the Electricity Regulation Act and the NER Act submitted for certification for deliberation by Parliament


- Internal processes are still underway.


31



ISMO Bill promulgated To be reported in the 4th quarter

- Bill submitted to Parliament

Developed regulatory mechanisms and delivery model(s) relating to municipal distribution infrastructure

Developed regulatory mechanisms and delivery model(s) for the pilot municipal infrastructure rehabilitation programme

Achieved Document submitted to parliament for consideration

Updated pricing policy framework documents


- Completed during 1st quarter.


32



Promulgated Standard offer incentive scheme for solar water heaters and reducing energy in the building envelope


- Process of engagement with NERSA is still underway.

PROGRAMME 3 (ENERGY REGULATION)

33

PROGRAMME 3 (ENERGY REGULATION) (2)

34


Performance Result


Percentage of cases where enforcement notices are issued in cases where non-compliance is identified during routine compliance inspections

Enforcement notices issued in 80% of cases where non-compliance is identified

Achieved All enforcement notices issued where non-compliance were identified.

Percentage of cases where enforcement notices are issued in cases where non-compliance is identified during fuel samples testing

Enforcement notices issued in 95% of cases where non-compliance is identified

Not achieved The Service Provider to test the fuel samples not yet appointed, Bids evaluations completed.


35


Performance Result


Percentage of licence applications approved that is with ownership of at least 50% BEE

Will commence in 2014/15

N/A

Percentage of arbitration requests finalised within the prescribed timeframes

100% Achieved No arbitration requests received during the 3rd quarter.

Revised Basic Fuel Price (BFP) Working Rules Process and Magisterial District Zones (MDZ).

Submit Progress Report

Not achieved Only two bidders submitted their proposals , to be re-advertised once.


36


Performance Result


Determine Benchmark Service Station (BSS) asset base

Draft report on the BSS asset base

Not achieved Only two bidders submitted their proposals and could pass the technical evaluation stage. It would be re-advertised once the BAC has approved the Bid Evaluation Committee report.

Promulgation and Implementation of Biofuels pricing Framework

-

PROGRAMME 4 (ELECTRIFICATION AND ENERGY PROGRAMME MANAGEMENT)

37

PROGRAMME 4 (ELECTRIFICATION AND ENERGY PROGRAMME MANAGEMENT) (1)

38


Performance Result


Number of reports on the allocation of funding and monitoring of grid electrification of households projects in comparison to the electrification plan

1 report on the allocation of funding and monitoring of electrification of households projects in comparison to the electrification plan

Achieved:Municipalities: Annual Planned: 86 356Achieved to Date: 60 328 (including roll-overs). Eskom: Annual Planned: 157 839 Achieved to Date: 104 416 (including roll-overs).

INEP is establishing the Projects Steering Committees for the intervention on under-performing municipalities, and also the project managers are assigned to perform the intervention as a corrective measure.Substations and MV lines can only be reported complete when energized; substations take longer to construct due to delays by long lead material, appointment of contractors and land approvals.


39


Performance Result


Number of reports on the allocation of funding and monitoring of non-grid connection projects in comparison to the electrification plan

1 report on the allocation of funding and monitoring of electrification of households projects in comparison to the electrification plan

Achieved7 684 non-grid connections out of a total 15 956 connections.

Additional non-grid service providers were appointed to accelerate the rollout of the non-grid programme in rural and urbanized areas. The current connections rate is below planned, but with the additional service providers appointed and the increase rate of delivery by existing service providers the connection rate has improved.

Allocations 2013/14 (End Dec ’13)2013/14

(R’000)

2013/14

Progress

MUNICIPALITIES R 1 314 772 R360 064

PLANNED CONNECTIONS 86 356 19 213 (60 328)

ESKOM (NATIONAL) R 2 141 027 R1 728 581

PLANNED CONNECTIONS 157 839 74 002 (104 416)

NON - GRID R 86 400 R 46 222

PLANNED CONNECTIONS 15 956 7 684

TOTAL PLANNED CONNECTIONS

260 151 100 899 (172 428)

TOTAL ALLOCATIONS R 3 542 199 R 2 134 867

40


41


Performance Result


Number of reports on the allocation of funding and monitoring of the establishment of integrated energy centres (IEC) in comparison to the integrated energy centre plan

1 reports on the allocation of funding and monitoring of electrification integrated energy centres in comparison to the integration energy centre plan

AchievedMakwane IeC in Qwaqwa, Free State completed and start operating in beginning of December 2013, but not officially opened.

A strategy is being developed for next years IeC progress.


42


Performance Result


Number of reports on progress made with regards to the construction and operation phases of IPP projects

1 reports on progress made with regards to the construction and operation phases of IPP projects

Achieved:56% of the construction of Bid Window 1 projects are completed at the end of December 2013. Bid Window 2 has only recently started, and shows approximately 2.4% completion against project plan

BID Window 1 Construction Progress Against Project Plan

43

BID Window 1 SED Progress

44

BID Window 2 Construction Progress Against Project Plan

45

BID Window 2 Progress SED Progress

46

PROGRAMME 5 (NUCLEAR ENERGY)

47

PROGRAMME 5 (NUCLEAR ENERGY) (2)

48



Level of implementation of actions based on the approved action plan resulting from the Mission Report of nuclear infrastructure review conducted

Draft Self-Assessment Report

Achieved -

To commission an additional 9600 MW of nuclear energy into the grid by 2030

Establish Procurement Body in accordance with the approved process (if approved)

Partially Achieved – request for establishment sent to NT in December 2013

Delayed approvals.


49


Performance Result


Strategy for Nuclear fuel cycle infrastructure development submitted to the decision making structures

Recommendation on fuel cycle strategy at Working Group completed

Partially Achieved – Recommended by DG and submitted to NT

Addressing of comments at NESWG currently underway

Established National Radioactive Waste Disposal Unit

Framework to engage affected Necsa employees completed

Partially Achieved – discussion on Framework commenced

The Board of Directors has ben appointed.Discussions on Framework commenced in the interim.


50


Performance Result


Accounting and control of possession, acquisition, transportation, importation and exportation of nuclear material through consideration of 100% of authorisation applications within 8 weeks

100% authorisations considered within 8 weeks time period

Partially Achieved – 90%

3 export authorisations were delayed as they await response from the key nuclear stakeholders.

Number of nuclear safeguard compliance reports submitted to the relevant decision making structures

1 Achieved


51


Performance Result


Promulgated National Nuclear Regulator Amendment Act

Public consultation

Not Achieved Moved to 2014/15

Promulgated Nuclear Energy Amendment Act

Public consultation

Not Achieved Moved to 2014/15

Demystifying nuclear energy through the number of public awareness campaigns and the number of community outreach events per annum


- Target to be reported during the 4th quarter

PROGRAMME 6 (CLEAN ENERGY)

52

PROGRAMME 6 (CLEAN ENERGY) (2)

53



Number of municipalities for which Energy consumption baselines have been developed

- 10 energy consumption baselines received from municipalities

-


54



National energy efficiency (NEE) strategy document submitted to Cabinet for approval

- The review of the National Energy Efficiency Strategy document has been completed and the Cab Memo has been submitted for cabinet's considerations.

-


55



Energy conservation scheme (ECS) submitted to Parliament

Consultation on the ECS with 10 industry companies representing the intensive energy users sector

Partially achieved. Discussions were held with NERSA. A policy review has identified fatal flaws with the ECS philosophy and led to development of an alternative approach

Policy review necessary due to lack of legal basis for implementing ECS


56



Feasibility study report on the Northern Cape Solar Park Concept

- The final feasibility reports for both Solar Park sites (Prieska & Upington) to be submitted in January 2014.


57



Completed planning and contracting model for ensuring that the subsidised SWH units comply with the local content requirements

Final planning and contracting model for ensuring that the subsidised SWH units comply with the local content requirement completed

Achieved. A revised SWH contracting model was approved by DG and sent to Eskom. A Service Level Agreement (SLA) with SABS for Local Content Verification has been drafted. Cabinet Memo to be presented to update on progress


58



Promulgated Standard offer incentive scheme for solar water heaters and reducing energy in the building envelope


Achieved. The Regulation for Allowance on Energy Efficiency Savings signed off by Minister of Finance in November,

Launched on 4th December 2013 & promulgated on 9th Dec 2013. Standard Offer incentive as part of Revised Contracting Model

59

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Documents

Presentation to the Parliamentary Committee on Energy – 3 rd Quarter Performance (2013/14)