1. Presentation to Energy Portfolio Committee National Assembly 09 October 2012 The Presidency Department of Performance Monitoring and Evaluation OVERVIEW OF PROGRESS MADE BY THE DEPARTMENT OF ENERGY WITH RESPECT TO COMMITMENTS TO OUTCOMES

2. The Presidency: Department of Performance Monitoring and Evaluation INTRODUCTION 2

3.  Aim is to improve service delivery by: 1.Introducing whole-of-government planning linked to key outcomes, clearly linking inputs and activities to outputs and the outcomes 2.Implementing the constitutional imperative for cooperative governance by negotiating inter-departmental and inter-governmental delivery agreements for the outcomes 3.Increasing strategic focus of government 4.Making more efficient and effective use of limited resources through introducing more systematic monitoring and evaluation 3 The outcomes are the government’s main initiative to achieve effective spending on the right priorities.

4. The Presidency: Department of Performance Monitoring and Evaluation Delivery Agreements A Delivery Agreement is a charter between all the key stakeholders who need to work together to achieve the outcome.  Performance Agreements between President and outcome coordinating Ministers requested them to work with other key stakeholders to develop detailed Delivery Agreements for each outcome  Delivery Agreements describe key activities, sub-outputs, outputs, indicators, and targets, identify required inputs and clarify roles and responsibilities of each key body which contributes to the achievement of the outcome  Performance Agreements between President and other Ministers also requested them to work with the coordinating Ministers on relevant delivery agreements  New National Treasury guidelines for strategic plans indicate that departments’ strategic plans and APPs must reflect their commitments to delivery agreements – will be monitored by the Auditor General and should also be monitored by Parliament 4

5. The Presidency: Department of Performance Monitoring and Evaluation DOE CONTRIBUTION TO THE OUTCOMES 5

6. The Presidency: Department of Performance Monitoring and Evaluation 1.BASIC EDUCATION: Quality basic education 2.HEALTH: A long and healthy life for all South Africans 3.SAFETY: All people in South Africa are and feel safe 4.EMPLOYMENT: Decent employment through inclusive economic growth 5.SKILLS: Skilled and capable workforce to support an inclusive growth path 6.ECONOMIC INFRASTRUCTURE: An efficient, competitive and responsive economic infrastructure network 7.RURAL DEVELOPMENT: Vibrant, equitable, sustainable rural communities contributing towards food security for all 8.INTEGRATED HUMAN SETTLEMENTS: Sustainable human settlements and improved quality of household life 9.LOCAL GOVERNMENT: Responsive, accountable, effective and efficient Local Government system 10.ENVIRONMENT: Protect and enhance our environmental assets and natural resources 11.INTERNAL AND EXTERNAL RELATIONS: Create a better South Africa, a better Africa and a better world 12.PUBLIC SERVICE: An efficient, effective and development oriented public service and an empowered, fair and inclusive citizenship 6 The outcomes to which DoE contributes

7. The Presidency: Department of Performance Monitoring and Evaluation Department of Energy’s role in relation to outcome 6 Outcome 6: An Efficient, Competitive and Responsive Economic Infrastructure Network Output 1: Improving competition and regulation Output 2: Ensure reliable generation, distribution and transmission of electricity Output 3: To ensure the maintenance and strategic expansion of our road and rail network, and the operational efficiency, capacity and competitiveness of our sea ports Output 4: Maintenance and supply availability of our bulk water infrastructure Output 5: Communication and information technology Output 6: Develop a set of operational indicators for each segment 7

8. The Presidency: Department of Performance Monitoring and Evaluation Department of Energy’s role in relation to outcome 9 Outcome 9: Responsive, accountable, effective and efficient Local Government system Output 1: Implement a differentiated approach to municipal financing, planning and support Output 2: Improving Access to Basic Services (also covered by Output 2 in Outcome 6) Output 3: Implementation of the Community Work Programme Output 4: Actions supportive of the human settlement outcomes Output 5: Deepen democracy through a refined Ward Committee model Output 6: Administrative and financial capability Output 7: Single Window of Coordination 8

9. The Presidency: Department of Performance Monitoring and Evaluation Department of Energy’s role in relation to outcome 10 Outcome 10:Protect and enhance our environmental assets and natural resources Output 1: Quality and quantity of water resources enhanced Output 2: Greenhouse gas emissions reduced, climate change impacts mitigated & air/atmospheric quality improved Output 3: Sustainable environment management Output 4: Biodiversity protected 9

10. The Presidency: Department of Performance Monitoring and Evaluation PROGRESS REPORT 10 Progress as planned or completed, on schedule, milestone or target met Progress with activity but not on schedule Strong likelihood that milestone or target will not be achieved within the planned timeframe

11. The Presidency: Department of Performance Monitoring and Evaluation 11 Progress on Outcome 6 Output 2: Ensuring reliable generation, distribution and transmission of energy Sub-outputTargetsProgress reported by DoE for 1 st Quarter 2012/13DPME comments 2.1 Create regulatory and institutional structures for the introductio n of viable Independen t Power Producers (IPPs) and start process for the participatio n of IPPs in 2010 ISMO Bill enacted by 2011/12 Financial and technical Due Diligence for ISMO conducted by 2011/12 Systems and change management process put in place to make ring-fenced ISMO functionally independent of Eskom by 2012/13 ISMO legislation introduced in parliament after stakeholder consultation at Nedlac. A due diligence process has been initiated to investigate the possible impact of the transfer of transmission assets into ISMO. It is anticipated to complete the legislation by the first quarter of 2013, whereafter the state-owned company will become operational. Eskom ring-fenced the functions of the ISMO and a comprehensive business plan has been developed following the phased approach for meeting the objectives of the ISMO Bill. PFMA approval for the establishment of the ISMO subsidiary was completed and submitted to the Departments of Public Enterprises and National Treasury New generation capacity regulations under the Electricity Regulation Act have been promulgated pertaining to IPPs Approximately 2 400MW of renewable energy IPPs have been selected as preferred bidders for the generation of power from wind, solar and small-hydro technologies starting in 2012. Note delays due to finalising is the Government Support Framework Agreement (GSFA) to Eskom as the off-taker of the power from IPPs has shifted the financial closure of the window 1 IPPs, which was supposed to have happened in June 2012. Behind schedule, but good progress was made by the DoE in developing the ISMO legislation as well as starting the participation of IPPs. DoE, DPE and NT need to work together to accelerate the due diligence process for ISMO and GSFA. DPME

12. The Presidency: Department of Performance Monitoring and Evaluation 12 Progress on Outcome 6 Output 2: Ensuring reliable generation, distribution and transmission of energy Sub-outputTargets Progress reported by DoE for 1 st Quarter 2012/13 DPME comments 2.2 Develop a funding and implementati on plan and reduce the electricity distribution infrastructure maintenance backlog of R27.4bn (baseline in 2009) to R15bn by 2014 Funding and implementation plan in place by March 2011 Report detailing a map of distribution asset status for 50% of all Municipalities by 2012/13 Initiate interventions, monitor rehabilitation projects and reduce backlog by R8bn in 2012/13 The Cabinet Memo on the Approach to Distribution Asset Management (or ADAM) has been approved at the cluster and will be submitted to Cabinet for consideration. The options considered for funding ADAM at municipal level include (i) tariff based, or (ii) concessionary financing through development financial institutions, subject to regulatory conditions that municipalities will be required to accept. Consultations ongoing regarding the financing options All Metros have been mapped in respect of the status of their electricity distribution infrastructure On actual distribution network rehabilitation, pilot projects will be initiated once the ADAM concept has been approved by Cabinet The planning work is behind schedule Difficult to ascertain whether R8bn reduction in backlog in 2012/13 will be met or whether it is adequate, because DoE is not reporting on municipal rehabilitation expenditure using own funds. Municipalities are already receiving maintenance funding through Nersa approved tariffs. DPME

13. The Presidency: Department of Performance Monitoring and Evaluation 13 Sub-outputTargetsProgress reported by DoE for 1 st Quarter 2012/13DPME comments 2.3 Household access to electricity should be 92% by 2014 Targets for 12/13: (1) 180 000 households electrified (2) 500 schools electrified (3) 10 000 solar electricity home systems installed (4) Expansion of electrification by additional 200 000 households through non-fiscal funding 86 % access to electricity by household had been achieved by June 2012 and the implementing agents are on schedule to produce 180 000 household connections this financial year. 4 900 connections were reported in the first quarter and the numbers will improve as and when municipalities commence with their electrification projects in the second quarter. Currently the Department is in discussion with Development Bank of South Africa (DBSA) for the frontloading of electrification projects to the amount of R2 billion. It is anticipated that the frontloading programme will be rolled out in the 3 rd quarter. Fifteen Municipalities have been identified to participate in this programme and the DBSA is currently conducting a due diligence in terms of ascertaining technical, institutional and financial viabilities of these municipalities. The programme will be focusing on areas where there are huge backlogs. According to DBE data percentage of schools with electricity improved from 57% in 2002 to 86% in July 2011. Between 2008 and 2010 an additional 1000 schools were electrified. DPME not optimistic that the 92% electrification target will be reached by 2014. See next slide. DPME Progress on Outcome 6 Output 2: Ensuring reliable generation, distribution and transmission of energy

14. The Presidency: Department of Performance Monitoring and Evaluation  Target: from 81% in 2009 to 92% in 2014  Access to electricity improved to 86% in June 2012 report  Concerned that the 2014 target may not be achieved  Actual delivery is below the required trajectory, although there has been a recent improvement (see graph below)  Between forty and fifty thousand households per month will require to be electrified for 92% by 2014 target to be met (only 4900 connections reported in previous quarter) 14 Electrification Delivery Trajectory

15. The Presidency: Department of Performance Monitoring and Evaluation 15 Sub-outputTargetsProgress reported by DoE for 1 st Quarter 2012/13DPME comments 2.4 Develop a funding model for electricity generation build programme (Eskom Capex) to ensure security of supply Funding model developed and submitted to Cabinet by 2010/11 (DPE) By June 2012 78% of funding for the current Eskom build programme (Medupi, Kusile, Ingula, RTS, Transmission projects and refurbishments Projects) had been secured. A Cabinet Memo for the long term electricity tariff trajectory has been completed, with a proposal on how to fund the entire portfolio of projects under the Integrated Resource Plan Eskom has and continues to focus on export-credit agencies, development financing institutions and the domestic money market for its funding requirements. Eskom obtained approval from the government to increase the government guaranteed domestic bond issuance programme (DMTN programme) from R65 billion to R100 billion. An achievement was conclusion of negotiation of access to the Clean Technology Fund, supported and co-financed with other development finance institutions in order to finance the Sere wind farm and the Upington concentrating solar plant. Eskom has also secured export-credit-backed financing from both the US Export and Import Bank (for Kusile power station) and obtained approval by SACE in Italy (for the Ingula underground works contract). While good progress has been made for securing much of the IRP2010, much work needs to be done on the nuclear build programme, before there is clarity on Eskom’s role and the funding model for nuclear. Progress on Outcome 6 Output 2: Ensuring reliable generation, distribution and transmission of energy DPME

16. The Presidency: Department of Performance Monitoring and Evaluation 16 Sub-outputTargetsProgress reported by DoE for 1 st Quarter 2012/13DPME comments 2.5 Long-term energy mix diversification to address the security of energy supply and requirements for renewable energy (1) Extend IRP, covering 25 year window by December 2010 and issue licences in accordance with IRP implementation – 1000MW installed in 2012/13 (2) Accelerated 1 million Solar Water Heaters roll-out by 2013 (DoE, DPE, NT) (3) Demand Side Management (9 TWH saving in 2012/13) (1) ITEM COMPLETE. The Integrated Resource Plan was developed and adopted after thorough public consultation. The RE requirements outlined to constitute 40% of all future investment till 2030. Based on provisions in the IRP, the REIPP Procurement Programme has secured 1 416 MW from 28 IPPs in window 1. Further over 1000 MW was secured from further 19 IPPs in window (2) Verified Solar water heating had reached a total of 289 201 claims as at 31 March 2012 compared to 27 149 the same period last year. On the national solar water heater (NSWH) programme, Eskom as the implementation agent is expected to sign agreement before end-August 2012 and to commence with installations under an increased local content requirement to create local jobs. (3) Eskom continues with the rollout of energy efficient lights such as LED, pool timers, geyser blankets. and Power Alert system continue to be broadcasted on television between 17:00 to 21:00 as well the increased awareness of the 49m campaign. (1) IRP completed and implementation commenced (2)The solar water heating installation programme is a little behind schedule. (3)More attention needs to be paid to reporting on, and increasing actual demand-side savings. Progress on Outcome 6 Output 2: Ensuring reliable generation, distribution and transmission of energy DPME

17. The Presidency: Department of Performance Monitoring and Evaluation 17 Sub-outputTargets Progress reported by DoE for 1 st Quarter 2012/13 DPME comments 2.6 Migrate Eskom coal from road to rail Rehabilitate coal haulage roads (joint responsibility with DPE and DoT) Additional 380 km coal haulage roads rehabilitated by 2012/13 2012/13: 19mpta coal on rail, and 23.5mpta on road For the quarter ending 30 June 2012, 2.3 million tons of targeted 12 million tons (2012/13) was transported by rail. On the rehabilitation of coal roads, during the 1st Quarter of 2012/2013, the bulk of the work was for preparation and earthworks, 21km was resealed and 3km strengthening / reconstruction was completed. Eskom has spent R500m of the R950m approved by NERSA for coal roads for the MYPD 2 as at 31 March 2012. The balance will be spent during the 2012/13 financial year. Delivery agreement target for coal on rail by the end of 2012/13 is 19 million tons which is unlikely to be achieved. Progress on coal roads also seems to be slow DPME Progress on Outcome 6 Output 2: Ensuring reliable generation, distribution and transmission of energy

18. The Presidency: Department of Performance Monitoring and Evaluation 18 Sub-outputTargets Progress reported by DoE for 1 st Quarter 2012/13 DPME comments 2.7 Restructuring of the electricity distribution industry Decision on the end state of EDI Holdings by 2010/11 The decision on EDI Holdings has been finalised by Cabinet, and EDI restructuring process terminated. In the revised Delivery Agreement, the project will be excluded. Distribution infrastructure maintenance backlog at municipal level still needs to be addressed 2.8 Setting cost reflective tariffs while cushioning the poor from increasing electricity costs Develop targeting framework for qualifying beneficiaries in collaboration with municipalities by 2011. 2012/13: 100% coverage of qualifying beneficiaries Approximately 75% of qualifying indigent customers receiving free basic electricity. With regard to Inclined Block Tariffs (IBT) Eskom has implemented 100% of their customers and Municipalities have implemented 60%. Better mapping and targeting of indigent households needed for FBE, CFL’s and solar geysers, for IBT not to penalise the poor DPME Progress on Outcome 6 Output 2: Ensuring reliable generation, distribution and transmission of energy

19. The Presidency: Department of Performance Monitoring and Evaluation 19 Progress on Outcome 10: Output 2: Reduce greenhouse gas emissions reduced, climate change impacts mitigated & air/atmospheric quality improved Sub-outputTargets Progress reported by DoE for 1 st Quarter 2012/13 DPME comments 2.3 Renewable energy deployed Power generated that is renewable (10 000 GWh by 2014) Renewable Energy IPP Procurement Programme has secured 1 416 MW from 28 IPPs in window 1. Further, over 1000 MW was secured from further 19 IPPs in window 2. On the Sere Wind Farm, final Eskom board approval obtained for the project. Upington Solar project is in the development phase with evaluation of the Owners Engineer completed. Request for Information issued to test the supplier market ahead of a formal tender later in the year. Access to land has been identified as a challenge While progress is evident, some intervention is required on Upington Solar and to clear obstacles to enable the rapid realisation of the REIPP construction. Measurement of current use of Renewable Energy must be reported in order to track progress. DPME

20. The Presidency: Department of Performance Monitoring and Evaluation 20 Progress on Outcome 10: Output 2: Reduce greenhouse gas emissions reduced, climate change impacts mitigated & air/atmospheric quality improved Sub- output Targets Progress reported by DoE for 1 st Quarter 2012/13 DPME comments 2.5 Efficient energy use 12% energy efficiency improvement by 2015 Institutional arrangements for the National Energy Efficiency Agency (NEEA) are in place now, in line with the statutory role NEEA plays under the provisions of the Energy Act. The Energy Act provisions for Energy Efficiency (EE) were made operational last year Energy efficiency incentives under the Income Tax Amendment Act have been provided for with the promulgation of regulations 2L and 2i, in terms of which companies can claim tax relief in lieu of the energy savings achieved Cabinet will be approached in October 2012 regarding the Energy Efficiency Strategy including the campaign, the baseline for energy savings (EE Target Monitoring System) and the initiatives to reduce energy intensity [industrial (efficient motors, compressors, hvac systems, residential (efficient lighting, solar water heaters etc.) and commercial (public buildings etc.) ] Over the past year, 1.4 TWh of savings have been verified as being due to energy efficiency interventions (mainly in the industrial sector – out of a total of about 220TWh annual consumption Whilst progress is noted, reporting is required on the extent of actual reductions in relation to the target percentage DPME

21. The Presidency: Department of Performance Monitoring and Evaluation 21 Thank you Go to http://www.thepresidency.gov.za/dpme.asp for PME documents including narrative guide to outcomes approach, outcomes documentshttp://www.thepresidency.gov.za/dpme.asp and delivery agreement guide