Annual Report 2009/2010
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ANNUAL REPORT 2009/2010 Annual Report 2009/2010 VISION To be a world-class leader in energy regulation MISSION To regulate the energy industry in accordance with government laws and policies, standards and international best practices in support of sustainable development 1 CONTENTS PROFILE OF NERSA 5 MEMBERS OF THE ENERGY REGULATOR 6 THE ENERGY REGULATOR AND ITS SUBCOMMITTEES 8 MEMBERSHIP OF THE ENERGY REGULATOR SUBCOMMITTEES 9 HIGHLIGHTS OF 2009/10 12 CHAIRPERSON’S REPORT 16 STRATEGIES OF THE ENERGY REGULATOR 20 CHIEF EXECUTIVE OFFICER’S REPORT 28 Electricity Industry Regulation 28 (a) Licences granted, amended renewed or withdrawn (b) Regulations made and directives issued by the Minister of Energy (c) Existing position and envisaged commercial developments with respect to the electricity industry (d) Health, Safety and Environmental matters (e) Access to Network Infrastructure (f) Tariffs or tariff structures set or approved (g) Distribution maintenance (h) Independent technical audits (i) Rules, Guidelines and Codes issued by NERSA (j) Grid Code Amendments (k) Electricity Distribution Industry (EDI) restructuring (l) Energy Efficiency and Demand Side Management (EEDSM) Piped-Gas Industry Regulation 36 (a) Licences granted, amended or withdrawn (b) Regulations made and directives issued by the Minister of Energy (c) Existing position and envisaged commercial developments with respect to the piped-gas industry (d) Health, safety and environmental matters (e) Tariffs set or approved (f) Piped-Gas Prices (g) Administering Schedule One of the Agreement Petroleum Pipelines Industry Regulation 39 a) Licences granted, amended or withdrawn b) Existing position and envisaged commercial developments with respect to the petroleum pipelines industry c) Health, safety and environmental matters d) Access to network infrastructure e) Tariffs set or approved f) Implementation of compliance frameworks g) Rules h) Tariff Methodologies 2 NATIONAL ENERGY REGULATOR AnnualAnnual Report Report 2009/2010 2010 Contents Cross-cutting Matters 42 (a) Constitutional Review (b) Legislative Matters (c) Regulatory Reporting Manuals (d) Regulatory Reporting System (e) Benchmarking the Regulator against international best practices (f) Complaints Resolution (g) Customer Education (h) Development, Implementation and Maintenance of the Licensee Information System (LIS) for Electricity, Piped-Gas and Petroleum Pipelines Regulation (i) Integration of the GIS for all three regulated industries Organisational Matters 46 (a) Human Resources Management (b) Information Resource Management (c) Financial Management (d) Management of NERSA’s Corporate Image (e) International Coordination and Partnerships Corporate Governance 54 (a) Code of practices and conduct (b) The Energy Regulator and its members (c) Subcommittees of the Energy Regulator Acknowledgements 65 PERFORMANCE AGAINST PRE-DETERMINED OBJECTIVES 68 ANNUAL FINANCIAL STATEMENTS 163 Statement of Responsibility 164 Report of the Auditor-General 165 Report of the Audit and Risk Subcommittee 167 Accounting Authority’s Report 169 Statement of Financial Position 177 Statement of Changes in Net Assets 178 Statement of Financial Performance 179 Cash Flow Statement 180 Notes to the Annual Financial Statements 181 ABBREVIATIONS 203 3 4 NATIONAL ENERGY REGULATOR Annual Report 2009/2010 PROFILE OF NERSA The National Energy Regulator of South Africa (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 pipelines industries in terms of the Electricity Regulation Act, 2006 (Act No. 4 of 2006), the Gas Act, 2001 (Act No. 48 of 2001) and the Petroleum Pipelines Act, 2003 (Act No. 60 of 2003). NERSA’s mandate is further derived from written government policies as well as regulations issued by the Minister of Energy. NERSA is expected to pro-actively take the necessary regulatory actions in anticipation of and/or in response to changing circumstances in the energy industry. NERSA was established on 1 October 2005 and began regulating the piped-gas and petroleum pipelines industries on 1 November 2005. The regulation of the electricity industry was taken over from the erstwhile National Electricity Regulator (NER) on 17 July 2006. 5 MEMBERS OF THE ENERGY REGULATOR (1 APRIL 2009 TO 31 DECEMBER 2009) The Regulator Members were appointed by the Minister of Minerals and Energy on 1 October 2005. The Full-Time (Executive) Regulator Members were appointed for a period of five years until 30 September 2010 and the Part-Time (Non-Executive) Regulator Members were appointed for a period of four years until 30 September 2009. The term of office of the Part-Time Regulator Members was extended until 31 December 2009. The Regulator Members for the period 1 April 2009 to 31 December 2009 were: Mr Collin Matjila Ms Dolly Mokgatle Mr Smunda S Mokoena (Chairperson) (Deputy Chairperson) (CEO) Part-Time Regulator Member Part-Time Regulator Member Full-Time Regulator Member BA, LLB B Proc, LLB, HDip Tax Law BSc (Eng), MBA CEO: Kopano Ke Matla Investments Executive Director: Peotona Group Holdings Chief Executive Officer: NERSA Mr Thembani Bukula Dr Rod Crompton Ms Linda Makatini Full-Time Regulator Member Full-Time Regulator Member Part-Time Regulator Member BSc (Eng), Post Graduate Dip (Engineering BA Hons, HED, PhD (Humanities) LLM (International Law) Business Management) Member primarily responsible for CEO: Ngwane Mining Member primarily responsible for Electricity Petroleum Pipelines Regulation Regulation Mr Joe Lesejane Prof Divya Singh Ms Ethèl Teljeur Part-Time Regulator Member Part-Time Regulator Member Full-Time Regulator Member BCom, Hons B Compt, CA (SA), Fellow BA (LAW), LLB, LLM BA Hons, MSc (Economics) Chartered Management Accountant (UK) and Advocate of the High Court of South Africa Member primarily responsible for Certificate in Control Self Assessment (CCSA). Deputy Registrar: University of South Africa Piped-Gas Regulation Director: Mokwalo Training & Consulting Services (UNISA) 6 NATIONAL ENERGY REGULATOR Annual Report 2009/2010 MEMBERS OF THE ENERGY REGULATOR (1 JANUARY 2010 – 31 MARCH 2010) New Part-Time Regulator Members were appointed by the Minister of Energy for a period of four years with effect from 1 January 2010. The Energy Regulator consisted of the following Regulator Members for the period 1 January 2010 to 31 March 2010: Ms Cecilia Khuzwayo Mr Joe Lesejane Mr Smunda S Mokoena (Chairperson) Part-Time Regulator Member (CEO) Part-Time Regulator Member B.Comm, Hons B Compt, CA (SA), Fellow Full-Time Regulator Member BCom (Economics, Business Economics and Chartered Management Accountant (UK) BSc (Eng), MBA Private Law); Industrial Relations Diploma, BA and Certificate in Control Self Assessment Chief Executive Officer: NERSA (Hons) Human Resource Development (CCSA). Effective Director Programme and Certificate Director: Mokwalo Training & Consulting Programme in Coaching. Services Executive Coach and Independent Consultant Mr Thembani Bukula Dr Rod Crompton Ms Khomotso Mthimunye Full-Time Regulator Member Full-Time Regulator Member Part-Time Regulator Member BSc (Eng), Post Graduate Dip (Engineering BA Hons, HED, PhD (Humanities) BCom, BCompt (Hons), CA Business Management); Member primarily Member primarily responsible for Petroleum (SA), Higher Diploma in Tax responsible for Electricity Regulation Pipelines Regulation Law; Independent Financial Consultant Ms Ethèl Teljeur Ms Gillian Whittington Banda Full-Time Regulator Member Part-Time Regulator Member BA Hons, MSc (Economics) Masters in Modern History; MBA Member primarily responsible for Management and Economic Development Piped-Gas Regulation Consultant 7 THE ENERGY REGULATOR AND ITS SUBCOMMITTEES In terms of Section 8 of the National Energy Regulator Act, 2004 (Act No. 40 of 2004), the Energy Regulator reconstituted the subcommittees in order to efficiently and effectively carry out its mandate. The subcommittees for the period 1 April 2009 to 31 March 2010 were divided into three categories, namely, Cross-cutting Subcommittees, Industry-specific Regulatory Subcommittees and Governance Subcommittees. The Subcommittees are: Cross-cutting: • Policy Subcommittee (POS) • Regulator Executive Committee (REC) Industry-specific Regulatory: • Electricity Subcommittee (ELS) • Piped-Gas Subcommittee (PGS) • Petroleum Pipelines Subcommittee (PPS) Governance: • Audit and Risk Subcommittee (ARS) • Finance Subcommittee (FIS) • Human Resources Subcommittee (HRS) • Remuneration Subcommittee (REMCO) In January 2010, the Energy Regulator approved that: • The Human Resources Subcommittee and Remuneration Subcommittee be merged into one subcommittee called Human Resources Subcommittee; and • The Policy Subcommittee be dissolved. The implications thereof are that: − The REC considers all cross-cutting regulatory and other organisational matters except those matters dealt with by the Governance Subcommittees; − Industry-specific regulatory matters are considered by the specific and relevant regulatory subcommittees. Therefore, the subcommittees for the period 1 January 2010 to 31 March 2010 are divided into three categories, namely, Regulatory Subcommittees, Governance Subcommittees and Cross-cutting Subcommittees. The subcommittees are: Cross-cutting • Regulator Executive Committee (REC) Industry-specific: • Electricity Subcommittee (ELS) • Piped-Gas Subcommittee (PGS) • Petroleum Pipelines Subcommittee