Annual Report 2010/2011 Ms Dipuo Peters, MP Minister of Energy I have the honour of submitting the Annual Report of the Department of Energy for the period 1 April 2010 to 31 March 2011. Ms Nelisiwe Magubane Director-General: Energy Department of Energy Building 2B Trevenna Campus Corner Meintjies and Schoeman Streets Sunnyside Pretoria 0002 Private Bag X19, Arcadia, Pretoria 0007 www.energy.gov.za Pretoria: (012) 444 4190 Cape Town: (021) 427 1017 ISBN: 978-0-621-40414-2 RP: 255/2011 Design and Layout: Formeset Digital Tshwane (Pty) Ltd Printing: Formeset Print (Pty) Ltd Department of Energy – Vote 28 Contents 1. General Information ................................................................................................... 1 Vision, Mission and Values............................................................................................... 2 Organisational Structure(s) .............................................................................................. 3 Legislative Mandate ......................................................................................................... 4 Entities Reporting to the Minister ..................................................................................... 4 Minister’s Statement......................................................................................................... 6 Deputy Minister's Remarks .............................................................................................. 10 Accounting Officer’s Overview ......................................................................................... 13 2. Information on Predetermined Objectives........................................................... 19 2.1 Overall Performance..................................................................................................... 20 2.1.1 Voted funds ...................................................................................................................... 20 2.1.2 Aim of vote ....................................................................................................................... 20 2.1.3 Summary of programmes................................................................................................. 20 2.1.4 Key strategic objectives achievements ............................................................................ 21 2.1.5 Overview of the service delivery environment for 2010/11............................................... 24 2.1.6 Overview of the organisational environment for 2010/11 ................................................. 27 2.1.7 Key policy developments and legislative changes ........................................................... 28 2.1.8 Departmental revenue, expenditure and other specific topics ......................................... 29 2.1.9 Departmental expenditure................................................................................................ 29 2.1.10 Transfer payments ........................................................................................................... 29 2.1.11 Conditional grants and earmarked funds ......................................................................... 31 2.1.12 Capital investment, maintenance and asset management plan....................................... 32 2.2 Programme Performance............................................................................................. 33 Programme 1: Administration........................................................................................... 33 Programme 2: Hydrocarbons and Energy Planning......................................................... 50 Programme 3: Electricity Nuclear and Clean Energy....................................................... 61 Programme 4: Associated Services ................................................................................. 69 3. Annual Financial Statements .................................................................................. 75 Report of the Audit Committee ......................................................................................... 77 Report of the Accounting Officer ...................................................................................... 80 Report of the Auditor-General .......................................................................................... 97 Appropriation Statement .................................................................................................. 102 Department of Energy – Annual Report 2010/2011 i Notes to the Appropriation Statement .............................................................................. 113 Statement of Financial Performance................................................................................ 115 Statement of Financial Position........................................................................................ 116 Statement of Changes in Net Assets ............................................................................... 117 Cash Flow Statement....................................................................................................... 118 Statement of Accounting Policies and Related Matters ................................................... 119 Notes to the Annual Financial Statements (including Accounting Policies)...................... 129 Disclosure Notes to the Annual Financial Statements ..................................................... 139 Annexures (unaudited supplementary schedules) ........................................................... 156 4. Human Resource Management ............................................................................. 175 5. Other Information........................................................................................................ 227 Acronyms........................................................................................................................ 228 ii Department of Energy – Annual Report 2010/2011 Section 1: General Information Vision, Mission and Values Vision 2014 A transformed and sustainable energy sector with universal access to modern energy carriers for all by 2014. Vision 2025 Improving our energy mix by having 30% clean energy by 2025. Mission To regulate and transform the sector for the provision of secure, sustainable and affordable energy. Values Batho Pele Ethics Honesty Integrity Accountability Professionalism Ubuntu 2 Department of Energy – Annual Report 2010/2011 Organisational Structure(s) Department of Energy – Interim Operational Structure implemented on 1 April 2010 Minister of Energy 1. South African Nuclear Energy Corporation (NECSA) 2. National Nuclear Regulator (NNR) 3. CEF (Pty) Ltd 4. Electricity Distribution Industry Director-General Holdings (EDIH) 5. National Energy Regulator of South Africa (NERSA) Chief Directorate Ministerial and Directorate Audit Parliamentary Services Services Electricity, and Office of the Chief Office of the Chief Hydrocarbons and Corporate Nuclear and Clean Financial Officer Operating Officer Energy Planning Services Energy (CFO) (COO) (The Deputy Minister of Energy joined the Department in October 2010) Department of Energy – Approved Organisational Structure Minister of Energy 1. South African Nuclear Energy Corporation (NECSA) 2. National Nuclear Regulator (NNR) 3. CEF (PTY) LTD 4. Electricity Distribution Industry Deputy Minister of Energy Holdings (EDIH) 5. National Energy Regulator of South Africa (NERSA) Director-General of Energy Chief Directorate Ministerial and Directorate Parliamentary Audit Services Services Policy Energy Integrated Nuclear Corporate Office of Office Develop- Operational Energy Energy Services the CFO of the COO ment Services Planning Department of Energy – Annual Report 2010/2011 3 Legislative Mandate • The National Energy Act, 2008 (Act No. 34 of 2008), is the enabling legislation that empowers the Minister of Energy to ensure that diverse energy resources are available in sustainable quantities and at affordable prices in the South African economy to support economic growth and poverty alleviation, while taking into account environmental considerations. In addition, the Act provides for the increased use of renewable energies; contingency energy supplies; the holding of strategic energy feedstock and carriers; and adequate investment in energy infrastructure. Importantly, the Department of Energy (DoE) is mandated to provide energy planning and measures for the furnishing of certain data and information on energy demand, supply and generation. • The Electricity Regulation Act, 2006, (Act No. 4 of 2006) as amended, establishes a national regulatory framework for the electricity supply industry to be enforced by the National Energy Regulator. In terms of Section 34 (1), the Minister of Energy is empowered to promulgate regulations for the establishment of Independent Power Producers (IPPs) for the purpose of greater competition in the electricity-generation sector to increase the supply of electricity. • The Petroleum Products Amendment Act, 2003 (Act No. 58 of 2003), as amended, provides for the licensing of persons involved in the manufacturing or sale of petroleum products; promotes the transformation of the South African petroleum and liquid fuels industry and authorises the Minister of Energy to make specific regulations. Entities Reporting to the Minister of Energy • The National Energy Regulator of South Africa (NERSA) derives its mandate from the National Energy Regulator Act, 2004 (Act No. 40 of 2004),