Annual Report - nersa.org.za€¦ · E sk omtb h i c nv e al du t sp r ead mcu o . Svny- x (76)...

Annual Report

2011/2012

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NERSA’s Vision and Mission

Vision

To be a world-class leader in energy regulation

Mission

To regulate the energy industry in accordance with government laws andpolicies, standards and international best practices in support ofsustainable development

NERSA l Annual Report – 2011/12

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Vision


Mission

To regulate the energy industry in accordance with government laws andpolicies, standards and international best practices in support ofsustainable development

Contents

CONTENTS1. ABBREVIATIONS AND ACRONYMS 4

2. PROFILE OF NERSA 7

3. CHAIRPERSON’S REPORT 9

4. CORPORATE GOVERNANCE 13n Codes of practices and conduct 13n The Energy Regulator and its members 14n Subcommittees of the Energy Regulator 16

5. CHIEF EXECUTIVE OFFICER’S REPORT 23n Introduction and Context 23n Summary of organisational performance 23

l Electricity Industry Regulation 24l Piped-Gas Industry Regulation 25l Petroleum Pipelines Industry Regulation 27l Cross-Cutting Regulatory Matters 28l Organisational Matters 29

n Acknowledgements 33

6. ACHIEVEMENTS OF 2011/12 35

7. PERFORMANCE AGAINST PREDETERMINED OBJECTIVES 41

8. ANNUAL FINANCIAL STATEMENTS 123n Statement of Responsibility 124n Report of the Auditor-General 125n Report of the Audit and Risk Committee 127n Accounting Authority’s Report 129n Statement of Financial Position 132n Statement of Financial Performance 133n Statement of Changes in Net Assets 134n Cash Flow Statement 135n Notes to the Annual Financial Statements 136

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1. Abbreviations and Acronyms

AEP AMERICAN ELECTRIC POWER

AFS ANNUAL FINANCIAL STATEMENTS

AFUR AFRICAN FORUM FOR UTILITY REGULATORS

AGM ANNUAL GENERAL MEETING

AMEU ASSOCIATION OF MUNICIPAL ELECTRICITY UNDERTAKINGS

ARC AUDIT AND RISK COMMITTEE

ASB ACCOUNTING STANDARDS BOARD

ASME AMERICAN SOCIETY OF MECHANICAL ENGINEERS

AUC AFRICAN UNION COMMISSION

BBBEE BROAD-BASED BLACK ECONOMIC EMPOWERMENT

BEE BLACK ECONOMIC EMPOWERMENT

CAM COST ALLOCATION MANUAL

CC CLOSE CORPORATION

CEO CHIEF EXECUTIVE OFFICER

CNG COMPRESSED NATURAL GAS

COFIT COGENERATION FEED-IN TARIFF

CoGTA DEPARTMENT OF COOPERATIVE GOVERNANCE AND TRADITIONAL AFFAIRS

COP17 17TH CONGRESS OF PARTIES

CSP CONCENTRATED SOLAR POWER

DENOSA DEMOCRATIC NURSING ORGANISATION

DJP DURBAN JOHANNESBURG PIPELINE

DoE DEPARTMENT OF ENERGY

DoL DEPARTMENT OF LABOUR

DSM DEMAND SIDE MANAGEMENT

DTD DRAFT TARIFF DETERMINATION

ECB ELECTRICITY CONTROL BOARD

EDI ELECTRICITY DISTRIBUTION INDUSTRY

EE ENERGY EFFICIENCY

EEDSM ENERGY EFFICIENCY AND DEMAND SIDE MANAGEMENT

ELS ELECTRICITY SUBCOMMITTEE

ERB ENERGY REGULATION BOARD

ESETA ENERGY SECTOR EDUCATION AND TRAINING AUTHORITY

ETL EXTRACT TRANSFORM AND LOADING

EU EUROPEAN UNION

EWURA ENERGY AND WATER UTILITIES REGULATORY AUTHORITY

EXCO EXECUTIVE COMMITTEE

FBE FREE BASIC ELECTRICITY

FERC FEDERAL ENERGY REGULATORY COMMISSION

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Abbreviations

FIC FINANCE COMMITTEE

FSRU FLOATING STORAGE AND RE-GASIFICATION UNIT

FTP FILE TRANSFER PROTOCOL

GCAC GRID CODE ADVISORY COMMITTEE

GJ/a GIGAJOULE PER ANNUM

GRAP GENERALLY RECOGNISED ACCOUNTING PRACTICE

GTA GAS TRANSPORTATION AGREEMENT

HR HUMAN RESOURCES

HRC HUMAN RIGHTS COMMISSION

HRC HUMAN RESOURCES COMMITTEE

IBT INCLINING BLOCK TARIFF

ICASA INDEPENDENT COMMUNICATIONS AUTHORITY OF SOUTH AFRICA

ICER INTERNATIONAL CONFEDERATION OF ENERGY REGULATORS

IET INDUSTRY EXPERT TEAM

IPP INDEPENDENT POWER PRODUCER

IRP INTEGRATED RESOURCE PLAN

ISMO INDEPENDENT SYSTEM AND MARKET OPERATOR

IT INFORMATION TECHNOLOGY

kWh KILOWATT-HOUR

LIS LICENCEE INFORMATION SYSTEM

LNG LIQUEFIED NATURAL GAS

MANCO MANAGEMENT COMMITTEE

MIRTA MINIMUM INFORMATION REQUIREMENTS FOR TARIFF APPLICATIONS

MOU MEMORANDUM OF UNDERSTANDING

MTPPP MEDIUM-TERM POWER PURCHASE PROGRAMME

MVP MARKET VALUE PRICING

MW MEGAWATT

MYPD MULTI-YEAR PRICE DETERMINATION

NARUC NATIONAL ASSOCIATION OF REGULATORY UTILITY COMMISSIONERS

NBBR NERSA BENCHMARKING BETTER REGULATION

NEHAWU NATIONAL EDUCATION HEALTH AND ALLIED WORKERS UNION

NER NATIONAL ELECTRICITY REGULATOR

NERSA NATIONAL ENERGY REGULATOR OF SOUTH AFRICA

NMPP NEW MULTI-PRODUCT PIPELINE

NNR NATIONAL NUCLEAR REGULATOR

OCGT OPEN CYCLE GAS TURBINE

OFGEM OFFICE OF GAS AND ELECTRICITY MARKETS

OHS OCCUPATIONAL HEALTH AND SAFETY

ORC OPERATIONAL RISK COMMITTEE

PAIA PROMOTION OF ACCESS TO INFORMATION ACT

PCP POWER CONSERVATION PROGRAMME

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PFMA PUBLIC FINANCE MANAGEMENT ACT

PGS PIPED-GAS SUBCOMMITTEE

PIDA PROGRAMME FOR INFRASTRUCTURE DEVELOPMENT IN AFRICA

PPA POWER PURCHASE AGREEMENT

PPC PARLIAMENTARY PORTFOLIO COMMITTEE

PPI PRODUCER PRICE INDEX

PPS PETROLEUM PIPELINES SUBCOMMITTEE

PRRM PRIMARY RESPONSIBLE REGULATOR MEMBER

PV PHOTO VOLTAIC

RE RENEWABLE ENERGY

REC REGULATOR EXECUTIVE COMMITTEE

RED REGIONAL ELECTRICITY DISTRIBUTOR

REEEP RENEWABLE ENERGY AND ENERGY EFFICIENCY PROGRAMME

REFIT RENEWABLE ENERGY FEED-IN TARIFFS

RERA REGIONAL ELECTRICITY REGULATORY ASSOCIATION

RfD REASON FOR DECISION

RFR REGULATORY FINANCIAL REPORT

ROMPCO REPUBLIC OF MOZAMBIQUE PIPELINE INVESTMENT COMPANY (PTY) LIMITED

ROR RATE OF RETURN

RRM REGULATORY REPORTING MANUAL

RRS REGULATORY REPORTING SYSTEM

SADC SOUTHERN AFRICAN DEVELOPMENTCOMMUNITY

SALGA SOUTH AFRICAN LOCAL GOVERNMENT ASSOCIATION

SALRC SOUTH AFRICAN LAW REFORM COMMISSION

SAPP SOUTHERN AFRICAN POWER POOL

SAPREF SOUTH AFRICAN PETROLEUM REFINERY (PTY) LTD

SAQA SOUTH AFRICAN QUALIFICATIONS AUTHORITY

SERC STATE ELECTRICITY REGULATORY COMMISSION OF CHINA

SO SYSTEMS OPERATOR

USAID UNITED STATES AGENCY FOR INTERNATIONAL DEVELOPMENT

VGN VIRTUAL GAS NETWORK

WEC WORLD ENERGY CONGRESS

WEF WIND ENERGY FACILITY

WFER WORLD FORUM ON ENERGY REGULATION

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2.Profile of NERSA

The National Energy Regulator of South Africa (NERSA) is a regulatory authority established as a juristic person interms of Section 3 of the National Energy Regulator Act, 2004 (Act No. 40 of 2004). NERSA’s mandate is toregulate 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. 60of 2003).

NERSA’s mandate is further derived from written government policies as well as regulations issued by the Ministerof Energy. NERSA is expected to perform the necessary regulatory actions in anticipation of and/or in response tochanging circumstances in the energy industry.

Profile of Nersa

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Chairperson’s Report

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Energy Regulator, the performance and relevance of the Regulator is informed by the tangible impact andbenefits of its work on the citizens of South Africa.

To regulate these industries effectively, NERSA adheresto the following Regulatory principles:n Transparency;n Neutrality;n Consistency and predictability;n Independence;n Accountability;n Integrity; and n Efficiency.

To this end, NERSA has crystallised its five strategic goalsas follows:n To create Regulatory certainty in the energy sector;n To protect the interests of the public and the

customers;n To create a dispensation for fair competition for

industry players;n To create energy supply certainty; andn To create an effective organisation that delivers on

its mandate and purpose.

South Africa’s electricity, piped-gas and petroleumpipelines industries form the backbone of the localeconomy. This is not only from a growth point of view,but also in terms of job creation and social upliftment.Because of the complexity and monopolistic nature ofthe industries in this sector, effective Regulation is criticalto ensure balance for all stakeholders and customers.

The pivotal role that NERSA plays by regulating theelectricity, piped-gas and petroleum pipelines industriesis underpinned by the mandate of NERSA that isenshrined in the National Energy Regulator Act, 2004(Act No. 40 of 2004), 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 (ActNo. 60 of 2003).

NERSA welcomes the current process by the Departmentof Energy (DoE) to amend the National EnergyRegulator Act, 2004, Electricity Regulation Act, 2006and the Gas Act, 2001. The amendment of these Actsis expected to strengthen our Regulatory frameworkwithin the energy sector.

While the mandate of NERSA is derived from legislationgoverning and prescribing the role and functions of the

Ms Cecilia Khuzwayo

It is my pleasure to present this Annual Report of theNational Energy Regulator of South Africa (NERSA)for the period 01 April 2011 to 31 March 2012. Thisis the third report released during my tenure asChairperson at NERSA. It has been highly rewardingto observe the organisation’s continuous positiveimpact on economic growth and social developmentwithin South Africa.

3.Chairperson’s Report

These goals are aligned to the following five outcomesthat the Minister of Energy has committed to:n Outcome 2: A long and healthy life for all South

Africans;n Outcome 4: Decent employment through

inclusive economic growth;n Outcome 6: An efficient, competitive and

responsive economic infrastructurenetwork;

n Outcome 8: Sustainable human settlement andimproved quality of household life;and

n Outcome 10: Environmental assets and naturalresources that are well protectedand continually enhanced.

The availability of reliable, affordable and clean energyfrom a national planning context is central to stimulatingproductive capacity leading to sustainable economicand social development. The National PlanningCommission Diagnostic Report released on 09 June2011 identified a ‘combination of rising energy prices,a desire for energy security and the threat of climatechange to continue to drive changes in the way societieswork.’

The continuing global economic downturn, a decline inenergy reserves and greater emphasis on de-carbonising the energy mix are some of the challengesNERSA will continue to face in the future.

South Africa continues to be challenged by security ofsupply in the electricity and petroleum industries. Theconstruction of new electricity generation capacity andTransnet’s New Multi-Product Pipeline (NMPP) will assistin alleviating some of the constraints.

The growth of the gas market in South Africa remains achallenge, given the paucity of domestic natural gasand the substantial investment cost involved for newentrants. However, the gas industry may undergo rapidexpansion with the availability of natural gas inneighbouring countries such as Mozambique andincreased global LNG supply.

With the need to diversify the energy sources in thiscountry and with the emphasis shifting towards a green economy, the introduction of renewable energyand independent power producers into the electricitygrid will be a priority for the near future.

I would like to take this opportunity to congratulate theSouth African Government for delivering a first-rateconference in Durban, the 17th Conference of the Parties (COP17) to the United Nations FrameworkConvention on Climate Change (UNFCCC).

The following are some of the main challenges andNERSA’s contributions during the review period:

Electricity regulation

Electricity regulation continues to be a busy andchallenging area. The need for all stakeholders to work together as we strive to achieve a sustainable andorderly industry is now more important than ever before.In particular, the industry is challenged by:n The shortage of generation capacity; n The backlog in maintenance and refurbishment in

the municipal electricity systems; andn The need to progress towards the Government’s

goals for clean energy and the reduction of carbonemissions.

In this regard, the Energy Regulator conducted publichearings and completed licensing of the twenty-eight(28) recommended Independent Power Producers (IPPs)for the first phase of the competitive bidding process ledby the Department of Energy in line with the IntegratedResource Plan 2010.

NERSA has also made an important contribution toeconomic and social development by keeping electricityprices in check, which benefits consumers. NERSA’sreview of Eskom’s tariffs for the final year of the threeyear multi-year price determination cycle by reducing itby 9.9% to an average increase of 16%, brought awelcome relieve to all South Africans. This is part ofNERSA’s contribution to curb the rising electricity costsand alleviate Government’s triple challenges of poverty,inequality and unemployment.

Inclining Block Tariffs (IBTs)

NERSA recently conducted a study on the impact of theintroduction of the Inclining Block Tariffs (IBTs) incushioning the poor against increasing electricity tariffs.The results of the study confirm that low incomecustomers are indeed benefitting from the introductionof IBTs.

Inclining Block Tariffs have been fully implemented byEskom to both its conventional metered customers andits prepaid meter customers. Seventy-six (76)municipalities fully implemented IBTs to bothconventional metered customers and prepaidcustomers. NERSA is continually assisting the remainingmunicipalities to effectively implement IBTs.

Piped-Gas Regulation

NERSA continues to licence activities related to theconstruction and operation of gas facilities and trading

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Chairperson’s Report

in gas and has issued a number of licences related tothese activities. The new sources of gas found inneighbouring countries such as Mozambique and alongthe East Coast of Africa indicate a strong potential forfurther growth of the industry and NERSA is strategicallypositioned to facilitate such growth within a regulatedenvironment.

NERSA has rigorously enforced compliance with licenceconditions and provisions of the Gas Act, 2001. In thisregard, several instances of non-compliance wereidentified through regular compliance inspections andnotices of non-compliance were issued. In most casesthe licencees took swift remedial action to address thenon-compliance.

While the Energy Regulator continues to enforcecompliance with licence conditions and therequirements of the Gas Act, its ability to apply punitivemeasures is affected by the lack of effective penaltyprovisions in the current legislative framework.

We are therefore hopeful that the review of the Gas Actwill enable NERSA to further add value in regulating thepiped-gas industry effectively.

In ensuring that the piped-gas industry is conducive toinvestment and that piped-gas companies are able tocompete through pricing, NERSA developed theMethodology to Approve Maximum Prices for Piped-Gas in South Africa (as required by the Gas Act). Themethodology is applicable to all licencees which areinvolved in piped-gas trading activities, except Sasol, towhom the methodology will apply from the end of theSpecial Regulatory Dispensation period on 25 March2014.

Petroleum Pipelines Regulation

The construction boom in the petroleum pipelines andstorage industry is proceeding, led by large investmentsby state owned enterprises (Transnet). It is encouragingto see the participation of the private sector andpreviously disadvantaged people. In conjunction withthe investment boom, the petroleum storage industry isundergoing ownership restructuring. In a welcomedevelopment after pressure from NERSA, an increasingnumber of storage owners are publishing theirAllocation Mechanisms which will make it easier for newentrants and others to access storage capacity. Securityof supply has been enhanced with Transnet’s New Multi-Product Pipeline (NMPP) from Durban to Gautenghaving opened in January 2012. We look forward tothe completion of the NMPP project, which willsubstantially improve the supply infrastructure andlogistics from the East Coast.

The petroleum storage facility industry is undergoingsome restructuring, where larger storage facilitiesespecially those connected to the Transnet pipelinesystem are expanding capacity, while smaller storagefacilities across the country are either being closed downor being transferred to new owners.

Prospects of third-party access are improving as storagefacility licencees submit their Allocation Mechanism andhave their tariffs approved.

Cross-Cutting Regulatory Matters

The successful completion of the implementation ofPhase 1 of the Regulatory Reporting Manuals (RRMs),which prescribe the accounting procedures andrequirements necessary to achieve uniformity andconsistent reporting of the financial information requiredby NERSA for tariff setting, monitoring and/or tariffapproval, will further strengthen NERSA’s Regulatorymandate.

NERSA is also contributing to the broader society’sunderstanding of energy regulation through hostingtraining and development courses that can be attendedby external parties. In trying to enhance economicregulation capacity, NERSA arranged three regulatorytraining workshops targeting NERSA staff, licencees andrelevant Government departments.

Organisational Matters

During the period under review, NERSA conductedintensive strategic planning sessions. The strategicplanning sessions were aimed at aligning our StrategicPlan and Annual Performance Plan to the twelveoutcomes of Government and specifically thoseoutcomes that the Minister of Energy has contracted todeliver on.

NERSA is aware that as a public entity, it is expected tocontribute to Government’s twelve outcomes, which arebased on Government’s Medium Term StrategicFramework (MTSF) that clearly articulates the agendaof Government.

NERSA continued to play an active role regionally andcontinentally, through participation in the activities ofthe African Forum of Utility Regulators (AFUR) and theRegional Electricity Regulators Association of SouthernAfrica (RERA). At the last RERA Annual General Meeting(AGM), NERSA was re-elected as the Chair of RERA.

At year end, the levies collected from the industries wereR68 Million (21.8% decrease) for the electricity industry;R42 Million (49.7% increase) for the piped-gas industryand R32 Million (21.0% decrease) for the petroleum

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pipelines industry. This is an 8.6% decrease from theprevious financial year (2010/11).

The attainment of the seventh unqualified audit is anachievement for the organisation and clearlydemonstrates NERSA’s continuing commitment to goodcorporate governance.

The implementation of the recently revisedorganisational structure progressed well, with 82% ofthe positions filled. The development of competent anddedicated staff is a fundamental requirement forachieving NERSA’s goals. The focus was therefore onacquiring and developing regulatory competencies inthe areas that will be of crucial importance in future.

We welcome the re-appointment of the three PrimarilyResponsible Regulator Members by the Minister ofEnergy. The appointments will further strengthen ourRegulatory mandate.

Conclusion

As we look back on another successful year, I would liketo express my gratitude to all members and staff of theEnergy Regulator for their hard work and unwaveringdedication throughout this period. Our new Chief

Executive Officer, Ms Phindile Nzimande, has settled inwell and I cannot think of a better person to take NERSAforward and make it an even more effective and efficientorganisation.

I would also like to thank the Minister of Energy, MsDipuo Peters and her staff at the Department of Energyfor their ongoing support.

Finally, I would like to extend my sincere appreciationto our stakeholders for their co-operation in helping usto execute our mandate efficiently. I am confident thatby continuing to work together, we can effect positivechange in the energy industry and the country as awhole.

Mrs Cecilia Khuzwayo Chairperson

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Corporate Governance

4.Corporate Governance

(a) Codes of practices and conduct

The Energy Regulator is committed to complying with the recommendations of the King III Report, Protocol onCorporate Governance in the Public Sector. In its quest to adhere to best practices and sound governance principles,the Energy Regulator subjects itself to the annual assessment of the effectiveness of the Energy Regulator and itsCommittees.

In complying with the National Energy Regulator Act, 2004 (Act No. 40 of 2004) read with the Public FinanceManagement Act, 1999 (Act No. 1 of 1999), all Regulator Members are required to declare their interests, if any,before the start of each meeting of the Energy Regulator. In addition, Regulator Members are required, upon theirappointment, to declare to the Minister of Energy any interest in the three regulated industries. Further, RegulatorMembers must declare gifts, shares and hospitality that they may receive from the regulated energy industry.

The Energy Regulator has a Code of Conduct that guides Regulator Members on how to conduct themselves whenexecuting their duties. The Code of Conduct is reviewed on a regular basis together with the terms of referenceand delegations to Committees of the Energy Regulator.

Compliance with the Promotion of Access to Information Act

Sixty (60) requests for information were received and were dealt with within the time period allowed for by thePromotion of Access to Information Act (PAIA). The report on the requests was submitted to the Human RightsCommission (HRC).

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Ms Cecilia Khuzwayo (Chairperson)

Part-Time Regulator MemberB.Comm (Economics, Private Lawand Business Economics)Effective Director ProgrammeAdvanced Coaching PracticeExecutive Leadership Coaching Consultant

Ms Phindile Nzimande (CEO) (appointed 01 May 2011)

Full-Time Regulator MemberB.Proc; LLB Chief Executive Officer: NERSA

Mr Thembani Bukula (re-appointed 01 April 2011)

Full-Time Regulator MemberBSc (Eng); Post Graduate Dip (Engineering Business Management) Member primarily responsible forElectricity Regulation

Dr Rod Crompton (re-appointed 01 April 2011)

Full-Time Regulator MemberBA Hons; HED; PhD (Humanities) Member primarily responsible for Petroleum Pipelines Regulation

(b) The Energy Regulator and its Members

The Minister of Energy appoints Members of the Energy Regulator, comprising Part-Time (Non-Executive)and Full-Time (Executive) Regulator Members, including the Chief Executive Officer (CEO).

The Energy Regulator is supported by staff under the direction of the CEO. The Energy Regulator consisted of the following Regulator Members for the period 01 April 2011 to 31 March 2012:

Mr Joe Lesejane (Deputy Chairperson)

Part-Time Regulator MemberB.Comm; Hons B Compt; CA (SA);Fellow Chartered Management Accountant (UK); Certificate in Control Self Assessment (CCSA) Director: Mokwalo Training & Consulting Services


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Mr Oupa Komane (appointed 01 November 2011)

Part-Time Regulator MemberMSc (Engineering Business Management);Diplomas in Business Management,Supervisory Management and Effective DirectorshipDeputy General Secretary of the National Union of Mineworkers

Ms Khomotso Mthimunye

Part-Time Regulator MemberBComm; BCompt (Hons); CA (SA);Higher Diploma in Tax Law Independent Financial Consultant

Ms Ethèl Teljeur (re-appointed 01 April 2011)

Full-Time Regulator MemberBA Hons; MSc (Economics)Member primarily responsible forPiped-Gas Regulation

Ms Gillian Whittington Banda

Part-Time Regulator MemberMA (Modern History); MBA Management and Economic Development Consultant

c. Appointment of Regulator Members

Below is a table indicating the appointment dates of the Energy Regulator Members:

d. Constitution of the Energy Regulator and its Committees

The constitution of the Energy Regulator Committees was changed on 16 January 2012. This change is reflectedin the meeting attendance tables of the fourth quarter.

The reconstitution of the committees was necessitated by the appointment of Mr Oupa Komane on 01 November2011 as the ninth Regulator Member. Mr Komane took over chairmanship of the Human Resources andRemuneration Committee from Mrs Khuzwayo.

e. Attendance of Energy Regulator and Committee meetings

During the reporting period, the Regulator Members and their attendance at the meetings of the Energy Regulatorwere as follows:

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Member Status Date of Appointment

1. Ms C Khuzwayo Chairperson 01 January 2010

2. Mr J Lesejane Deputy Chairperson 01 January 2010

3. Ms P Nzimande Chief Executive Officer 01 May 2011

4. Mr T Bukula Regulator Member *01 April 2011

5. Dr R Crompton Regulator Member *01 April 2011

6. Mr O Komane Regulator Member 01 November 2011

7. Ms K Mthimunye Regulator Member 01 January 2010

8. Ms E Teljeur Regulator Member *01 April 2011

9. Ms G Whittington Banda Regulator Member 01 January 2010

10. Ms M Joubert External Member – Audit & Risk Committee **01 March 2010

11. Ms N Joubert External Member – Human Resources and Remuneration Committee

**01 March 2010

12. Mr J Mabaso External Member – Human Resources and Remuneration Committee

**01 March 2010

13. Mr M Nkhabu External Member – Audit & Risk Committee **01 March 2010

*Re-appointed on 01 April 2011, initially appointed in 2005**Re-appointed on 01 March 2010

ENERGY REGULATOR MEETINGS

MEMBER STATUS TOTAL (2011/12) ATTENDED (2011/12)

Ms C Khuzwayo Chairperson 13 8

Mr J Lesejane Deputy Chairperson 13 9

Ms P Nzimande Regulator Member (CEO) 13 11

Mr T Bukula Regulator Member 13 12

Dr R Crompton Regulator Member 13 13

Ms E Teljeur Regulator Member 13 13

Ms K Mthimunye Regulator Member 13 10

Ms G Whittington Banda Regulator Member 13 13

Mr O Komane Regulator Member 5 3


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Attendance of Committee meetings during 2011/12

SUBCOMMITTEE MEETINGS

ELECTRICITY SUBCOMMITTEE


Mr T Bukula Chairperson 13 13

Ms P Nzimande Member (CEO) 13 6

Ms C Khuzwayo Member (Alternate from 1st to 3rd Quarter) 9 1

Dr R Crompton Member 13 12

Ms E Teljeur Member 13 12

Ms G Whittington Banda Member (Permanent from1st to 3rd Quarter) 13 11

Mr J Lesejane Member (Permanent for 4th Quarter) 4 3

Ms K Mthimunye Member (Alternate for 4th Quarter) 2

Mr O Komane By invitation 1

PIPED-GAS SUBCOMMITTEE


Ms E Teljeur Chairperson 12 12


Mr T Bukula Member 12 9


Mr J Lesejane Member (Alternate) 12 0

Ms K Mthimunye Member 12 9

PETROLEUM PIPELINES SUBCOMMITTEE


Dr R Crompton Chairperson 9 9




Ms K Mthimunye Member (from 1st to 3rd Quarter) 9 6

Ms G Whittington Banda Member (Changed from Alternate to Permanent) 9 7

Mr J Lesejane By Invitation 1

Ms C Khuzwayo Member (Alternate for 4th Quarter)

AUDIT AND RISK COMMITTEE


Ms K Mthimunye Chairperson 5 5

Ms G Whittington Banda Member 5 4

Mr M Nkhabu External Member 5 3

Ms M Joubert External Member 5 4

Mr O Komane (Member for 4th Quarter) 1 1

Ms P Nzimande By invitation (CEO) 5 5

Ms C Khuzwayo By invitation 1

FINANCE SUBCOMMITTEE


Mr J Lesejane Chairperson 5 5




Mr T Bukula By invitation 1

Dr R Crompton By invitation 1

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FINANCE SUBCOMMITTEE


Mr J Lesejane Chairperson 5 5




Mr T Bukula By invitation 1


JOINT FINANCE AND AUDIT AND RISK COMMITTEE


Mr J Lesejane Chairperson (Finance) 1 0

Ms K Mthimunye Chairperson (Audit and Risk) 1 1

Ms P Nzimande Member (CEO) (Finance) (and invitee to Audit andRisk)

1 1

Ms E Teljeur Member (Finance) 1 1

Ms G Whittington Banda Member (Finance) 1 1

Mr M Nkhabu External Member (Audit and Risk) 1 0

Ms M Joubert External Member (Audit and Risk) 1 1

HUMAN RESOURCES AND REMUNERATION COMMITTEE


Mr O Komane Chairperson (from 4th Quarter) 2 2

Ms C Khuzwayo Member (Chairperson from1st to 3rd Quarter) 8 7


Mr J Lesejane Member (from 1st to 3rd Quarter) 8 2


Mr T Bukula Member (from 3rd Quarter) 2 1

Ms N Joubert External Member 8 7

Mr J Mabaso External Member 8 5


REGULATOR EXECUTIVE COMMITTEE


Ms P Nzimande Chairperson (CEO) 24 15




Attendance of Public Hearings during 2011/12

ELECTRICITY SUBCOMMITTEE PUBLIC HEARING




Ms C Khuzwayo Member (Alternate 1st to 3rd quarter) 15 2




Mr J Lesejane Member 6 3

Ms K Mthimunye Member (Alternate 4th quarter) 3


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PIPED-GAS SUBCOMMITTEE PUBLIC HEARING


Ms E Teljeur Chairperson 3 3




Mr J Lesejane Member (Alternate) 3 0


PETROLEUM PIPELINES SUBCOMMITTEE PUBLIC HEARING







Ms G Whittington Banda Member (Alternate) 4 1

REGULATOR EXECUTIVE COMMITTEE PUBLIC HEARING






ENERGY REGULATOR WORKSHOP











EXTENDED ELECTRICITY SUBCOMMITTEE WORKSHOP




Ms C Khuzwayo Member (Alternate) 5 3




Mr J Lesejane By invitation 5 3

Ms K Mthimunye By invitation 5 2

Attendance of Workshops during 2011/12

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PETROLEUM PIPELINES SUBCOMMITTEE WORKSHOP

MEMBER STATUS TOTAL(2011/12) ATTENDED (2011/12)








MEMBER STATUS TOTAL(2011/12) ATTENDED (2011/12)





Attendance of Workshops during 2011/12

ENERGY REGULATOR WORKSHOP











EXTENDED ELECTRICITY SUBCOMMITTEE WORKSHOP




Ms C Khuzwayo Member (Alternate) 5 3




Mr J Lesejane By invitation 5 3

Ms K Mthimunye By invitation 5 2


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REGULATOR EXECUTIVE COMMITTEE WORKSHOP














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Chief Executive Officer’s Report

Introduction

In executing our mandate, the strategic thrust remained,ensuring development and sustainability of theElectricity, Piped-Gas and Petroleum Industries in linewith Government objectives. This is a challenging taskas we always need to strike a fair balance between theneeds of all our stakeholders.

The achievements attained during the review periodwere certainly not without trials and challenges. Securityof supply, non-compliance in addressing maintenancebacklogs and enforcement of licence conditions weresome of the main challenges within the three regulatedindustries.

The extensive strategic and business planning processconducted during the review period enabled us toclearly outline and align our five strategic objectives toGovernment’s identified twelve outcomes. Thealignment will greatly contribute in addressing identifiedchallenges and contribute to the country’s social andeconomic growth.

While we pause to review and assess our progress, theexperience, knowledge and expertise gained during thereview period has strengthened the foothold from whichwe embark into the future. Going forward, we remainsteadfast in our resolve to increase the constructiveimpact of NERSA’s functions on the well-being of society.We remain aware that the relevance of NERSA mustalways be informed by the tangible benefits of its workto the citizens of this country.

Summary of organisational performance

Now in its seventh year of existence, I am pleased toannounce that NERSA has once again maintained anunqualified audit report – a clear testament to the ethosof responsible and accountable corporate governancethat exists throughout the organisation.

The total planned projects for NERSA during the reviewperiod were 543. A total of 358 (66%) were successfullycompleted and 49 (9%) projects were partiallyimplemented due to external dependencies, while 136(25%) projects were delayed.

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Phindile Nzimande

I am pleased to present my first annual report asChief Executive Officer of NERSA. The period underreview presented us with challenges andachievements alike; we can acknowledge NERSA’srobust progress along its trajectory of becoming aworld-class standard-bearer for effective and efficientenergy regulation in South Africa and the Continent.

5.Chief Executive Officer’s Report

The following is a summary of the organisation’sperformance during the review period:

n In total, 66% of the planned projects weresuccessfully implemented;

n 34% projects were not fully implemented due todelays which include external dependencies;

n In Electricity Industry Regulation, 63% of plannedprojects were successfully implemented;

n In Piped-Gas Industry Regulation, 73% of theplanned projects were successfully implemented;

n In Petroleum Pipelines Industry Regulation, 85% ofthe planned projects were implemented;

n 58% of Cross-Cutting Regulatory projects werecompleted; and

n 54% of the Organisational projects werecompleted.

Electricity Industry Regulation

(a) Licences granted, amended, renewed or withdrawn

NERSA is responsible for granting, amending, renewingor withdrawing the licences of regulated entities in theelectricity sector. The following licensing activities wereconducted during the review period:

n five (5) generation licences were granted;n one (1) generation licence was amended and no

generation licences were withdrawn;n one (1) distribution licence was granted, three (3)

were amended and one (1) private distributor’slicence was revoked after the applicant handed overits electricity supply infrastructure to Eskom; and

n no licences were transferred or renewed.

(b) Tariffs or tariff structures set or approved

Eskom Tariffs

The Energy Regulator approved a revised tariff increasefor Eskom for the period 01 April 2012 to 31 March2013 of 16% instead of the originally approved tariff of25.9%.

Eskom’s retail tariffs were approved on 02 March 2012,and the adjustment of the previously approved Eskomcoal benchmark prices for the 2011/12 financial yearwas approved on 21 June 2011.

Licencees Distributors Tariff Approval

The Energy Regulator is responsible for the approval oftariffs for all municipalities and other electricitydistributors in South Africa. The Energy Regulatorapproved the tariff benchmarks and review of themunicipal tariff guideline for the 2012/13 financial year.

A total of one hundred and eighty-two (182), out of onehundred and eighty-nine (189), licencees distributorstariff applications were approved. Two (2) licencees aredistributing for their own use, one (1) indicated that theywould not be increasing their tariffs in the financial year,while four (4) applications were not received.

Cogeneration and Renewable Energy Feed-InTariffs (COFIT and REFIT)

During the review period, the Energy Regulatorapproved the rules and tariffs for cogeneration projects.

Charge out rates and FBE rates

The Energy Regulator approved the charge out ratemechanism and 2011/12 Free Basic Electricity (FBE)rate. This is aimed at ensuring that poor residentialelectricity consumers have access to electricity.

(c) Regulations made and directives issued by theMinister of Energy

The Minister made the following regulations during thereview period:

n Electricity Regulations on the Integrated ResourcePlan 2010-2030 Electricity Regulation Act No. 4 of2006;

n Electricity Regulations on New GenerationRegulations (Regulation number R 399 Gazette No.9530 of 4 May 2011); and

n Electricity Regulation Act Section 34(1)Determination by the Minister of Energy – IPPProcurement Programme 2011.

(d) Grid Code Management

NERSA, as the Chair of the Grid Code AdvisoryCommittee (GCAC), with the technical assistance fromthe Industry Expert Team (IET), created an enablingenvironment for extensive dialogue to take place. Thisculminated in the process where industry playerssubmitted the following requests for amendment andexemption applications to the South African Grid Codeby interested and affected parties in response to theevolving operational environment to ensure that theCode is aligned to the current best practices:

n ten (10) amendments and eighteen (18) exemptionsto the Transmission Grid Code; and

n three (3) amendments and six (6) exemptions to theDistribution Grid Code.

NERSA convened workshops on the initial phases of theself-assessment exercise to test levels of compliance tothe Distribution Code with five (5) licencees.

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The Governance Code is currently under review at theGCAC to ensure that it is representative of all interestedand affected parties, by incorporating renewable energyproject developers/investors.

(e) Other activities

The Energy Regulator approved:

n the Generation, Transmission and ComplianceFrameworks;

n the progress and close-out reports on the correctiveaction plans of the Independent Technical Audits onGenerators and Distributors;

n the service incentive schemes for EskomTransmission and Distribution, which setperformance targets for Eskom and ultimatelydetermine rewards and/or penalties that can beimposed on Eskom at the end of its second Multi-Year Price Determination (MYPD2) period; and

n the Electricity Distribution Licensing Proceduretogether with the Electricity Distribution LicenceApplication Form, Inspection in loco Questionnaireand the Licence Tracking and Archiving Procedure.

In order to establish an orderly functioning electricityresale business, NERSA has embarked on a journey toaddress the challenges posed by the increasing numberof complaints by customers about the improperpractices of electricity resellers, who are currently notregulated. NERSA compiled a Concept Paper on thesubject matter and circulated it to identified stakeholderssoliciting their comments prior to provincial workshopsfacilitated by the team as an information-gatheringexercise.

Six (6) provincial workshops were convened duringOctober 2011. The inputs gathered from thestakeholder consultations have been utilised to compilea Consultation Paper. The next stage relating to thefinalisation of the regulatory framework is dependent onthe outcomes of the amendment process of theElectricity Regulation Act that is under way.

Piped-Gas Industry Regulation

(a) Licences granted, amended, renewed or withdrawn

NERSA is responsible for the licensing of theconstruction and operation of gas transmission, storage,distribution, liquefaction and re-gasification facilities, aswell as trading in the piped-gas industry. The followingrepresents all licence activities during the review period:

Licences granted

n seven (7) construction licences were granted toSasol Gas Ltd;

n eight (8) licences were granted to Sasol Gas Ltd forthe operation of transmission facilities in KwaZulu-Natal;

n one (1) licence was granted to Sasol Gas Ltd for theoperation of a distribution facility in Umgeni;

n six (6) licences were granted to Sasol Gas Ltd totrade in natural gas in certain areas correspondingto its licensed transmission pipelines Kwa-ZuluNatal;

n one (1) licence was granted to Sasol Gas Ltd totrade in gas in the Umgeni area in Kwa-Zulu Natal;and

n three (3) applications were received for registrationof gas production activities in terms of section 28of the Gas Act, namely Highland Exploration inVirginia, Dundee Biogas in KwaZulu-Natal andPetrosa in Mosselbay.

Licences amended

The Energy Regulator amended 15 (fifteen) licencesgranted to Sasol Gas Ltd related to the operation ofdistribution and transmission facilities and trading ingas. The licences were amended to include newlyconstructed gas distribution facilities (mostly additionalcustomer connections) in areas where Sasol Gas Ltdalready had trading and distribution operation licences.

Licences withdrawn

No licences were withdrawn during the period underreview.

Licences revoked

Six construction licences granted to Sasol Gas Ltd wererevoked for the following areas:

n Alton in KZN (transmission)n Sasolburgn Secunda arean Sasolburg area (transmission)n Mobeni in KZN (distribution)n Prospecton in KZN (distribution)


The Energy Regulator approved the following:

n Transmission tariff for Transnet Pipelines for thepipeline from Secunda to Durban South (LillyPipeline) for the period 01 January to 31 December2011 on 06 July 2011;

n the ROMPCO quarterly tariff for each of the fourquarters of the 2011/12 financial year;

n the Virtual Gas Network (Pty) Ltd (VGN) draft tariffassessment and VGN was requested to amend itstariff structure based on NERSA’s comments; and

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n the ROMPCO preliminary tariff assessment forvolumes >120 MG to be transported in theROMPCO pipeline and that ROMPCO wasrequested to amend its tariff structure based onNERSA’s comments.

(c) Piped-gas prices

The following prices were approved during the reviewperiod:

n Price capping in terms of clause 8 of Schedule Oneto the Agreement which provides for the averagegas price that Sasol may charge any customer usingup to ten (10) million gigajoules of gas per annumfor both 2009/10 and 2010/11;

n Maximum prices for distributors and reticulators interms of clause 9 of Schedule One to theAgreement;

n Maximum prices for Greenfields customers in termsof clause 10 of Schedule One to the Agreement;

n Maximum prices for Brownfields customers in termsof clause 11 of Schedule One to the Agreement;

n Minimum landed price of gas at Secunda for 2012;and

n Aggregate prices for 2010.

(d) Regulated Prices and Tariffs

Non-compliance with pricing provision

Through its proactive and effective intervention in themarket, NERSA found instances of non-compliance withthe gas pricing clauses of the Regulatory Agreement,resulting in significant price reduction for small industrialusers of gas. This includes FG Gallo t/a Springworkscc. In addition, four other industrial customers werereimbursed by the licensed entity; Sasol Gas Limitedfollowing lower discounts granted than those prescribedin the Regulatory Agreement.

There were findings of non-compliance with marketvalue pricing as well as regulatory discounts onfollowing investigations:

n Vaal SanitaryWare complaint – Notice ofcompliance issued

n FG Gallo – price was reduced by Sasol Gasfollowing non-compliance

n Inquiry into compliance with discounts – fourcustomers received reimbursement

n Inquiry into Aggregate Results – approved and pricediscrepancies are due to market value pricing whichis discriminatory in nature

These findings by the Regulator affirm its commitmentin ensuring transparency as well as fair and affordableregulated prices.

Approval of maximum prices

In order to provide certainty to potential investors andencourage entry into the gas industry, NERSA developeda methodology to approve maximum prices of gas. Thismethodology will enable NERSA to exercise itsregulatory oversight on prices of gas charged to theindustry while also ensuring transparency on pricedetermination.

NERSA also made an assessment of the extent andstatus of competition in the gas industry, and found thatcompetition is inadequate. This finding paves the wayfor NERSA to invoke its powers to monitor and approvemaximum prices of gas.

(e) Enforcement of Compliance

NERSA continues to sharpen its focus on complianceenforcement. This is evidenced by eleven instances ofnon-compliance uncovered through statutorycompliance inspections conducted. These incidents ofnon-compliance relate to construction and operation ofpipelines and trading in gas without the requisitelicences, as well as breach of licence conditions whereinlicensed entities failed to meet the required safety andtechnical standards. Following notices of non-compliance issued, Sasol Gas Limited has sinceremedied the non-compliance.

(f) Other activities

The Energy Regulator approved the Methodology toApprove Maximum Prices for Piped-Gas. The EnergyRegulator determined that there is inadequatecompetition in the piped-gas industry. Thisdetermination paves the way for the implementation ofthe Maximum Pricing Methodology.

NERSA facilitated dialogues on gas infrastructureinvestment between gas industry stakeholders inOctober and November 2011 where the challengesexperienced by the industry in relation to investments ingas infrastructure were discussed and possible solutionswere proposed for some of the challenges. The GasDialogues were held through well-attended workshopsin Durban, Cape Town and Midrand where participantsfrom diverse backgrounds such as gas producers,suppliers, traders and customers, potential investors,members of the public, state funded institutions, andfinancial institutions were in attendance.

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n three (3) licencees have submitted a list ofreportable safety incidents in terms of section 24 ofthe Occupational Health and Safety Act, 1993 (ActNo. 85 of 1993) (OHS Act);

n three (3) licencees have submitted information ontheir annual average monthly volumes stored for thelicencee and for third parties; and

n fifteen (15) licencees have submitted their annualinformation regarding historically disadvantagedSouth Africans.


During the review period, the Energy Regulatorapproved tariffs for a number of storage facilities forEngen, Tarlton, Engen Durban, Chevron, Sasol Oilstorage facilities, VOPAK and Natcos. It also approvedtariffs for the South African Petroleum Refinery (Pty) Ltd(SAPREF) Single Buoy Mooring (SBM); Berths 6, 7 and8 loading facilities, all in Durban.

The publication of the Draft Tariff Determination (DTD)for Transnet Pipelines’ petroleum tariffs for 2012/13and the Transnet Pipelines Tariff Benchmarking Reportwere approved for public comment.

The Energy Regulator amended Transnet’s petroleumpipelines licence conditions by setting tariffs for itspipelines system for 2012/13. The increase translatesto a 4 cent per litre increase in the retail price of petrol,which represents a 0.37% increase.

On 02 February 2012, the Energy Regulator receiveda tariff application from Chevron for its four (4)petroleum pipelines. This is the first pipelines tariffapplication from a privately owned petroleum company.

NERSA received and analysed 133 tariff applicationsfor petroleum storage and loading facilities. Thisrepresents 83% of licencees that have complied with thisaspect of their licence conditions.

NERSA’s initiative to acquire proper regulatory reportingadvanced significantly. Regulatory Financial Reportswere received from Chevron, Engen and TransnetPipelines.

The publication of the following documents wereapproved: Benchmarking Report on Transnet’sPetroleum Pipelines tariffs; Annual Guidelines for theAssessment of Storage and Loading Facilities; theInterest Cover Ratio for the Petroleum Pipelines Industry;and Frequently Asked Questions (FAQ) on how tocomply with the Petroleum Pipelines Act.

NERSA met with fifteen (15) licencees to provideassistance in completing their storage tariff applications.

Valuable input was obtained from industry participantsduring these workshops. The input has beenconsolidated into a report that will be presented to theMinister of Energy.

Petroleum Pipelines Industry Regulation

a) Licences granted, amended, renewed or withdrawn

In terms of its mandate, NERSA is responsible forgranting, amending, renewing or withdrawing thelicences of regulated entities in the petroleum pipelinessector. The following licensing matters were concludedduring the review period:

n three (3) construction licences were granted; n four (4) operation licences were granted;n five (5) licences were amended; andn the following storage facility licences were revoked:

l Chevron South Africa (Pty) Ltd (Bloemfontein,Welkom, Hartswater, Bethal, Louis Trichardt,Mokopane, Mafikeng, Kimberley, Keimoes,Newcastle, Queenstown, Empangeni,Bredasdorp, and Moreesburg) – due to changein ownership of the facility;

l BP Southern Africa (Vryheid Airport, UmtataAirport, Polokwane International, HoedspruitAirport, Delport Krugersdorp Airport,Bethlehem Airport and Nelspruit Airport) – dueto change in ownership of the facility;

l Chevron South Africa (Pty) Ltd (Clocolan, Kempand Piet Retief) – due to facilities that were nolonger required or were uneconomic tooperate; and

l BP Southern Africa (Port Elizabeth Airport,Grand Central Airport, Plettenberg Bay Airportand V & A Airport) – due to facilities that wereno longer required or were uneconomic tooperate.

Compliance

NERSA has begun in earnest with the enforcement ofcompliance by licencees with the requirements of theirlicence conditions, the regulations and the PetroleumPipelines Act, 2003. In doing so, licencees have beenreminded of their need to comply through letters, andwhere necessary, through the issuing of non-compliancenotices in terms of section 25 of the Petroleum PipelinesAct, 2003. The following is the status of compliance bylicencees:

n eleven (11) of the thirty-three (33) licencees havesubmitted their allocation mechanisms;

n twenty-two (22) of the licencees are submitting theirmonthly utilisation data;

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(c) Existing position and envisaged commercialdevelopments with respect to the petroleumpipelines industry

Oil companies continue rationalising their operationsby transferring ownership of storage infrastructure atsmaller depots to operators and resellers. These newowners will now have to apply for licences in their ownnames.

A number of smaller storage depots have beendecommissioned. This has resulted in a number ofapplications to revoke licences that were previouslygranted to the oil companies.

(d) Other Activities

The Petroleum Pipelines Subcommittee of the EnergyRegulator was updated on a quarterly basis on thesecurity of supply of petroleum products to the inlandmarket, and the development and operational state ofthe petroleum infrastructure.

Cross-Cutting Regulatory Matters

(a) Legislative Matters

The draft Memorandum of Understanding (MOU) withthe Competition Commission was approved by theRegulator Executive Committee on 12 September 2011and the MOU has been sent to CompetitionCommission for further negotiations with NERSA.

NERSA received the National Energy RegulatorAmendment Bill and the Electricity Regulation SecondAmendment Bill from the Department of Energy (DoE)for comment. NERSA submitted comments on theNERSA Bill to the DoE on 20 January 2012 andsubmitted comments on the Electricity RegulationSecond Amendment Bill on 20 February 2012.

NERSA submitted formal comments on the publishedIndependent System and Market Operator (ISMO) Bill.The ISMO Bill served as the initial step in Government’sintention to establish a state-owned entity which willprovide an independent system and market operationoutside Eskom Holdings. The objective of the ISMO Billis to provide an independent system and marketoperation to ensure a safe, secure and efficientoperation of the integrated power system, trading ofelectricity at wholesale level and to provide for mattersconnected therewith.

(b) Regulatory Reporting Manuals (RRMs)

The RRMs prescribe the accounting procedures andrequirements necessary to achieve uniformity and consistent reporting of the financial information required

by NERSA for tariff setting, monitoring and/or tariffapproval.

Regulatory Financial Reports (RFRs) were received fromEskom, Engen, Chevron and Transnet in compliancewith the Regulatory Reporting Manuals. Eskomsubmitted their audited Regulatory Reports in December2011 and Eskom’s RFR was approved on 19 March2012. The Energy Regulator noted the evaluation reporton Chevron’s RFR at its meeting of 16 January 2012.The Cost Allocation Manual (CAM) of Transnet Pipelines(Gas) was approved.

(c) Regulatory Reporting System (RRS)

The RRS is a system which is required for theimplementation of the Regulatory Reporting Manuals forthe regulated energy industries of South Africa. The finalimplementation report of the RRS was approved on 29June 2011 and the project plan for Stage 2 of the RRSwas approved on 22 September 2011. The RRSreceived a nomination for the 2011 SAP QualityAwards.

(d) Training

In efforts to enhance economic regulation capacity,NERSA arranged three regulatory training workshopstargeting NERSA staff, licencees and relevantgovernment departments. The training was structured inthree models, namely:

n Foundation of Economic Regulation and RegulatoryAccounting (A-Z of Regulation); 18 to 21 July 2011

n Marginal Cost Pricing in tariff setting; 01 to 04August 2011

n Regulatory Impact Assessment; 26 to 27 September2011.

n On 12 to 13 October 2011, NERSA offeredtraining on benchmarking. The training wasconducted by NERA Economic Consulting – aninternational economic regulations company.

(e) Complaints Resolution and Proactive Investigations

NERSA received three hundred and twenty-two (322)electricity-related complaints from both customers andlicencees during the period under review. More than80% of the complaints and disputes were resolvedsuccessfully. The outstanding complaints and disputes are complex in nature and consequently requireconsiderable time to resolve them. The majority of thecomplaints involved municipalities implementing tariffincreases which had not been approved by NERSA,tariffs implemented before the approvedimplementation date, incorrect billing of customers and estimated electricity bills. Three (3) dispute resolutionissues were approved by the Energy Regulator:

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n Mediation between Chiawelo Community & Eskom – Testing of Disputed Electricity Prepaid Meters in Chiawelo.

Four piped-gas investigations were approved of which three resulted in finding of non-compliance. These are:

- Vaal SanitaryWare complaint – Notice of compliance issued- FG Gallo – price was reduced by Sasol Gas following non-compliance- Inquiry into compliance with discounts – four customers received reimbursement- Inquiry into Aggregate Results – approved and price discrepancies are due to market value pricing which is

discriminatory in nature

(f) Customer Education

Customer education workshops and activities were conducted in various communities to create awareness amongcustomers/consumers about NERSA’s role and mandate. Most of the customer education workshops conductedduring the review period were done in collaboration and cooperation with consumer focused forums, consumerorganisations and the Provincial Consumer Affairs Departments.

A series of workshops were conducted in Soweto following the complaints received regarding inaccurate metersand implementation of IBTs. These workshops were conducted in partnership with Eskom and the GautengDepartment of Economic Development. Workshops were conducted in Orlando East, Pimville, Meadowlands andDiepkloof.

Community Radio Stations have been identified as the most effective platform to create greater awareness aboutNERSA’s role because of its broader reach and use of language that communities understand. Community RadioStations used during the review period include: Moutse Community Radio, Moletsi FM and Star FM.

Organisational Matters

(a) Human Resource Management

The implementation of the organisational structure progressed well, with 82% of the positions filled. The staffcomplement of the structure is one hundred and seventy-seven (177) and the staff strength during the review periodwas 146 (one hundred and forty-six). The process of filling the remaining vacant positions is ongoing.

The tables below provide information on employment and vacancies, staff movements, recruitment and internalappointments within NERSA for the period under review:

Employment and Vacancies

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Employment and vacancies by division

Division Number of posts Number of posts filled Vacancies

Electricity Regulation 53 47 6

Piped-Gas Regulation 19 13 6

Petroleum Pipelines Regulation 19 13 6

Finance & Administration 15 12 3

Corporate Services 32 29 3

Human Resources 7 5 2

Specialised Support Units 32 27 5

Total 177 146 31

Percentage 82% 18%

Employees with disabilities 0 0 0

Staff movements

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Staff movements by reason

Termination type Number % of total

Death 1 0.6

Resignation 14 9.4

Expiry of contract

Dismissal – operational

Dismissal – misconduct 1 0.6

Dismissal – inefficiency

Discharge – ill health 1 0.6

Retirement

Other

Total 17 11.4

Internal Appointments

Occupational band Male Female

African Coloured Indian White African Coloured Indian White Total

Top management

Senior management

Mid-management 1 1

Skilled 3 3 6

Semi-skilled

Unskilled

Total 3 4 7

Staff Development and Training

A Training and Development Plan to address the skillrequirements of new and existing staff was completedand submitted to the Energy Sector Education andTraining Authority (ESETA). In the review period, onehundred and thirty-eight (138) staff members attendedforty-seven (47) local training courses and seventy-five(75) staff members attended twenty-four (24)international courses.

Skills Development Training Programme

All ten (10) learners undergoing learnership havecompleted the NERSA Learnership Programme(National Certificate in Energy Regulation – NQF Level5). One (1) learner has been appointed as a Financial

and Economic Analyst in the Electricity Pricing and Tariffs Department. Six (6) learners have been appointed on atemporary basis in various departments within NERSA.

Wellness Programme

NERSA employees participated in the following wellnessprogrammes during the reporting period:

n Men’s Health Day;n The 702 Walk the Talk event;n NERSA Sports Day;n NERSA Women’s Day Celebration;n Workshop on Financial Wellbeing;n 16 Days of Activism For No Violence Against

Women and Children Abuse campaign; and n 2011 World Aids Day commemoration outreach

programme.

Recruitment

Occupational band Male Female

African Coloured Indian White African Coloured Indian White Total

Top management

Senior management 1 1 1

Mid-management 1 1 2

Skilled 8 6 1 15

Semi-skilled 3 3

Unskilled

Total 9 1 11 1 22


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Pension Fund

The NERSA Pension Fund is administered by SanlamRetirement Fund Administration (SRFA) on behalf ofSanlam and by a Board of Trustees representing thepension-related interests of NERSA and its employees.The fund is governed by the Pension Fund Act, 1956(Act No. 24 of 1956).

Employee Representative Body

NERSA recognises freedom of association andconcluded a recognition agreement with the NationalEducation Health and Allied Workers Union (Nehawu)as the representative body for staff members on mattersthat affect them, such as conditions of employment andsalary increases.

(b) Financial Management

NERSA is listed as a public entity in terms of Schedule3A of the Public Finance Management Act, 1999 (ActNo.1 of 1999) (PFMA).

NERSA’s annual business is conducted in terms of itsStrategic Plan and its Business Plan and Budget,prepared in the year prior to the review period, andsubmitted to the Minister of Energy. The financialoutcomes of NERSA’s pursuits and results are reportedannually in its Annual Financial Statements (AFS), whichare published in its Annual Report. The AFS areprepared in accordance with the requirements of thePFMA, the National Energy Regulator Act, 2004 (ActNo. 40 of 2004), Treasury Regulations and GenerallyRecognised Accounting Practice (GRAP).

The Annual Financial Statements, Performance AgainstPredetermined Objectives and Annual Report for2010/11 were approved on 26 May 2011 andsubmitted to the Auditor-General, Minister of Financeand Minister of Energy on 31 May 2011.

The Strategic Plan (2012/13 – 2016/17) and AnnualPerformance Plan (2012/13 – 2014/15) weresubmitted to the Minister of Energy on 31 August 2011,and the Annual Report was submitted to the Minister ofEnergy, Minister of Finance and Auditor-General on 31August 2011.

The imposition of the electricity levy was gazetted by theMinister of Energy on 15 April 2011, taking effect from01 April 2011. The imposition of the piped-gas andpetroleum pipelines levies was gazetted on 10 June2011, taking effect from 01 April 2011. All levies forthe 2011/12 financial year were billed by 31 March2012.

Cash flow mitigating reserve

NERSA has a cash-flow risk mitigation reserve toovercome timing differences between the start of thefinancial year and the start of levy payment by theindustries. The reserve target is three (3) monthsemployment cost for all staff members and 4.5% of theannual operating expenditure budget. This reserve willalso cover a shortfall in levies in cases where the leviescollected are below the total expenditure. The balanceof the reserve is R25,374,450 million (2010/11:R26,135,917 million).

(c) Risk Management

NERSA’s Internal Audit Unit assists Management and theAudit and Risk Committee to effectively discharge theirresponsibility by evaluating and improving theeffectiveness of risk management, control, andgovernance processes. The Internal Audit Unit reportsadministratively to the CEO and functionally to the Auditand Risk Committee. The Unit also provides consultingservices, attending meetings of the Finance Committee,the Operational Risk Committee and the AuditorSteering Committee.

During the review period, the Internal Audit Unitcompleted twenty (20) planned audits, two (2) ad hocassignments and one (1) fraud investigation.

Organisational risks in the approved Strategic RiskRegister contain, among others, fraud risks. NERSA hasa zero tolerance policy on fraud, corruption and misuseof public resources. A Fraud Hotline is in place which isoperated by an external service provider and guaranteesthe anonymity of any person calling in to reportsuspected fraud, corruption or misuse of publicresources. No cases of fraud were reported during thefinancial year.

NERSA has a Risk Management Policy in place. Thepurpose of this policy is to guide the identification andmanagement of risk in a cohesive, structured andeffective manner. The policy also serves as basis tounderstand, manage and communicate risk strategiesmore effectively. The Strategic Risk Register wasapproved by the Energy Regulator. This register containsindustry-specific risks, cross-cutting risks andorganisational risks. The register also contains strategiesto reduce the realisation of the risks. The Audit and RiskCommittee monitors the implementation of thesestrategies on a bi-annual basis as part of their role inoverseeing risk management in the organisation.

In terms of one of the good governance principlescontained in the King III Report, the Energy Regulator isrequired to assume the responsibility of InformationTechnology Governance. To ensure compliance with thisprinciple, it has expanded the mandate of the RegulatorExecutive Committee, as the operational committee ofthe Energy Regulator, to take this responsibility. To date,a number of IT policies and procedures have beenapproved by the said Committee.

(e) Externally Focused Responsibilities and Initiatives

Different approaches and communication mechanismswere used to engage stakeholders and the public atlarge in the processes and activities of the EnergyRegulator. These include, among others, stakeholdermeetings, public hearings, exhibitions, the NERSAwebsite, as well as the print and electronic media.

Parliamentary Portfolio Committee on Energy

NERSA has interacted on several occasions with theParliamentary Portfolio Committee on Energy (PPC):

n to brief the PPC on the NERSA Strategic Plan(2011/12 – 2013/14) and Business Plan withBudget (2011/12) as well as the NMPP and theREFITs;

n to present NERSA’s Annual Report for 2010/11;n to attend briefing sessions by the Department of

Energy on the gazetted amendments of theElectricity Regulation Act and National EnergyRegulator Act as well as the Cleaner Fuels 2programme and the Independent System andMarket Operator (ISMO) Bill;

n to attend the Presidential Review Task Team on StateOwned Entities focusing on Energy; and

n to attend the outcomes of COP17 regarding theenergy sector.

Public Awareness

Extensive public awareness was generated throughparticipation in eleven (11) exhibitions. NERSA also tookpart in various public participation activities of theDepartment of Energy, which include the following:

n Launch of Energy Month in Cape Town; n Electricity Switch-on in Ntambanana Municipality in

Kwa-Zulu Natal; n Annual Learners Focus Week;n National Electrification Indaba in Durban; andn Electricity Switch-On at Upper Ntseleni in Kwa-Zulu

Natal.

Three stakeholder workshops were conducted toeducate stakeholders on the methodology to approvemaximum prices for gas, in Durban, Cape Town andMidrand. Dialogues on constraints to gas infrastructure investment were held in Midrand, Durban and CapeTown. Four education sessions were held with customersto educate them on regulated prices as well asmethodology, including field investigations conducted.

Media Coverage

Daily monitoring of print and electronic media inrelation to electricity, piped-gas, petroleum pipelinesand any other matter in relation to energy wasconducted. The majority of NERSA’s coverage for thereview period was neutral and most coverage was onelectricity related issues.

Fifty-seven (57) media interviews were facilitated withthe print and electronic media and six (6) mediastatements were issued.

International Coordination and Partnerships

The CEO, in her capacity as Chairperson of RERA,attended the Southern African Development Community(SADC) Ministers of Energy Meeting in May 2011.

NERSA participated in the following regional andcontinental regulatory activities:

n African Forum for Utility Regulators (AFUR)Executive Committee meeting in Nouakchott,Mauritania on 28 July 2011.

n The 8th AFUR Annual Conference and GeneralMeeting which took place from 19 to 21 April 2011at Eskom Convention Centre in Midrand, Gauteng.The theme of the Conference was ‘Balancing theinterests of stakeholders in Regulatory Services’. TheConference was attended by NERSA staff andRegulator Members.

n AFUR Workshop on Tariff Design for the Electricityand Water Sectors hosted on NERSA premises from15 to 19 August 2011.

n AFUR Training Workshop on the design of pro-poortariffs for the Water and Electricity Sectors was heldat NERSA premises from 14 to 17 November 2011.Four (4) NERSA staff members attended the training.

n RERA Subcommittee and Portfolio Committeemeetings in Swakopmund, Namibia from 12 to 16September 2011.

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n The RERA 8th Annual Conference and GeneralMeeting in Mangochi, Malawi from 31 October to04 November 2011. During these events, RERAmembers discussed the regional issues pertainingto promoting compatible regulatory reportingsystems; plugging the power demand and supplygap; and developing regulatory capacity through apeer review and learning network. Additionally,during the Annual General Meeting, NERSA was re-elected as the Chairperson of the Association foranother term.

n NERSA is a participant in the Clean EnergyEducation and Empowerment (C-3E) Women’sInitiative, which was launched on 20 August 2011by the Minster of Energy in South Africa. Thisinitiative is part of the eleven global initiativeslaunched by the Clean Energy Ministers on 20 July2010 as part of the African Union’s declaration of2010-2020 as the Africa Women’s decade. Themain goal of the initiative is to create meansthrough which women across societies are in aposition to actively contribute to the move towardsclean energy. NERSA’s contribution has been toprovide support in setting up the programmes forthe initiative in South Africa through learnership, developing policies that would assist in theattainment of some of the programmes, as well as participating in joint education and information sharing sessions held with women together with other entities in the energy sector.

The RERA Guidelines on Cross-Border Power Tradingwere considered and adopted by the Energy Regulatoron 24 November 2011.

As part of its commitment to regional cooperation andinformation-sharing with other regulators and energyrelated entities, NERSA facilitated study tours to SouthAfrica by the Electricity Control Board (ECB) of Namibiaand the Energy and Water Utilities Regulatory Authority(EWURA) of Tanzania. A number of information sharingrequests were also received from the Energy RegulationBoard (ERB) of Zambia, the State Electricity RegulatoryCommission of China (SERC), Rwanda UtilitiesRegulatory Agency and the Ministry of Minerals, Energyand Water Resources of Botswana.

In preparation for the Conference of Parties (COP 17)hosted by the Republic of South Africa from 28November to 09 December 2011, NERSA served onthe Energy Technical Steering Committee (ETSC) set upby the Department of Energy. The main role of theSteering Committee was to develop a plan and makesubmissions on energy related activities, programmesand projects that were to be part of COP 17. NERSA

also had an exhibition stand at COP17 where the workdone by NERSA was shared with visitors to the stand.

ACKNOWLEDGEMENTS

My best wishes and thanks go to the Chairperson andmy fellow Regulator Members for their advice, guidanceand support. Their tireless efforts have made my taskmuch easier. I extend a sincere thank you to each oneof them for their contribution.

I would like to express my deep gratitude to MinisterDipuo Peters, Deputy Minister Barbara Thompson andthe Director-General of Energy for their ongoingsupport and encouragement of NERSA and its work. Myspecial thanks go to NERSA Management and Staff fortheir commitment to the organisation and theircontributions to its success.

Finally, I wish to pay tribute to our stakeholders for theircontinued support, which lessens the difficult task ofregulating this important industry. NERSA remainscommitted to regulate the energy industry in support ofsustainable growth and development.

Phindile NzimandeChief Executive Officer

33

34


Achievements for 2011/12

6.Achievements for 2011/12

35

NERSA’s main achievements for 2011/12 are groupedas industry specific regulatory; cross-cutting regulatory;and organisational:

Electricity Industry Regulation:

n Tariffs:

l Approved a revised tariff increase for Eskom forthe period 01 April 2012 to 31 March 2013 of16% instead of the originally approved tariff of25.9% on 9 March 2012;

l Approved 177 municipal tariffs and reviewed 9tariff applications for 2011/12;

l Approved tariff benchmarks and municipal tariffguideline for 2012/13 on 09 March 2012;

l Approved Eskom’s Retail Tariff StructuralAdjustment on 02 March 2012;

l Approved the charge out rate mechanism and2011/12 Free Basic Electricity rate on 29 July2011;

l Approved the annual review of the RenewableEnergy Feed-In Tariffs (REFIT) and rules forrenewable energy (RE) projects on 21 June2011;

l Approved the Rules on Cogeneration Feed-InTariffs (COFITs) on 21 June 2011;

l Concurrence with the determination made bythe Minister of Energy in line with section 34 ofthe Electricity Regulation Act, 2006 (Act No. 4of 2006) on the procurement process forrenewable energy on 08 July 2011;

l Approved the regulatory rules on NetworkCharges for third parties on the transportationof energy on 30 March 2012;

l Adjustment of the previously approved Eskomcoal benchmark prices for 2011/12 on 21June 2011;

l Six provincial workshops on electricityresellers/trading were held during the month ofOctober in Cape Town, Nelson Mandela Bay,Bloemfontein, Durban, East London andJohannesburg; and

l On 27 June 2011, Eskom released their2010/11 financial results which indicatedalignment with the second Multi-Year PriceDetermination (MYPD2) revenue allocations.

n Generation:

l In March 2012, NERSA conducted nationalhearings on the licence applications by the 28‘Department of Energy Renewable Energy

Independent Power Producer programme’preferred bidders;

l In terms of the Electricity Regulation Act, NERSAconcurred with the section 34(1) Ministerialdetermination on new generation capacity interms of the Electricity Regulation Act on 15February 2012. The determination was that thecountry indeed needs new generation capacityand the new generation capacity is to comefrom Open Cycle Gas Turbines (OCGTs) andEskom would be the buyer;

l Approved that a permanent exemption begranted to Komati Power Station pertaining toClause 3.1.7(2) of the Network Code of theTransmission Grid Code, which relates to‘Restart after Power Station Blackout’ on 24 May2011;

l Approved the Standard Conditions forEmbedded Generation within MunicipalBoundaries on 21 June 2011;

l Approved Eskom’s Power Purchase Agreementswith municipal generators on 24 November2011;

l Approved the Framework for Renewable EnergyPerformance on 29 February 2012; and

l Approved the Generation ComplianceFramework on 14 March 2012.

n Transmission:

l Approved the Limitation of Liability for theTransmission Grid Code on 24 May 2011;

l Approved the Transmission ComplianceFramework on 14 March 2012;

l A permanent exemption was granted to KomatiPower Station pertaining to Transmission GridCode, which relates to ‘Restart after PowerStation Blackout’; and

l NERSA submitted comments on the draftIndependent System and Market Operator Billto the Department of Energy.

n Distribution:

l The mediation between the Chiawelocommunity and Eskom was successfullycompleted after the adoption of the reportTesting of Disputed Electricity Prepaid Meters inChiawelo, Soweto on 28 October 2011;

l Approved the close-out report on the correctiveaction plans of the Independent Technicalaudits on Generators on 22 September 2011;

l Approved the Distribution Compliance Audit Framework including the three (3) year rolling plan on 28October 2011;

l Approved the Electricity Distribution Licensing Procedure, Form and Inspection in loco questionnaire on14 March 2012; and

l Approved an amendment to the Distribution Code relating to the System Operation Code Clause 8(1)(e)for the wording ‘Emergency and Contingency Planning’, to read as ‘Restoration and continuation of supplyto every power station during normal and abnormal conditions is to be classified as a high priority’ on 24May 2011.

n Licensing:

Table of licences, including amendments

Piped-Gas Industry Regulation:

n Pricing and Tariffs:

l Determined that there is inadequate competition in the piped-gas industry. This determination paves theway for the implementation of the Methodology to Approve Maximum Prices for Piped-Gas on 29 February2012;

l Approved the Methodology to Approve Maximum Prices for Piped-Gas on 28 October 2011 after extensiveconsultation;

l Approved four sets of ROMPCO quarterly tariffs;l Approved the transmission tariff for Transnet Pipelines for the pipeline from Secunda to Durban South (Lilly

Pipeline) for the period 01 January to 31 December 2011 on 06 July 2011;l Approved the aggregate piped-gas prices for 2010 for different categories of customers in various

provinces on 06 July 2011; l Approved the maximum prices for Greenfields customers for 2010 according to clause 10 of Schedule

One of the Agreement Concerning the Mozambique Gas Pipeline between the Government of the Republicof South Africa and Sasol Ltd on 07 September 2011;

l Approved the maximum prices for distributors and reticulators for 2010/11 on 05 October 2011; l Made a preliminary determination on the transmission tariffs for Transnet Pipelines (Lilly Pipeline) and

ROMPCO and storage tariffs for Virtual Gas Network (Pty) Ltd; l Approved minimum gas prices for 2010/11 on 06 July 2011;l Approved the report on compliance with regulatory discounts for 2010 on 06 July 2011;l Approved an alternative source of data for the price capping mechanism as prescribed by Schedule One

to the Agreement Concerning the Mozambique Gas Pipeline between the Government of the Republic ofSouth Africa and Sasol Ltd on 10 August 2011;

l Approved the price capping mechanism for 2009/10 and 2010/11 on 10 August 2011;l Sasol Gas Ltd reimbursed four of its small customers after a notice of non-compliance was issued by the

Energy Regulator that they failed to grant appropriate discounts prescribed in Clause 12 of Schedule Oneto the Agreement Concerning the Mozambique Gas Pipeline between the Government of the Republic ofSouth Africa and Sasol Ltd;

36


Generation Distribution

Awarded 1. Electrawinds Africa and Indian Oceans (PTY) Limited (Wind generation)

2. Sherpa Trade and Investment (Pty) (Biomass plant)3. Avon Peaking Power (Pty)4. Dedisa Peaking Power (Pty)5. Mondi (Pty) Ltd

1. Vleesbaai Services (Pty) Ltd

Amended 1. TSB Sugar RSA Ltd 1. City of Tshwane Metropolitan Municipality (include Kungwini and Nokeng tsa Taemane)

2. Blouberg Local Municipality (exclude Ngwanallela village)

3. Eskom (include Ngwanallela village)

Revoked 1. Algorax Pty Ltd


l Four complaints were resolved, including Vaal SanitaryWare, Terranova, Supreme Heat Treatment and FGGallo. Three notices of non-compliance resulted from the investigations into the complaints;

l Vaal SanitaryWare has commenced price renegotiation with Sasol Gas following finding of non-compliancewith market value pricing against Sasol Gas Ltd by the Energy Regulator;

l Four investigations were initiated;l One mediation was conducted;l Developed a brochure to assist stakeholders and customers with implementation of Maximum Price

Methodology; andl Three stakeholder workshops to inform stakeholders on the approved Methodology to Approve Maximum

Prices for Piped-Gas were held in Durban, Midrand and Cape Town.

n Licensing:

Table of licences, including amendments and revocations

37

Transmission Distribution

Licences Awarded:

Construction(all applications were from Sasol Gas)

1. Alton Industrial(KZN)2. 17th Reformer Secunda3. Secunda, Witbank, Middleburg (Ogies)4. Sasolburg- New Energy Holdings

1. Duncanville (Vereeniging)2. Boksburg (Galvspin Galvanisers)3. Wadeville, East Rand

Operation (all applications were from Sasol Gas)

1. Durban North2. Empangeni3. Mandini4. Avoca5. Verulam6. Newcastle7. Empangeni – Alton Richards Bay8. Durban South

1. Umgeni Business Park

Trading(all applications were from Sasol Gas)

1. Empangeni2. Empangeni- Alton Richards Bay3. Mandini4. Newcastle5. Avoca6. Durban South

1. Umgeni Business Park

Licences Amended:


1. Olifantsfontein2. Umgeni

1. Meydustria2. Elandsfontein x 2

Operation(all applications were from Sasol Gas)

1. Wadeville-Chloorkop x 2 1. Duncanville2. Alrode3. Wadeville4. Nigel5. Witwatersrand

Trading(all applications were from Sasol Gas)

1. Alrode2. Duncanville3. Wadeville4. Nigel5. Witwatersrand

Licences Revoked:


1. Alton, KZN2. Sasolburg Area3. Secunda Area4. Sasolburg Area

1. Mobeni, KZN2. Prospecton, KZN

38


l Registered three gas production activities namely Dundee Biogas in KwaZulu-Natal, PetroSA in Mosselbayand Highland Exploration in Virginia.

n Compliance Monitoring:

l Approved a report on notices of non-compliance by Sasol Gas from the inception of NERSA on 22 March2012, indicating that thirteen notices of non-compliance were issued during 2011/12 and a total of sixteennotices of non-compliance were issued since the inception of NERSA in 2005; and

l Sustained compliance enforcement has resulted in a shift from a culture of non-compliance by licenceesin the past to a more proactive stance aimed at compliance.

n Other:

l In addition to projects identified in the Business Plan, an initiative to consult with stakeholders on the hurdlesto gas infrastructure investment was approved. This consultation was done through Dialogues on gasinfrastructure investment held in Midrand (26 October 2011), Cape Town (31 October 2011) and Durban(04 November 2011);

l Approved the report on the NERSA dialogues on gas infrastructure investment on 22 March 2012. Thisreport will be presented to the Minister of Energy and discussed with the Department of Energy beforebeing published on the NERSA website;

l Consulted on the adequacy of competition in the piped-gas industry;

l Participated in the task team to assist the Department of Energy to develop the first draft amendment tothe Gas Act and presented an overview of areas to be considered for amendment to the Department ofEnergy.

Petroleum Pipelines Industry Regulation:

n Tariffs:

l Approved an increase of 31.58% in allowable revenue for Transnet Pipelines for the period 2012/13 andthe Reasons for Decision on 15 March 2012;

l Approved the Tariff Benchmarking report on 14 February 2012 and published the report for publiccomment;

l Approved and published annual guidelines for the assessment of storage and loading facility tariffs;

l Approved and published an interest cover ratio for the petroleum pipelines industry;

l Approved Engen tariffs for its 64 storage facilities and Reasons for Decision on 23 June 2011;

l Approved Tarlton storage facility tariffs and Reasons for Decision on 09 May 2011;

l Approved Engen Durban tariffs for its two storage facilities and Reasons for Decision on 02 December2011;

l Approved Chevron storage facility tariffs and Reasons for Decision on 02 December 2011;

l Approved Natcos storage facility tariffs and Reasons for Decision on 02 December 2011;

l Approved SAPREF’s Single Buoy Mooring tariffs and Reasons for Decision on 17 January 2012;

l Approved tariffs for Berths 6, 7 and 8 and Reasons for Decision on 12 March 2012;

l Approved Sasol Oil storage facility tariffs and Reasons for Decision on 12 March 2012;

l Approved VOPAK tariffs and Reasons for Decision on 16 January 2012;

l Approved and published Frequently Asked Questions on tariff applications; and

l International experts were invited to provide training to NERSA staff and interested stakeholders onbenchmarking from 12 to 14 October 2011.

n Licensing:

Table of licences, including amendments and revocations


39

Construction Operation

Awarded 1. BP Southern Africa – Waltloo facility2. Oiltanking Cululo – Couga3. BP Southern Africa – Rand Airport

1. Wilprops (Pty) Ltd – Roodekop2. PetroSA - Voorbaai storage facility and associated transfer pipelines con-

necting it to the PetroSA Refinery and marine loading facilities in Mossel Bay3. Bulembo Airport – Bisho

Amended 1. Transnet Pipelines - New Multi-Product Pipeline (NMPP)

1. Vopak Terminal Farewell and King Site – Durban2. The following BP Southern Africa licences were amended

to allow for multiple products handling:a. Waltloo (Pretoria)b. Montague Gardens (Cape Town)c. East Londond. Tzaneene. Klerksdorpf. Cape Aviation (Cape Town International Airport)

Revoked 1. Chevron South Africa (Pty) Ltda. Bethal; b. Bredasdorp; c. Empangeni; d. Mooreesburg; e. Kemp; f. Kimberley; g. Keimoes; andh. Mokopane

Compliance Monitoring:l All of the major oil companies have submitted applications for the approval of tariffs for their storage

facilities; l Licencees began to submit data in terms of the Regulations to the Petroleum Pipelines Act; andl The licencees are starting to submit their allocation mechanisms and these are being approved by NERSA.

Cross-Cutting Regulatory:

n Approved the final implementation report of the Regulatory Reporting System on 29 June 2011; n Approved the project plan for Stage 2 of the Regulatory Reporting System on 22 September 2011;n Approved the Cost Allocation Manual of Transnet Pipelines (Gas);n Approved the Spring Lights Gas Cost Allocation Manual;n Approved Eskom’s Regulatory Financial Report on 19 March 2012; n Approved a draft Memorandum of Understanding with the Competition Commission on 12 September 2011;n NERSA presented the following courses that were attended by NERSA staff, representatives from relevant

government departments as well as from licencees:l A-Z of Regulation (Foundation of Economic Regulation) and Regulatory Accounting from 18 to 21 July

2011,l Marginal Cost Pricing in tariff setting from 01 to 4 August 2011, andl Regulatory Impact Assessment from 01 to 4 August 2011; and

n The Regulatory Reporting System has been nominated for the 2011 SAP Quality Awards.

Organisational:

n Appointment of the four full-time Regulator Members (including the Chief Executive Officer) by the Minister ofEnergy with effect from 01 April 2011;

n Appointment of Mr Oupa Komane as a part-time member of the Energy Regulator by the Minister of Energywith effect from 01 November 2011;

n NERSA received an unqualified Audit Report for 2010/11; n Tabling and Ministerial approval of the Strategic Plan (2012/13 – 2016/17) and Annual Performance Plan

(2012/13 – 2014/15); andn NERSA has been re-elected as the Chair of the Regional Electricity Regulators Association (RERA).

40


Performance Against Predetermined Objectives

41

7.Performance Against Predetermined Objectives

1. EXECUTIVE SUMMARY

1.1. The National Energy Regulator of South Africa(NERSA) is a regulatory authority established as ajuristic person in terms of Section 3 of the NationalEnergy Regulator Act, 2004 (Act No. 40 of 2004).NERSA’s mandate is to regulate the electricity,piped-gas and petroleum pipelines industries interms of the Electricity Regulation Act, 2006 (ActNo. 4 of 2006), Gas Act, 2001 (Act No. 48 of2001) and Petroleum Pipelines Act, 2003 (Act No.60 of 2003). The structure of the Energy Regulatorconsists of nine members, five of whom are part-time, and four full-time, including the ChiefExecutive Officer (CEO). The Energy Regulator issupported by a secretariat under the direction ofthe CEO.

1.2. NERSA is a public entity as per the Public FinanceManagement Act, 1999 (Act No. 1 of 1999)(PFMA), and therefore has to comply with therequirements of this Act. In terms of TreasuryRegulation 29.3.1, NERSA is responsible forestablishing procedures for quarterly reporting tofacilitate effective performance monitoring,evaluation and corrective action.

1.5. From the above table it is evident that of the 110 planned Electricity Industry Regulation activities in the NERSABusiness Plan for 2011/12, 66 (63%) have been executed as planned. Forty one activities (37%) have notbeen executed as planned, of which 28 have not been executed as planned due to external dependencies.

1.6. From the above table it is also evident that of the 44 planned Piped-Gas Industry Regulation activities in theNERSA Business Plan for 2011/12, 32 (73%) have been executed as planned. Twelve (27%) of activitieshave not been executed as planned of which 5 have not been executed as planned due to externaldependencies.

1.7. From the above table it is further evident that of the 148 planned Petroleum Pipelines Industry Regulationactivities in the NERSA Business Plan for 2011/12, 125 (85%) have been executed as planned. Twenty-threeactivities (16%) have not been executed as planned of which 13 have not been executed as planned due toexternal dependencies.

1.3. In line with this requirement, the Energy Regulatorhas approved a format for quarterly reporting tothe Minister of Energy on the progress made withregards to the implementation of the BusinessPlan. Apart from these quarterly performancereports, this report on the summary of theperformance against predetermined objectives for2011/12 is in compliance with Section 55(2)(a) ofthe PFMA.

1.4. The following table provides an analysis ofNERSA’s performance on its planned activities upto the end of the 2011/12 business year. Thistable indicates industry-specific regulation, cross-cutting regulatory, organisational and overallperformance for the organisation. Percentagesindicated are of all planned activities in theBusiness Plan. Due to the responsive nature of thebusiness conducted by the organisation, a numberof delays in planned activities occurred due tosynergies with or dependencies on external parties.As NERSA does not have control over theseparties, the table indicates the delay in plannedactivities due to external dependencies separately.




Cross-cutting Regulatory

Organisational

Total

Executed As Planned Not Executed As Planned Total

Delayed due to external dependencies Delayed (Other)

69 (63%) 28 (25%) 13 (12%) 110

32 (73%) 5 (11%) 7 (16%) 44

125 (85%) 13 (9%) 10 (7%) 148

15 (58%) 3 (12%) 8 (31%) 26

117 (54%) 0 (0%) 98 (46%) 215

358 (66%) 49 (9%) 136 (25%) 543

42


1.8. Moreover, from the above table it is evident that of the 26 planned Cross-Cutting Regulatory activities in theNERSA Business Plan for 2011/12, 15 (58%) have been executed as planned. Eleven (43%) of activitieshave not been executed as planned of which 3 have not been executed as planned due to externaldependencies.

1.9. Lastly, from the above table it is evident that of the 215 planned Organisational activities in the NERSABusiness Plan for 2011/12, 117 (54%) have been executed as planned. Ninety eight (46%) activities havenot been executed as planned.

1.10. In summary, it is evident that of the total of 543 planned activities in the NERSA Business Plan for 2011/12,358 (66%) have been executed as planned. Although 183 (34%) activities have not been executed asplanned, 49 (9%) have not been executed as planned due to external dependencies.

1.11. The following table provides a comparison between NERSA’s performance on its planned activities for2009/19, 2010/11 and 2011/12.

1.12. Even though it is evident from the table that NERSA’s execution of its planned activities for 2011/12 was 2%less than in 2010/11 and in line with the execution of its planned activities for 2009/10, the following shouldbe highlighted:

1.12.1. Most of the activities that are delayed due to other reasons are delayed due to human resourceconstraints. The reason being that there was a delay in the implementation of the NERSA structurethat was approved by the Energy Regulator in September 2010. Activities were planned around thestructure being implemented;

1.12.2. During the fourth quarter, Eskom submitted an application to NERSA for the reopener of the Multi-Year Price Determination for 2012/13. This was an unplanned submission and the approval of therevised tariff was a priority as it has to be implemented on 1 April 2012. This resulted inreprioritisation that had to take place and less critical activities were delayed;

1.12.3. A number of activities that were not executed as planned (70 of the 187 or 37%) were due to aripple effect (one activity was not executed as planned which had an impact on the execution ofother activities (see graph below for a breakdown of the percentages of these activities between thedifferent industries);

2009/10

2010/11

2011/12

Executed As Planned

66%

68%

66%

Not Executed As Planned


15% 19%

14% 18%

9% 25%


43

1.12.4. NERSA met all statutory deadlines as far as compliance with the Public Finance Management Actand Treasury Regulations are concerned. With regards to statutory deadlines specified in the industry-specific legislation, NERSA has made a vast improvement on meeting these deadlines.

1.13. NERSA believes that its services add value to the electricity, piped-gas and petroleum pipelines industries insupport of government’s economic and social objectives. Value has been added in each of the followingstrategic objectives:1. To create regulatory certainty in the energy sector;2. To protect the interests of the public and the customers;3. To create a dispensation for fair competition for industry players;4. To create energy supply certainty; and5. To create an effective organisation that delivers on its mandate and purpose.

2. PERFORMANCE AGAINST PREDETERMINED STRATEGIC GOALS

2.1. The following tables provide an analysis of the performance of NERSA on its planned activities up to the endof the 2011/12 business year for each of the predetermined strategic goals. These tables indicate industry-specific regulation, cross-cutting regulatory, organisational and overall performance for the organisation.Percentages indicated are of all planned activities during the course of the business year. Due to the responsivenature of the business conducted by the organisation, a number of delays in planned activities occurred dueto synergies or dependencies on external parties. As NERSA does not have control over these parties, thetables indicate the delay in planned activities due to external dependencies separately.

Figure: Percentage of activities not executed as planned that was due to a ripple effect

0%

10%

20%

30%

40%

50%

60%

Electricity Piped-Gas PetroleumPipelines

Cross-Cutting

Organisational

47%

33%

48%

55%

30%

44


2.2. Strategic Goal 1: To create regulatory certainty in the energy sector

Executed As Planned

Not Executed As Planned Total


Electricity Industry Regulation 27 (79%) 5 (15%) 2 (6%) 34

Piped-Gas Industry Regulation 16 (84%) 2 (11%) 1 (5%) 19

Petroleum Pipelines Industry Regulation 52 (84%) 0 (0%) 10 (16%) 62

Cross-cutting Regulatory 2 (67%) 0 (0%) 1 (32%) 3

Total 97 (82%) 7 (6%) 14 (12%) 118

2.3. Strategic Goal 2: To protect the interests of the public and the customers

Executed As Planned






Cross-cutting Regulatory 13 (57%) 3 (13%) 7 (30%) 23

Total 116 (71%) 34 (21%) 14 (9%) 164

2.5. Strategic Goal 4: To create energy supply certainty

Executed As Planned






Total 9 (56%) 2 (13%) 5 (31%) 16

2.6. Strategic Goal 5: To create an effective organisation that delivers on its mandate and purpose

Executed As Planned



Organisational 117 (54%) 0 (0%) 98 (46%) 214

Total 117 (54%) 0 (0%) 98 (46%) 214

2.4. Strategic Goal 3: To create a dispensation for fair competition for industry players

Executed As Planned





Total 20 (67%) 6 (20%) 4 (13%) 30

3. DETAILED REPORT ON THE PERFORMANCE AGAINST PREDETERMINED OBJECTIVES FOR 2011/12

3.1. In order to facilitate easy reading of the report on the progress made by the Energy Regulator in implementingits mandate with regard to the regulation of the electricity, piped-gas and petroleum pipelines industries, thereport is organised as follows:l Electricity Industry Regulation;l Piped-Gas Industry Regulation;l Petroleum Pipelines Industry Regulation;l Cross-Cutting Regulatory; andl Organisational.


45


Goal Key Performance Indicator

Outputs Target Completion Date PerformanceResult

Reasons forVariance

To createregulatory certainty inthe energysector

Implement Complianceframework forelectricity gener-ation, transmis-sion anddistribution

The Energy Reg-ulator approvedon 29 July 2011that the name ofthis key perform-ance indicator ischanged fromImplement Complianceframework forelectricity gener-ation as well astransmission anddistribution gridcode administra-tion to what is indicated as thiswill more accurately reflect the activities tobe undertaken

Compliance Frameworkfor generation, transmission and distribution

The Energy Regulator ap-proved on 29 July 2011that this output is addedto the NERSA BusinessPlan as the ComplianceFramework must first bedeveloped and approvedbefore it can be imple-mented

Approved compliance frame-work for distribution facilities

The Energy Regulator approvedon 26 January 2012 that thistarget is split into three differenttargets – one for generation,one for transmission and onefor distribution as it will ensureeasier reporting. In line withthis approval, it was approvedthat the name of this target ischanged from Approved compliance framework to what is indicated

31 December 2011

Added Completed

Approved compliance frame-work for transmission facilities

In line with the approved splitin the previous target, the Energy Regulator approved on 26 January 2012 that thistarget is added to the NERSA Business Plan

31 March 2012 AddedCompleted

Approved compliance frame-work for generation facilities

In line with the approved splitin the previous target, the Energy Regulator approved on 26 January 2012 that thistarget is added to the NERSA Business Plan


Generation, Transmissionand distribution Compli-ance Audits

The Energy Regulator ap-proved on 29 July 2011that this output is addedto the NERSA BusinessPlan as the undertakingof compliance audits ispart of NERSA’s mandate

Approved compliance Audits 31 March 2013 Added On Track

Monitor the implementa-tion of the corrective action plans from therecommendations of theIndependent Technicalaudits on Generators

Approved by the Energy Regulator

The Energy Regulator approvedon 29 July 2011 that the targetis changed from Submission tothe Energy Regulator to what is indicated as this will more accurately reflect the activity

30 September2011

The Energy Regu-lator approved on29 July 2011 thatthe completiondate is changedfrom 31 March2012 to what is indicated asNERSA completethis target earlierthan anticipatedduring planning

Completed

46




Outputs Target Completion Date Performance Result

Reasons for Variance

Monitor the imple-mentation of the cor-rective action plansfrom the recommen-dations of the Inde-pendent Technicalaudits on Distributors

The Energy Regulatorapproved on 29 July2011 that this outputis added to the NERSABusiness Plan as themonitoring of the implementation of thecorrective action plansis an important follow-up on the technicalaudits that were performed

Approval by the Energy Regulator


Develop and implement mecha-nisms to determineand rectify the existing electricitymaintenance back-log and prevent future backlogs inthe South Africandistribution industry

Technical Audits Report on TechnicalAudits

31 September2012

Removed • The Energy Reg-ulator approvedon 29 July 2011that this key performance indicator is removed fromthe NERSA Busi-ness Plan as ithas been completed in the previous financial year

Compliance Audits Report on analysisof corrective action plans

31 December2012

Removed

Monitoring implemen-tation of MaintenanceSummit resolutions

Monitoring Quarterly Removed

Electricity Infra-structure Analysisand Review includ-ing the calculationof the avoided costof generation(LRMC)

Long Run MarginalCost (LRMC)

Collection and update of genera-tion cost and performance data

As and when re-quired

On track

Monitoring supply-demand balance

Weekly On track

Monitoring imple-mentation of the resource plan andassessment of theimpact of delays inthe construction program

31 March 2012 Completed

Development andupdate of screeningcurve for generationtechnologies


Development andupdate of screeningcurves for DSM andEE resources



47





Development andupdate of screeningcurves for DSM andEE resources


Determination andreview of the rev-enue requirementsfor generation: capital, fuel, maintenance andoperation

When the IRP isreviewed

On track

Development andreview of the aver-age electricity generation pricepath based on theestablished by theDoE integrated resource plan

The Energy Regula-tor approved on 29July 2011 that thename of this targetis changed from Development andreview of the aver-age electricity gener-ation price pathbased on the estab-lished by the DMEintegrated resourceplan to what is indi-cated in line with thename change of therelevant governmentdepartment


Completed

Production costingstudies and simulations underfuel availability andprice fluctuations aswell as variations inplant availability


The Energy Regulator approved on 29July 2011 thatthis completiondate is changedfrom 31 March2012 to what isindicated as thiswill be when thestudies will beneeded

On track

Sensitivity and riskanalysis

“What if analysis”sensitivity cases

31 March 2012 Delayed l This target is delayed due tothe delays in thepurchasing of thePlexos software

48




Outputs Target CompletionDate

Performance Result


Master Plan Integration of IPPsinto the Grid:REFIT IntegrationCriteria

Approval of MasterPlan Integration ofIPPs into the grid:REFIT Integration Criteria

International bench-marking: sharing information with relevant governmentinstitutions with experience in administering renewable energyintegration

31 March2012

CompletedRemoved

l The Energy Regulator approved on 29 July2011 that this keyperformance indicator is removed from theNERSA Business Plan.This key performanceindicator was initiatedin relation to the selection criteria forrenewable energyproject under the NewGeneration regulations of 2009,which were repealed in May 2011

Development of immediate requiredguidelines and toolsfor the successfuladministration andimplementation ofREFIT in 2010 byNERSA

31 March2012

CompletedRemoved

l The Energy Regulatorapproved on 29 July2011 that this keyperformance indicatoris removed from theNERSA Business Plan.This key performanceindicator was initiatedin relation to the selection criteria forrenewable energyproject under the New Generation regulations of 2009,which were repealedin May 2011

Identification andspecification oflong-term objectivesand way forward forNERSA for the effec-tive administrationof the REFIT

31 March2012

CompletedRemoved

Monitoring and Review of REFIT(renewable energyand cogeneration)

Review of qualifyingprinciples and tariffsfor approved RE technologiesa. Update and

Collection ofREFIT technologycosts

b. Calculation of theLevelized Cost ofElectricity (LCOE)for cogenerationplants

Review of qualifyingprinciples and tariffsfor approved REtechnologiesa. Update and

Collection ofREFIT technol-ogy costs

b. Calculation ofthe LevelizedCost of Electric-ity (LCOE) forcogenerationplants

31 December2011

CompletedRemoved

l The annual review ofthe tariffs and rules forrenewable energy (RE)projects has beencompleted

l However, the EnergyRegulator approvedon 29 July 2011 thatthis key performanceindicator is removedfrom the NERSA Business Plan due tothe Ministerial Deter-mination on the Independent PowerProducer (IPP) procurement programfor implementation of competitive biddingprocess for procure-ment of renewableenergy power genera-tion of June 2011


49





Development of theREFIT tariffs for anyqualifying additionaltechnologies to be included

Approved tariffs 31 March 2012 CompletedRemoved

Development ofspecific licence con-ditions for REFITtechnologies

Approved licenceconditions

31 March 2012 CompletedRemoved

TransmissionAudit Plan2010/11

The Energy Reg-ulator approvedon 29 July 2011 that this key performance indicator name is amended fromTransmissionAudit Plan towhat is indicated to indicate the year of the audit

Request project documents

Issue a formalwritten request to NTC for provi-sion of a list ofall transmissionprojects under-taken in the current calendaryear

31 December2012

The Energy Regula-tor approved on 29July 2011 that thecompletion date ismoved from 30April 2011 to whatis indicated

Based on Eskom’s request for the de-ferment of the auditto the second quar-ter of 2012/13, theEnergy Regulator approved on 26January 2012 thatthe completion dateis moved from 30August 2011 towhat is indicated

On track

Methodology forcalculation of thecost of unserved energy (COUE)

Given the reasons forEskom Transmis-sion’s request for an extensionof the audit tothe second quar-ter of 2012/13,the Energy Regulator approved on 26 January 2012that this target is added to theNERSA BusinessPlan

31 March 2012 AddedDelayed

l The delays has beencaused by the fact thatEskom submits toNERSA:v Information based

on 2008 findingsv The 2008 findings

are based on tariffsthat are not cost re-flective and most ofeconomic condi-tions have changedwhich will have agreat influence onthe COUE

v The public versionof the Eskom reporton COUE does notinclude the PBPower report aswell as other stud-ies completed byEskom, as Eskomregards most oftheir informationconfidential

50






Approval of AssetManagement Practices

Given the reasonsfor Eskom Trans-mission’s requestfor an extension ofthe audit to the second quarter of2012/13, the Energy Regulatorapproved on 26January 2012 thatthis target is addedto the NERSA Business Plan

30 June 2012 AddedOn track

Analysis of information

Cost evaluation of each option

31 March 2012 Removed l The Energy Regulatorapproved on 29 July2011 that these targetsare removed from theNERSA Business Plan asthey do not form part ofthis key performance indicator

Determination ofpreferred option

Building of a business case forthe preferred option using thejustification criteria

31 March 2012 Removed

Energy Efficiency ofNERSA Building

NERSA building/site audit

Appointment ofconsultants

31 April 2012

The Energy Regu-lator approvedon 29 July 2011that the comple-tion date ismoved from 31April 2011 towhat is indicatedas this is a morerealistic comple-tion date for thetarget

Completed

Project Report onrecommended improvements forimplementation

The Energy Regulator approved on 29July 2011 that thetarget is changedfrom Project Reportto what is indi-cated to add moreclarity on what thereport is about

31 July 2012

In line with therecommendationabove, the Energy Regulatorapproved on 29July 2011 thatthe completiondate is movedfrom 31 July2011 to what is indicated asthis is a more re-alistic completiondate for the target

On track


51




Performance Result


Implementationof the project

Implementation report

31 March2012

Removed l The Energy Regulator approved on 29 July 2011that this target is removedfrom the NERSA BusinessPlan as it forms part of theprevious target

Electricity IndustryRegulation Newsletter

Industry newsletter

Report on ESI Issues

Quarterly On track

Report on Key Eco-nomic Indicators

Quarterly On track

Update on ESI andEDI RestructuringMatters

Quarterly On track

Electricity PricingPolicy implementa-tion and monitoring

Development ofthe Task Team

Draft Terms of Reference

30 April2011

Removed l The Energy Regulator approved on 29 July 2011that this key performanceindicator is removed fromthe NERSA Business Plan

Assessment ofthe CurrentAlignment

Assessment report 30 Septem-ber 2011

Removed

Impact assess-ment (IncludingMYPD)

Impact assessmentreport

31 March2012

Removed

Develop ImplementationStrategy

Draft ImplementationStrategy

30 June2012

Removed

Research andBenchmarks on ESI Reform (InternationalTrends)

Reports Research andBenchmarks reports

As and when required

Removed l The Energy Regulator approved on 29 July 2011that this key performanceindicator is removed fromthe NERSA Business Plan asthis is a routine activity thatis carried out for manymore projects

Monitoring the implementation ofthe Regulatory Reporting Manuals(RRMs) by Eskomand the metros

Full audited financial reportsfrom metros

Receive reportsfrom metros

31 October2011

Externally Delayed

l This target is externally delayed as NERSA is await-ing implementation plansand other relevant docu-mentation from the Metros

Analysis of reports 31 December2011

Externally Delayed

l Only reports form Eskomwere received. None werereceived from the Metros.These will be analysed assoon as they are received

Develop correctivemeasures to en-sure compliance toRRMs

31 January2012

Externally Delayed

l NERSA can only start devel-oping corrective measuresto ensure compliance toRRMs once the reports havebeen received from theMetros.

Approval of re-ports by EnergyRegulator

31 March2012

Externally Delayed

l This target is dependent on the finalisation of theprevious target

52






Full audited financialreportsfromEskom

Receive reportsfrom Eskom

30 June 2011 Externally Delayed

l NERSA is still awaitingthe Half Yearly FinancialRegulatory Reports (November 2011) from Eskom

Analysis of reports 30 September 2011

The Energy Regulatorapproved on 29 July2011 that the comple-tion date is moved from31 August 2011 to whatis indicated due to thedelay in receipt of theaudited financial reportsfrom Eskom

Completed

Develop correctivemeasures to ensure complianceto RRMs

31 October 2011

The Energy Regulator approved on 29 July2011 that the comple-tion date is moved from30 September 2011 towhat is indicated due tothe delay in receipt ofthe audited financial reports from Eskom

Completed

Approval of reports by EnergyRegulator

31 December 2011

The Energy Regulator approved on 29 July2011 that the comple-tion date is moved from30 November 2011 towhat is indicated due tothe delay in receipt ofthe audited financial reports from Eskom

Completed

Electricity Industry Performance Report

Report tothe EnergyRegulator

Approval by theEnergy Regulator

31 March 2011 Removed l The Energy Regulatorapproved on 26 January 2012 that thiskey performance indi-cator is removed fromthe NERSA BusinessPlan as NERSA does not currently have thehuman resources capacity to conduct the key performance indicator


53




Performance Result


Distribution Planning Audit(2010/11)

As part of the midterm re-view of the implementationof the NERSA Business Planfor 2011/12, the EnergyRegulator approved on 28October 2011 that this keyperformance indicator isadded to the NERSA Business Plan. Due to therevised New GenerationsRegulations that was pub-lished by the Minister ofEnergy on 4 May 2011,the Renewable EnergyFeed-In Tariffs could notcontinue. This resulted incapacity within NERSA toundertake this activitywhich will assist in creatingregulatory certainty withinthe electricity supply indus-try as NERSA used to auditonly Eskom Transmission inthe past

Analysis of the followingplanning documents:l Framework for

Distribution NetworkPlanning and Development;

l Network Investment Criteria; and

l Excluded Services

Obtain the plan-ning frameworkand a list of alldistribu3tion proj-ects undertaken inthe 2010/11 financial year fromthe selected Eskomdistribution area

31 December2011

AddedCompleted

High level reviewof the distributionplanning frame-work for the selected Eskom region

30 September2012

Completed

Detailed assess-ment of the selected distribu-tion projects forcompliance withthe relevant plan-ning sections ofthe DistributionNetwork Code

30 September2012

On track

54





PerformanceResult


To protect the interests of thepublic and the customers

Guidelines to mu-nicipalities on therationalisation oftariffs within the mu-nicipal distributionareas

The Energy Regula-tor approved on 29July 2011 that thename of the key per-formance indicatoris changed fromGuidelines to munic-ipalities on the ratio-nalisation of tariffswithin the RED towhat is indicated asCabinet has decided that theRED model for the restructuring of theelectricity distribu-tion industry, will notbe implemented

Approval of princi-ples for tariff ratio-nalisation within themunicipal distribu-tion areas

The Energy Regula-tor approved on 29July 2011 that thename of the outputis changed from Ap-proval of principlesfor tariff rationalisa-tion within the REDto what is indicatedin line with the ap-proved change tothe name of the keyperformance indicator

ApprovedPrinciples

31 March2012

The EnergyRegulator approved on29 July 2011that the com-pletion date ischanged from30 November2011 to whatis indicated

Delayed l The key performanceindicator has been delayed due to the refocusing of the Regional ElectricityDistribution (REDs)model.

Develop Implementation Strategy

Draft Im-plementa-tionStrategy

31 March2012

Delayed l The completion of thisoutput is dependent onthe completion of theprevious output

Developing a Regulatory Frame-work for DistributionTraders (Resellers)

Develop and Approve the Guidelines

ApprovedGuidelines

31 March2012

The EnergyRegulator ap-proved on 29July 2011 thatthe completiondate ischanged from30 June 2011to what is indi-cated

Delayed l The Electricity Subcom-mittee advised thatNERSA should wait forthe finalisation of theproposed amendmentof Electricity RegulationAct and have a consul-tation session with theDepartment of Energybefore finalising theconsultation paper onElectricity Resale/Trad-ing prior to publishingit for public comments.

Develop Implemen-tation Plan

Implemen-tation Plan

31 March2012

Delayed l This output will commence once theguidelines have beenapproved

Municipal Tariff approval

Revision and approval of currentfinancial, technicaland tariff levelbenchmarks

Approvedbench-marks for2012/13

31 January2012

Completed

Modelling the municipal tariffguideline usingEskom’s MYPD increase

Approvedmunicipaltariffguidelinesent to allmunicipal-ities for2012/13

31 January2012

Completed

Receiving, reviewingand recommendingnew tariffs for 188municipalities

ApprovedTariffs for2011/12

30 June 2011 Completed


55




PerformanceResult


Public hearing formunicipal tariffsthat are above theguideline increase


Implementation ofapproved tariffs

1 July 2011 Completed

MonitoringEskom’s MYPD2and planning forMYPD3

Review ofEskom’s 6months report

Identification ofcorrection factoramounts

30 June 2011and 31 Decem-ber 2011

ExternallyDelayed

l The 6 month reports fromEskom were received lateand there are still manyareas of disagreement be-tween Eskom and NERSA.These are still being dis-cussed

Establishing thebalance of the regulatory clear-ing account


ExternallyDelayed

l The 6 month reports fromEskom were received lateand there are still manyareas of disagreement be-tween Eskom and NERSA.These are still being dis-cussed

Establishing thebalance of thecapital expenditure carrying account


ExternallyDelayed

l The 6 month reports fromEskom were received lateand there are still manyareas of disagreement between Eskom and NERSA.These are still being discussed

Review of MYPDrules

MYPD methodology

28 February2012

The Energy Reg-ulator approvedon 29 July 2011that the comple-tion date ischanged from28 February2011 to what isindicated as thiswas a typingerror

Delayed l It was decided that the revision of the rules of theMYPD will be put on holduntil full clarity is received onthe review of the ElectricityPricing Policy by the DoE.These will now be completedin 2012/13

Planning theMYPD3

MYPD methodology

31 December2011

Completed

Consultation on MYPDmethodology

31 March 2012 Delayed l It was decided that this willbe put on hold until full clarity is received on the review of the Electricity Pricing Policy by the DoE.These will now be completedin 2012/13

Determination ofthe large munici-pal revenuesbased on theapproved Rateof Returnmethodology

Evaluation reports for the six metros forvarious sectionsof the applica-tions (2012/13increase)

Evaluation reports 31 March 2012 Delayed l There were disagreementswith the Starting RegulatoryAsset Base (SRAB) that wasdetermined by a consultanton behalf of NERSA. Thematter is now under discus-sion with the CFO’s from theMetros as SRAB is the maininput into the rate of returnmethodology and the deter-mination of the required revenues for the entities

56






Aide memoires(2012/13 increase) for:l EThekwinil City of Cape

Townl City of

Tshwanel City Powerl Ekurhulenil Nelson

Mandela Bay

Inputs from vari-ous leaders sub-mitted to projectleader

31 March 2012 ExternallyDelayed

l This is dependent onthe finalisation of thestarting regulatory assetbase by the Metros

Consult withmetro for final inputs from council



Consolidation ofinputs in AM



Public hearingsfor each metro in the six cities(2011/12 increase)

Public Hearing -EThekwini

30 April 2012

The Energy Regulatorapproved on 29 July2011 that this completion date ischanged from 30April 2011 to what isindicated as it was atyping error

ExternallyDelayed


Public Hearing -City of CapeTown

30 April 2012

The Energy Regulatorapproved on 29 July2011 that this completion date ischanged from 30April 2011 to what isindicated as it was a typing error

ExternallyDelayed


Public Hearing -City of Tshwane

30 April 2012


ExternallyDelayed


Public Hearing -City Power

30 April 2012


ExternallyDelayed


Public Hearing -Ekurhuleni

30 April 2012


ExternallyDelayed



57





Public Hearing -Nelson MandelaBay

30 April 2012

The Energy Regulatorapproved on 29 July2011 that this com-pletion date ischanged from 30April 2011 to what isindicated as it was atyping error

ExternallyDelayed


Energy Regulatorapproves

All metro revenues approved

30 June 2012

The Energy Regulatorapproved on 29 July2011 that this com-pletion date ischanged from 30June 2011 to what isindicated as it was atyping error

ExternallyDelayed


Implementationof IncliningBlock Tariffs(IBTs) for Eskomand municipali-ties

Approval ofEskom IBT ratesby the EnergyRegulator andfull implementa-tion by Eskom

Assessment of IBTrates

30 April 2011 Completed

Consultation withEskom


Continuous monitoring of theimplementation of IBTs


Approval of municipal IBTrates by the Energy Regulatorand full imple-mentation bymunicipalities

Assessment of IBTrates


Consultation withmunicipalities andprovide assistancewere required


Monitoring reporton the implemen-tation of IBTs


l The public hearing onthe review of the IBTswas scheduled to takeplace in February2012. Due to the proposed revision of theElectricity Pricing Policyby the Department ofEnergy, the Energy Regulator put on holdthe public hearing.Therefore action on thematter will be takenonce comments havebeen received on theElectricity Pricing Policy

58






The National FreeBasic Electricitycharge out ratemechanism and proposed Free BasicElectricity (FBE) rate

The Energy Regulatorapproved on 29 July2011 that the nameof this key perform-ance indicator ischanged from Deter-mine Free Basic Elec-tricity (FBE) rate towhat is indicated asthis more accurately reflects the activity

Approval of the National Free BasicElectricity charge outrate mechanism andproposed FBE rate

The Energy Regulatorapproved on 29 July2011 that the nameof this output ischanged from An approved FBE ratefor Eskom reimburse-ment to what is indi-cated in line with theapproved change in name of the key performance indicator

Energy Regulator ap-proval of the chargeout rate mechanismand 2011/12 FBErate

The Energy Regulatorapproved on 29 July2011 that this targetis added to theNERSA Business Planas the the charge outrate mechanism and2011/12 Free BasicElectricity (FBE) ratehave not as yet beenapproved by the Energy Regulator

31 July 2011 AddedCompleted

Approval by the Energy Regulator(2012/13)

31 January 2012 Completed

Eskom tabling thenew rate in Cabinet(2012/13)


Eskom implementsthe new rates to allits customers(2011/12)

1 August 2011 and 1 October 2011

As the Energy Regula-tor only considered theFBE rate for 2011/12on 29 July 2011, theEnergy Regulator approved on 29 July2011 that the comple-tion dates are movedfrom 1 April 2011 and1 July 2011 to what isindicated respectively

Completed

Resolution of complaints and disputes

The Energy Regulatorapproved on 29 July2011 that the nameof this key perform-ance indicator ischanged from Reso-lution of complaintsto what is indicatedto ensure that disputeresolution also formspart of the NERSABusiness Plan

Reports Submission to the Energy Regulator

The Energy Regulatorapproved on 29 July2011 that the nameof the target ischanged from Elec-tricity Industry reportsto what is indicatedas this is a more accurate reflection of the activities to be undertaken

Annually

In line with the approved amendmentof the target, the Energy Regulator approved on 29 July2011 that the comple-tion date is changedfrom Quarterly to whatis indicated

Completed


59




PerformanceResult


Facilitate establishment of end-user forums

Establishedend user forums

Reports Quarterly ExternallyDelayed

l A request wasmade to the Department of Energy to requestthe Minister of Energy to prescribethe procedure tobe followed in establishing end-user forums.NERSA is currently awaiting the re-sponse

Effective participation in establishedend-user forums

Reports Quarterly Removed l The Energy Regula-tor approved on29 July 2011 thatthis output is removed from theNERSA BusinessPlan as it is covered in the output above

Eskom retail tariffs structuraladjustments

The Energy Regulator approved on 29 July 2011that this key performance in-dicator is added to theNERSA Business Plan for2011/ 12 as it was accidentally left off

Approval ofEskom Retailtariff structuraladjustments

Approved revised tariff structures

28 February2012

AddedCompleted

Approval ofthe Eskom2012/13 Retail Tariffs

Approved retail tariffs 28 February2012

AddedCompleted

Development of RegulatoryRules on network charges forthird parties on the trans-portation of energy.

The Energy Regulator ap-proved on 29 July 2011 thatthis key performance indica-tor is added to the NERSABusiness Plan for 2011/12.The reason for this is thatthere is a requirement forNERSA to issue IndependentPower Producers (IPPs) withguidelines on the costs in-volved in network access and transporting of energy.This necessitates the provi-sion of principles, rules andmethodologies of transmis-sion and distribution wheel-ing including the treatmentof network congestion forimplementation as pre-scribed by the Electricity Pricing Policy

Approval ofthe RegulatoryRules on networkcharges forthird parties onthe transporta-tion of energy

Approval of the rules by the Energy Regulatory

30 Septem-ber 2011

AddedCompleted

60






To create adispensationfor fair com-petition forindustry players

Amendment, transfer,revocation and rectifi-cation of electricitydistribution licences

The Energy Regulatorapproved on 29 July2011 that the nameof this key perform-ance indicator ischanged from Amend-ment and renewal ofelectricity distributionlicenses and finaliseand implement guide-lines for trading, import and export ofelectricity licences towhat is indicated asthis will more accu-rately reflect the activi-ties to be undertaken

Evaluate appli-cations andmake recom-mendations to the EnergyRegulator asan when we receive application

Submission to the Energy Regulator


On track

Review and updatingof electricity genera-tion, transmission anddistribution licences

The Energy Regulatorapproved on 29 July2011 that the nameof this key perform-ance indicator ischanged from Reviewand updating of electricity distribution licences to what is in-dicated as the licensing is not onlyfor distribution butalso for generationand transmission

Review gener-ation, trans-mission anddistribution licence appli-cations andmake recom-mendations to the EnergyRegulator

In line with theapprovedamendment to the key performanceindicatorname, the En-ergy Regulatorapproved on29 July 2011that the nameof the output ischanged fromReview distri-bution licencesand make rec-ommendationsto the EnergyRegulator to what is indicated


31 March 2013

The Energy Regula-tor approved on29 July 2011 thatthe completiondate for this keyperformance indicator is movedfrom 31 March2012 to what is indicated as the review and updat-ing of all licencesin the generation,transmission anddistribution indus-tries will take morethan one year tocomplete

On track


61





Technical and economicalevaluation ofelectricity generation li-cence applica-tions

Evaluate appli-cations andmake recom-mendations to the EnergyRegulator as an when we receive application



On track

Review of REFITRules

Overall monitoringand review ofthe REFIT Rules

Data on the energypurchased underREFIT per technologyband and the totalcost of the REFIT be gathered andmaintained


• The Energy Regulatorapproved on 29 July2011 that this key per-formance indicator is re-moved from the NERSABusiness Plan due to theMinisterial Determina-tion on the IndependentPower Producer (IPP)procurement programfor implementation ofcompetitive biddingprocess for procurementof renewable energypower generation ofJune 2011

Update on the marketintroduction of thequalifying technolo-gies


Revised rules (if necessary)


Review of EnergyEfficiency andDemand SideManagement(EEDSM)

Assessment of the EEDSMaudit annualperformancereport

As part of themidterm reviewof the imple-mentation ofthe NERSABusiness Planfor 2011/12,the EnergyRegulator approved on28 October2011 that thename of thisoutput ischanged fromEvaluate andvalidate the informationsubmitted onEEDSM per-formance report to whatis indicated asthe annual re-port should becontinuouslyassessed andnot only evalu-ated at the end

Evaluate and ensurethat resources havebeen acquired economically and areutilized efficiently andeffectively


• The revision of the ruleson EEDSM is pendingthe publication of theenergy efficiency policyby the Minister of Energy

62






Evaluate and ensurethat the recoverieswere accurately andcompletely recorded

31 August 2012 On track

Evaluation of the newEEDSM project costs

The Energy Regulatorapproved on 29 July2011 that the nameof this target ischanged from Evalu-ation of the EEDSMproject costs to whatis indicated to ensureunderstanding thatthis is for new EEDSMprojects


The Energy Regula-tor approved on29 July 2011 thatthe completiondate is changedfrom 31 March2012 to what is in-dicated as NERSAdoes not have con-trol over whenthese projects areinitiated

On track

2011 EEDSM AnnualAudit

As part of themidterm review of theimplementation ofthe NERSA BusinessPlan for 2011/12,the Energy Regulatorapproved on 28 Oc-tober 2011 that thisoutput is added tothe key performanceindicator as the auditis conducted everyyear after the submis-sion of the auditedannual performancereport by Eskom inJune

Audit findings 31 March 2012 AddedDelayed

l The 2010/11audit has beencompleted. Thereport has notbeen finalised yetas validation ofsome of the find-ings in the draftaudit report stillhas to be done

Monitor EEDSM per-formance for compli-ance with MYPD2

As part of themidterm review of theimplementation ofthe NERSA BusinessPlan for 2011/12,the Energy Regulatorapproved on 28 October 2011 thatthis output is addedto the key perform-ance indicator as theMulti-Year Price Determination(MYPD) requires thatthe performance of the EEDSM ismonitored annually

Report submitted to the Electricity Subcommittee



63




PerformanceResult


Review of EEDSMrules for MYPD3

As part of themidterm review of theimplementation ofthe NERSA BusinessPlan for 2011/12,the Energy Regulatorapproved on 28 Oc-tober 2011 that thisoutput is added tothe key performanceindicator as modifi-cations need to bemade in line with theMYPD rules

Report submitted to the Electricity Subcommittee

Report submitted to the Electricity Subcommit-tee

AddedDelayed

l A workshop on modi-fication of the rules,incentives and penal-ties has been held.Eskom will submit theagreed proposals inthe next quarter

Review of the Rulesfor unsolicited bids

Review of RegulatoryRules for unsolicitedbids addressing thefollowing issues:l Format for

submissionl Selection criterial Evaluation

criterial Bid agreementl Procurement

process

Approved revisedrules for unsolicitedbids

31 March2012

Removed l The Energy Regulatorapproved on 29 July2011 that this keyperformance indicatoris removed from theNERSA Business Plandue to the MinisterialDetermination on theIPP procurement pro-gram for implementa-tion of competitivebidding process forprocurement of renewable energypower generation of June 2011

Develop an imple-mentation planand rollout forphase two of thelicencees that needto comply with theDistribution Codeand assess anddevelop code conditions for renewable energyand co-generationsupplies

Phase 2 Implementa-tion (50 MVA to 99MVA)

Phase 2 Rollout 31 March2012

Completed

Administration andManagement of thecode

Post Updated codedocuments on NERSAWebsite

2 weeks afterupdate

On track

Review of the code(Consider RenewableEnergy Grid Conditions)

Approved RenewableEnergy Grid Conditions

31 March2012

Delayed l This is delayed as thedrafting of the gridconnection conditionsfor solar took longerthan anticipated

Approved amendments and exemptions to thecode

Participated at GridCode Advisory Committee (GCAC)and IET level

As and whenrequired

On track

NERSA approvedamendments and exemption

As and whenrequired

On track

Monitor Phase 1 ImplementationProgress (100MVAupwards)

Progress Reports Quarterly On track

Align exemptions tothe complianceframework

Updated ComplianceFramework

As and whenrequired

On track

64





PerformanceResult


Management ofthe South AfricanTransmission GridCode

Administration andManagement of thecode

Post Updated codedocuments on NERSAWebsite

2 weeks afterupdate

On track

Review of the code(Consider RenewableEnergy Grid Conditions)

Approved RenewableEnergy Grid Condition

31 March2012

Delayed l This is delayed as thedrafting of the gridconnection conditionsfor solar took longerthan anticipated

Approve amendments and exemptions to thecode

Participated at GridCode Advisory Committee (GCAC)and IET level

As and whenrequired

On track

NERSA approvedamendments and exemption

As and whenrequired

On track

Align exemptions tothe complianceframework

Updated ComplianceFramework

As and whenrequired

On track

Establish frame-work for wholesaleelectricity environ-ment and whole-sale pricingprinciples (Regula-tory Framework forthe IndependentSystem and MarketOperator)

Inclusion of EnergyTrading in the Frame-work

Draft Framework onWholesale TradingEnvironment

The Energy Regulatorapproved on 29 July2011 that the nameof this target ischanged from Reviewof Principles in light ofPower ConservationProgramme (PCP) Decisions to what isindicated as this willmore accurately reflect the activities to be undertaken

31 September2011

ExternallyDelayed

l This is delayed as it is dependent on thefinalisation of the Independent Systemand Market OperatorBill

Framework forWholesale PricingPrinciples

Discussion documentand draft framework

31 March2012

ExternallyDelayed

l This is delayed as it isdependent on the fi-nalisation of the Inde-pendent System andMarket Operator BillThis is delayed as it isdependent on the fi-nalisation of the Inde-pendent System andMarket Operator Bill


65




PerformanceResult


Rules for the Inde-pendent System andMarket Operator(ISMO): Including theReview of WholesalePricing System in linewith the implementa-tion of ISMO

The Energy Regulatorapproved on 29 July2011 that the nameof this output ischanged from Revi-sion of the Frame-work for ElectricityWholesale Environ-ment to what is indi-cated

Revised CSM, dis-patch Rules, Marketoperation rules etc

The Energy Regulatorapproved on 29 July2011 that this targetis changed from DraftConsultation paperon review of Whole-sale Electricity PricingSystem (WEPS) towhat is indicated inline with the changein output name

1 February2012

The EnergyRegulatorapproved on29 July2011 thatthe comple-tion date ischangedfrom 31March 2012to what is indicated inline with theapprovedamendmentto the target

Externally delayed

l This is delayed as it isdependent on the finalisation of the Independent Systemand Market OperatorBill

Public consultationprocess

31 March2012

AddedExternallyDelayed

l This is delayed as it isdependent on the fi-nalisation of the Inde-pendent System andMarket Operator Bill

Approval by Regulator

30 April2012


l This is delayed as it isdependent on the fi-nalisation of the Inde-pendent System andMarket Operator Bill

Development of amonitoring frame-work and updatefor renewable en-ergy performance

As part of themidterm review of the implementa-tion of the NERSABusiness Plan for2011/12, the Energy Regulatorapproved on 28October 2011 thatthis key perform-ance indicator isadded to theNERSA BusinessPlan in order tomonitor the targetsin the publishedIntegrated Re-source Plan (IRP)2010 with per-formance relatingto the 2003 WhitePaper on renew-able energy policyin order to createa level playingfield for independ-ent power produc-ers and utilities

Framework documentwith indicators to beused

Framework documentwith indicators to be used submitted to the Electricity Subcommittee

28 February2012

AddedCompleted

66






Approval bythe EnergyRegulator


To create energy supplycertainty

Monitoring ofQuality of Supply and Service Incentive

Performance targets forEskom Distribution

Report 31 March 2012 Completed

Performance targets forEskom Transmission


Performance targets for large municipalities

Report 31 March 2013

The Energy Regulatorapproved on 29 July2011 that this comple-tion date is movedfrom 31 March 2012to what is indicated asthe large municipalitiesdo not have a systemin place and processesto measure the required performance indicators

On track

Power Quality Directive Implementation

Report 30 November 2012

The Energy Regulatorapproved on 29 July2011 that the comple-tion date is changedfrom 31 March 2012to what is indicated isthis is a more realisticcompletion date for thetarget

On track

Research and InvestigationProjects

The Energy Reg-ulator approvedon 29 July 2011that the name ofthis key perform-ance indicator ischanged fromAd-Hoc investi-gations intopower outagesto what is indi-cated as thischange wouldbroaden thescope of the keyperformance indicator

Investigate power outagesincidents, prepare reporton the findings and giverecommendations to theInvestigate power out-ages, quality of supplyand quality of service incidents, prepare reporton the findings and give recommendations to the Energy Regulator for thecorrective measures

In line with the approvedamendment to the nameof the key performance in-dicator, the Energy Regu-lator approved on 29 July2011 that the name of theoutput is changed from Investigate power outagesincidents, prepare reporton the findings and giverecommendations to theEnergy Regulator for thecorrective measures towhat is indicated

Submission tothe EnergyRegulator

The EnergyRegulator approved on29 July 2011amendment tothe output, it isapproved thatthe name ofthe target ischanged fromReport to whatis indicated

As and when required Completed


B. Piped-Gas Industry Regulation

67




PerformanceResult


Power ConservationProgram (PCP)

Implementation of Electricity ConservationScheme (ECS)

Implementa-tion report

31 March2012

ExternallyDelayed

l Delivery on the outputis dependent on theoutcomes of the reviewof the National Emergency ResponseTeam (NERT) PCP rules

EGM Rules Approved rules 31 December2011

ExternallyDelayed

l Delivery on the outputis dependent on theoutcomes of the review of the NationalEmergency ResponseTeam (NERT) PCP rules



Outputs Target Comple-tion Date

PerformanceResult


To createregulatorycertaintyin the energysector

Implement tariff guidelinesfor transmission and storage facilities

Transnet Assess tariffapplication

31 August2011

Completed

Monitor andapprove tariffs

31 December2011

ExternallyDelayed

l Delayed due tolate receipt of application

ROMPCO Assess tariffapplication

Quarterly Completed


Quarterly On track

Sasol Assess tariffapplication

31 March2012

ExternallyDelayed

l Sasol Gas is currently embark-ing on a processto determine thestarting regulatoryasset base before it can submit itstariff application

Other Assess tariffapplication

As andwhen licenced


As andwhen licenced

Development and imple-mentation of the maximumgas prices methodology

The Energy Regulator approved on 29 July 2011that the name of this keyperformance indicator ischanged from Implementa-tion of the maximum gasprices methodology to whatis indicated as the method-ology has to be developedbefore it can be imple-mented

Maximum pricingmethodology

The Energy Regula-tor approved on 29July 2011 that thisoutput is added tothe NERSA BusinessPlan in line with theapproved amend-ment to the key performance indicator name

Three stakeholderworkshops

31 December2011

AddedCompleted

Four meetingswith small andbig customers

31 December2011

AddedCompleted

Approvedmethodology

31 March2012

AddedCompleted

68




Outputs Target Comple-tion Date

PerformanceResult


Spring Lights Gas Approved prices

The Energy Regulator approved on 29 July 2011that this target is changedfrom Assessment of applications to what is indicated, as the revisedtarget will incorporate allactivities to be undertaken

31 March2012

Delayed l The completion dateshould have been re-flected as 31 March2013 instead of 31March 2012

Approved maximum gasprices

31 March2012

Removed l The Energy Regulatorapproved on 29 July2011 that these targets are removedfrom the NERSA Busi-ness Plan as it formspart of the approvedamendment to thefirst target

Publish the maximum gasprices on the NERSA website

30 June2011

Removed

Novo Energy Approved prices


As andwhen required

On track


As andwhen required

Removed l The Energy Regulatorapproved on 29 July2011 that these tar-gets are removedfrom the NERSA Busi-ness Plan as it formspart of the approvedamendment to thefirst target


30 June2011

Removed

VGN Approved prices


As andwhen required

On track


As andwhen required



31 March2011

Removed


69




PerformanceResult


Other Approved prices

The Energy Regulator approved on 29 July 2011that this target is changedfrom Assessment of applications to what is indi-cated, as the revised targetwill incorporate all activitiesto be undertaken


On track






Removed

Calculation of theaggregate (average) prices

Calculatethe aggre-gated piped-gas pricesfor all cate-gories of customersfor eachprovince according to the Regu-lations

Approved aggregate prices

The Energy Regulator approved on 29 July 2011that this target is changedfrom Preliminary determina-tion of the aggregate pricesto what is indicated, as therevised target will incorporate all activities to be undertaken

31 August 2011 Completed

Submission to PGS 30 September2011

Removed l The Energy Regulatorapproved on 29 July2011 that these targets are removedfrom the NERSA Busi-ness Plan as it formspart of the approvedamendment to thefirst target

Publish the aggregate results on the NERSA website

31 October2011

Removed

Investigation onpricing require-ments (e.g. MarketValue Pricing(MVP), refusal tosupply)

The Energy Regu-lator approved on29 July 2011 thatthe name of thiskey performanceindicator ischanged from Adhoc investigationon pricing require-ments (e.g. MarketValue Pricing) towhat is indicatedfor the sake ofmore clarity

Investigationreport

Submission to the EnergyRegulator

31 March 2012

The Energy Reg-ulator approvedon 29 July2011 that thecompletion dateis moved from31 December2011 to what isindicated as in-vestigations willbe carried outthroughout thefinancial year

Completed

70





PerformanceResult


Provide advice and recom-mend legislative amend-ments to the Gas Act

The Energy Regulator approved on 29 July 2011that the name of the keyperformance indicator ischanged from Commentson the possible draftamendments to the GasAct and the Regulationsto what is indicated asNERSA’s participation inthe review of the Gas Act isalso aimed at influencinggovernment policy.

Inputs/commentson draft amend-ments

Approved inputs/comments


On track

Update the piped-gasbrochure

Updates on the piped-gasbrochure

Published -1 bookletper annum

31 March2012

Removed l The Energy Regulatorapproved on 29 July2011 that this keyperformance indica-tor is removed fromthe NERSA BusinessPlan as it forms partof the key perform-ance indicator indicting Customereducation andawareness below

Licence construction activi-ties and the operation ofnewly constructed facilities

Licencesprocessed withinstatutory dead-lines

The Energy Regu-lator approvedon 29 July 2011that the name ofthis output ischanged from Licencesprocessed towhat is indicated

Approvedlicences

As and whenrequired

On track

Implement a compliancemechanism for transmis-sion, storage, distributionand trading in gas

Monitor and en-force compliancewith licence conditions

Audits Reports

31 March2012

Completed

Benchmarking of licensingconditions

Conduct bench-mark study

Report 28 February2012

Completed

To protectthe interestsof the publicand the customers

Implement Regulatory Reporting Manuals (RRMs)

Implementing the Regulatory Reporting Manuals

ProgressReport onimplemen-tation plans

Quarterly On track

Receivehalf-yearregulatoryfinancialstatements

1 February2012

Externally Delayed

l Sasol Gas requestedextra time to com-plete their regulatoryfinancial statementsand this requirementwas waived


71





Complete analysisof the reports


l Sasol Gas requestedextra time to com-plete their regulatoryfinancial statementsand this requirementwas waived

Establish Maxi-mum prices andenforce discountsaccording toSchedule One ofthe AgreementConcerning theMozambique GasPipeline betweenthe Government ofthe Republic ofSouth Africa andSasol Ltd

Maximum prices fordistributors andreticulators accord-ing to clause 9 ofSchedule One ofthe AgreementConcerning theMozambique GasPipeline betweenthe Government of the Republic ofSouth Africa andSasol Ltd

Approved prices

The Energy Regula-tor approved on 29July 2011 that thistarget is changedfrom Preliminary determination of themaximum prices towhat is indicated, as the revised targetwill incorporate allactivities to be undertaken

31 October 2011

The Energy Regu-lator approved on29 July 2011 thatthe completiondate is movedfrom 31 August2011 to what is indicated as thiswill be a more realistic comple-tion date

Completed



Approval of finalmaximum prices

31 October 2011 Removed

Publish maximumprices on the NERSAwebsite

30 November2011

Removed

Maximum prices for Greenfields customers accord-ing to clause 10 of Schedule One of the AgreementConcerning theMozambique GasPipeline betweenthe Government of the Republic ofSouth Africa andSasol Ltd

Approved prices

The Energy Regulatorapproved on 29 July2011 that this targetis changed from Preliminary determi-nation of the maximum prices towhat is indicated, asthe revised target willincorporate all activi-ties to be undertaken

31 October 2011


Completed



Approval of finalmaximum prices


Publish maximumprices on the NERSAwebsite

30 November2011

Removed

72






Enforce discountsto Brownfields customers accord-ing to clause 11 of Schedule One of the AgreementConcerning theMozambique GasPipeline betweenthe Government of the Republic ofSouth Africa andSasol Ltd

Approved report ondiscounts to Brown-fields customers

The Energy Regulatorapproved on 29 July2011 that this target ischanged from Prelimi-nary determination of discounts to what is indicated, as the revised target will incorporate all activities to be undertaken

31 October 2011


Completed



Approval of final discounts


Publish discounts onthe NERSA website

30 November2011

Removed

Enforce discountsto small customersaccording to clause12 of ScheduleOne of the Agree-ment Concerningthe MozambiqueGas Pipeline between the Government of the Republic ofSouth Africa andSasol Ltd

Approved report on discounts to small customers

The Energy Regulatorapproved on 29 July2011 that this target ischanged from Preliminary determina-tion of discounts to whatis indicated, as the revised target will incorporate all activitiesto be undertaken

31 October 2011


Completed



Approval of final discounts


Publish discounts onthe NERSA website

30 November2011

Removed

Administer price cappingmechanism

Determining theprice cap and European Bench-mark Prices accord-ing to clause 8 ofSchedule One ofthe AgreementConcerning theMozambique GasPipeline betweenthe Government of the Republic ofSouth Africa andSasol Ltd

Approved price capcalculation

The Energy Regulatorapproved on 29 July2011 that the name ofthe target is changedfrom Preliminary deter-mination of price capand European Bench-mark Price to what isindicated as this is amore accurate reflec-tion of what needs tobe undertaken

31 October 2011


Completed


73





Transition to maximum pricesaccording to theGas Act

Analyse and review theimpact of ScheduleOne to the Agreement


The Energy Regula-tor approved on 29July 2011 that thiscompletion date ismoved from 31 Au-gust 2012 to what is indicated as this activity will be com-pleted by the end ofthe current financialyear

Delayed l Delayeddue tohumanresource con-straints

Develop and imple-ment transitionalarrangements inpreparation of the expiry of ScheduleOne of the AgreementConcerning theMozambique GasPipeline between theGovernment of the Republic of SouthAfrica and Sasol Ltd

Approved transitionalarrangements

The Energy Regulator approved on 29 July 2011that the name of this targetis changed from Submis-sion to the Energy Regula-tor to what is indicated asthis is a more accurate reflection of the end product


Implement Disputeand Complaints Resolution procedures

The Energy Regula-tor approved on 29July 2011 that thename of the keyperformance indi-cator is changedfrom Develop andImplement Disputeand ComplaintsResolution proce-dures to what is indicated as theprocedures was developed duringthe previous finan-cial year

Conducting of investigations, mediations and arbitrations

The Energy Regulatorapproved on 29 July2011 amendment ofthe key performanceindicator name, it isapproved that thename of the output ischanged from Draftingof procedures to whatis indicated

Two investigations conducted

In line with the approvedamendment to the output,the Energy Regulator approved on 29 July 2011that the name of the targetis changed from Approved Dispute Resolution proce-dures to what is indicated

31 March 2012

In line with the approved amend-ment to the target,the Energy Regulatorapproved on 29 July2011 that the com-pletion date ischanged from 30September 2011 towhat is indicated

Completed

Conduct mediations andarbitrations

In line with the approvedamendment to the outputname, the Energy Regula-tor approved on 29 July2011 that this target isadded to the NERSA Business Plan


Monitor the meter-ing system for gascoming into SouthAfrica fromMozambique

Audits on ROMPCOpipeline

The Energy Regulatorapproved on 29 July2011 that the name ofthis output is changedfrom Reports onROMPCO’s currentmetering system towhat is indicated inorder to disaggregatethe activates to be undertaken

2 audits

In line with the approvedamendment to the output,the Energy Regulator ap-proved on 29 July 2011 thatthe name of the target ischanged from Conduct annual audit for the metersin Secunda and CPF to whatis indicated as there are 2audits planned for the financial year

31 March 2012

The Energy Regula-tor approved on 29July 2011 that thecompletion date ismoved from 31 December 2011 towhat is indicated asthe deadline for theconducting of the 2audits is the end ofthe financial year

Completed

74






Inspection on meteringof the ROMPCO system

1 inspection


Audit/inspection reports

In line with the approvedamendment of the firstoutput, the Energy Regulator approved on29 July 2011 that this output is added to theNERSA Business Plan

ApprovedReport


Conduct studies on the integrity ofthe existing gas infrastructure

Report ApprovedReport onstudy

31 March 2012

The Energy Regulatorapproved on 29 July2011 that the completion date ismoved from 31 August 2011 to whatis indicated as thiswill be when the keyperformance indica-tor will be completed

ExternallyDelayed

• Delayed due tolate receipt of thereport from theconsultants

To create a dispensa-tion for fair competitionfor industryplayers

Monitor MarketValue Pricingcompliance

Monitor MVP accordingto Schedule One of theAgreement Concerningthe Mozambique GasPipeline between theGovernment of the Republic of South Africa and Sasol Ltd

Report on MarketValue Pricing


Completed

Update the GasPricing Brochureand piped-gas informationbrochure

Compile information on gas prices to be included in the Gas Pricing Brochure

Publishedgas pricesbrochure

31 March 2012

The Energy Regulatorapproved on 29 July2011 that the completion date is changed from 31December 2012 towhat is indicated asthe activity will becompleted duringthis financial year

Completed

To createenergy supply certainty

Monitor Sasol’sgas supply com-mitments in termsof clause 4 ofSchedule One tothe Agreementconcerning theMozambique GasPipeline betweenthe Governmentof the Republic ofSA and Sasol Ltd

Determination of Sasol’sDispensation Period

AnnualReport onSasol’sCompli-ance withthe explo-rationcommit-ments for2010

31 March 2012 Completed l During the previ-ous financialyear the specialdispensation pe-riod was deter-mined to be 10years and there-fore no explo-ration wasneeded


75




PerformanceResult


Licence gas trading activi-ties in terms of the GasAct and registration of operations in terms of section 28

The Energy Regulator approved on 29 July2011 that the name ofthis key performance indicator is changed fromLicence piped-gas activities in terms of theGas Act to what is indicated in order to distinguish between theselicensing activities and thelicensing of constructionand operation facilities

Licences processed Approvedlicences

As and whenrequested

On track

Customer education andawareness

The Energy Regulator ap-proved on 29 July 2011that this key performanceindicator is added to theNERSA Business Plan as itis important to educatecustomers and enhanceknowledge and awarenessof Gas Act provisions in-cluding licensing andcompliance requirementsand bases for decisions

Conduct stakeholderworkshops focused oncompliance, licensingprocesses and provisionsof the Gas Act

4 work-shops inGauteng,KZN,Mpumalanga andFree State

31 January2012

AddedDelayed

l Delayed due tothe high numberof licence appli-cations that werereceived. Theavailable re-sources werecommitted tocompleting these licence applications

Produce reports onworkshops and impactevaluation

Reports 31 March2012

AddedDelayed

l Dependent onthe finalisation of the previousoutput

Monitoring and enforce-ment of third party accessto gas transmission andstorage infrastructure

The Energy Regulator ap-proved on 29 July 2011that this key performanceindicator is added to theNERSA Business Plan as itwill help provide guide-lines that can be used inthe allocation of thirdparty access to transmis-sion and storage facilities

Develop and implementcriteria for allocation ofthird party access to infrastructure

Draftguidelines

31 October2011

AddedDelayed

l Delayed due to a change infocus in the keyperformance indicator

Stake-holdercomments

30 Novem-ber 2011

AddedDelayed

l Delayed due to a change infocus in the keyperformance indicator

Approvedguidelines

31 March2012

AddedDelayed

l Dependent onthe finalisation of the previoustarget

C. Petroleum Pipelines Industry Regulation

76






To createregula-tory certaintyin the energysector

Licensing construction of new facilities

Issued licences

Confidentiality As and when required On track

Assess Adequacy

The Energy Regulator approved on 29 July 2011 that this target is addedto the output as the assessment of the adequacy of the application is an important part of the licensing activities

As and when required AddedOn track

Aide memoires As and when required On track

Public Hearings As and when required On track

Reasons for Decision As and when required On track

Implementation of Energy Regulator decision

As and when required On track

Database update As and when required On track

Licensing – operation ofnew facilities

Issued licences


Assess Adequacy

The Energy Regulator approved on 29 July 2011 that this target is addedto the output as the assessment of the adequacy of the application is an important part of the licensing activities


Aide memoires As and when required On track

Public Hearings As and when required On track





Amendments of licences

Amended Licences


Assess Adequacy

The Energy Regulator approved on 29 July 2011 that this target is addedto the output as the assessment of the adequacy of the application is an im-portant part of the activities around the amendment of a licence


Public consultation As and when required On track

Application processing As and when required On track






77





Revocation of licences

Revokedlicences


Assess Adequacy

The Energy Regulator approvedon 29 July 2011 that this targetis added to the output as theassessment of the adequacy ofthe application is an importantpart of the activities around therevocation of a licence


Public consultation As and when required On track

Application processing As and when required On track




Database update As and when required Delayed l Due to human resource con-straints, this activityhas not as yetcommenced.

Monitor and enforce compli-ance with con-struction andoperating licence condi-tions

The Energy Reg-ulator approvedon 29 July 2011that the name ofthe key perform-ance indicator ischanged fromMonitor and enforce compli-ance with oper-ating licenceconditions towhat is indicatedto ensure thatconstruction licences are alsomonitored

Reports –storagefacilities

Ad hoc inspections As and when required On track

Review compliance As and when required On track

Analyse findings As and when required On track

Submit reports As and when required On track

Implement decision As and when required l No decisions to be implementedduring the year

Update database As and when required l No update to thedatabase requiredduring the year

Reports –pipelines

Ad hoc inspections As and when required On track

Review compliance As and when required On track

Analyse findings As and when required On track


Implement decision As and when required On track

Update database As and when required On track

Reports –loadingfacilities

Ad hoc inspections As and when required l No ad hoc inspec-tions carried outduring the year

Review compliance As and when required l No compliance review requiredduring the year

Analyse findings As and when required l No analysis required during the year


Implement decision As and when required l No decision to im-plement during theyear

Update database As and when required l No update to thedatabase requiredduring the year

78






Comments onthe possibledraft amend-ments to the PetroleumPipelines Actand the LeviesAct and Regulations

Approvedcom-ments

Draft commentsfor worksh opping

As and when required l No possible draft amendments tothe Petroleum Pipelines Act andthe Levies Act and Regulations atthis stage

Workshop As and when requiredAs and when required

l No possible draft amendments tothe Petroleum Pipelines Act andthe Levies Act and Regulations atthis stage

Energy Regulatorapproval


Submission to theDepartment ofEnergy


Review of the PetroleumPipelines Rules

GazettedRules

Draft proposedamendments

As and when required l No amendments proposed to therules at this stage

Workshop As and when required l No amendments proposed to therules at this stage



Publish for comment


Review commentsand adjust


Gazette amendedrules


Investigate illegal PetroleumPipelines Act activities

Quarterlyreportson illegal activities

Site visits Annual

The Energy Regulatorapproved on 29 July2011 that the completion date is changed from Quarterly to what is indicated as this completion date is more realistic

Completed

Process information from public

Annual


Completed

Approval by Energy Regulator

Annual


Completed


79





Implement decision

Annual

The Energy Regulator approved on 29 July 2011that the completion date ischanged from Quarterly towhat is indicated as thiscompletion date is morerealistic

Completed

Approval by Energy Regulator

Annual


Completed

Implement decision

Annual


Completed

Populate and maintain adatabase of licencees

The Energy Regulator approved on 29 July 2011that this key performanceindicator is added to theNERSA Business Plan asthis activity is to ensure thatadequate record keeping ismaintained

LicenceeDatabase

Implementation ofthe Licencee Main-tenance System

31 May 2011 AddedCompleted

Upload/populatethe database

31 July 2011 AddedDelayed

l Delayed due tohuman resourceconstraints

Maintain database Quarterly reports AddedDelayed


Monthly volumes database(Regulation 6(1))

The Energy Regulator approved on 29 July 2011that this key performanceindicator is added to theNERSA Business Plan asthis activity is to monitorcompliance with Regula-tion 6(1)

VolumeDatabase

Letters to licenceesrequesting information

30 April 2011 AddedCompleted

Resolve snags/data quality


Consolidate information


Monitor utilization Bi-annual reports AddedOn track

Monitor compliance withallocation mechanism(Regulation 3(6))


Reports Letters to all licencees

31 March 2012

The Energy Regulator approved on 29 July 2011that the completion date ismoved from 31 May 2011to what is indicated assome licencees only havetheir deadline of 6 monthsafter licensing, after 31May 2011

AddedOn track

Analysis and report to EnergyRegulator

31 August 2011 AddedCompleted

80





PerformanceResult


Follow up on Energy Regulator guidance

31 October2011

AddedCompleted

Monitor licencees forcompliance with EnergyRegulator guidance

Annual Reports

AddedOn track

Monitor compliance withannual reporting (Regula-tion 6(2))i. Occupational Health

and Safety (OHS) Act,section 24 reports

ii. Incidents of damageby 3rd parties andcosts

iii. Encroachment onservitudes


AnnualReports

Letters to licencees on anniversary of licence

31 April2011

AddedDelayed


Analysis and report to Energy Regulator

31 May2011

AddedCompleted


31 July2011

AddedDelayed


Monitor licencees forcompliance with Energy Regulator guidance

Annual Reports

AddedDelayed


HDSA Submissions (Regulation 8)

The Energy Regulator approved on 29 July 2011that this key performanceindicator is added to theNERSA Business Plan asthis activity is to monitorcompliance with Regula-tion 8

AnnualReports

Letters to licencees on anniversary of licence

30 June2011

AddedDelayed


Analysis and report to Energy Regulator

31 July2011

AddedDelayed



31 August2011

AddedDelayed


Monitor licencees forcompliance with EnergyRegulator guidance

Annual Reports

AddedDelayed


To protectthe inter-ests of the public and the customers

Tariff Setting: Transnet

The Energy Regulator approved on 29 July 2011that the name of this keyperformance indicator ischanged from Tariff Set-ting: Transnet and possibleothers to what is indicatedto ensure focussing the keyperformance indicator onTransnet only

Expenseverifica-tion report

Analysis of 2010/11 expenses report

15 March2012

ExternallyDelayed

l Delayed due tolate receipt of report from theconsultants

ApprovedTransnetTariff for2012/13

Analysis of application 15 March2012

Completed

Clawback for 2010/11and 2011/12

The Energy Regulator approved on 29 July2011 that this target is renamed from Clawbackfor 2010/11 to what is indicated to ensure thatthe 2011/12 clawback is also included

15 March2012

ExternallyDelayed

l Delayed due tolate receipt of report from theconsultants

Tariff modelling 15 March2012

Completed

Draft tariff determination 15 March2012

Completed

Approved Transnet Tariff 15 March2012

Completed


81




PerformanceResult


Review New Multi Product Pipeline (NMPP) Construction/Procurement Costs

Preliminary investigationinto the definition of prudently incurred

The Energy Regulator ap-proved on 29 July 2011that this target is added tothe NERSA Business Planis this is an important activity to undertake dueto NERSA needing to define prudency properly

6 monthsafter projectcompletion

AddedOn track

Report on NMPP Construction Capital Cost

6 months after projectcompletion

l This will onlycommence aftercompletion of theNMPP

Report on ProcurementProcedure

6 months after projectcompletion

l This will onlycommence aftercompletion of theNMPP

Decommissioning study Audit of the Transnet decommission cost

6 monthsafter Trans-net provideits decom-missioningestimates

On track

Impact of cost on tariffs 6 monthsafterTransnet provide its decommis-sioning estimates

Removed l The Energy Regu-lator approvedon 29 July 2011that this target isremoved fromthe NERSA Busi-ness Plan be-cause the impactof the decommis-sioning cost ontariffs will bedealt with in theanalysis of thetariff applicationand will be explained in the Draft Tariff Determination

Tariff benchmarking report

The Energy Regulator ap-proved on 29 July 2011that this output is addedto the NERSA BusinessPlan as the benchmarkingof Transnet’s tariffs toother petroleum pipelinesis very important in order to ensure consistency. This decision is also inline with the decision ofthe Energy Regulator on31 March 2011 that this activity should be undertaken

Analysis of Transnet tariffsvs. other petroleumpipeline tariffs.

31 October2011 (draft report)

AddedCompleted

82





PerformanceResult


Sasol pipelines Setting of pipeline tariffs Regulatory AssetBase verification

As and whenrequired

l Sasol pipelines has not as yet made a tariff application

Analysis of application

As and whenrequired


Verification of expenses/clawbacks (as per criteria)

As and whenrequired



As and whenrequired


Chevronpipelines

Setting of pipeline tariffs Regulatory AssetBase verification

As and whenrequired

On track


As and whenrequired

On track


As and whenrequired

l To be conducted onceall outstanding informa-tion has been receivedfrom Chevron


As and whenrequired

l To be conducted onceall outstanding informa-tion has been receivedfrom Chevron

Tariff approvalfor storage andloading facilities

Engen Cape Town

The Energy Regulator approved on 29 July2011 that the name ofthis output is changedfrom Engen to what is indicated in order to distinguish between EngenCape Town and Engen Durban

Regulatory AssetBase verification

As and whenrequired

Completed


As and whenrequired

Completed

Verification of expenses/claw-backs (as per criteria)

As and whenrequired

Completed


As and whenrequired

Completed

Engen Durban

The Energy Regulator approved on 29 July2011 that this output isadded to the NERSA Business Plan in order to ensure that there is a distinction between EngenCape Town and EngenDurban


As and whenrequired

AddedCompleted


As and whenrequired

AddedCompleted

Verification of expenses/clawbacks (asper criteria)

As and whenrequired

AddedCompleted


As and whenrequired

AddedCompleted

BP and Shell (SAPREF)

The Energy Regulator approved on 29 July2011 that the name ofthis output is changedfrom SAPREF to what is indicated as this providesmore clarity on whoSAPREF is


As and whenrequired

Completed


As and whenrequired

Completed

Verification of expenses / clawbacks (asper criteria)

As and whenrequired

Completed


As and whenrequired

Completed


83




PerformanceResult


Total Regulatory Asset Base verification

As and whenrequired

On track


As and whenrequired

On track

Verification of expenses/clawbacks(as per criteria)

As and whenrequired

l This can only commence once the application has been finalised by the licencee

Energy Regulator approval

As and whenrequired

l The Energy Regulator will consider the application oncethe analysis of the applicationhas been completed

BP SA

The Energy Reg-ulator approvedon 29 July 2011that the name ofthis output ischanged fromBP to what is indicated as thisclarifies who thelicencee is

Regulatory Asset Base verification

As and whenrequired

Completed


As and whenrequired

Completed


As and whenrequired

Completed


As and whenrequired

Completed

Sasol Regulatory Asset Base verification

As and whenrequired

Completed


As and whenrequired

Completed


As and whenrequired

Completed


As and whenrequired

Completed

Vopak Regulatory Asset Base verification

As and whenrequired

Completed


As and whenrequired

Completed


As and whenrequired

Completed


As and whenrequired

Completed

IVS Regulatory Asset Base verification

As and whenrequired

On track


As and whenrequired

On track


As and whenrequired

On track


As and whenrequired

On track

84





PerformanceResult


Chevron Regulatory Asset Base verification

As and whenrequired

Completed

Analysis of application As and whenrequired

Completed


As and whenrequired

Completed

Energy Regulator approval As and whenrequired

Completed

Sasol and Total (Natcos)

The Energy Regulatorapproved on 29 July2011 that the name ofthis output is changedfrom Natcos to what is indicated as this provides more clarityon who Natcos is


As and whenrequired

Completed


Completed


As and whenrequired

Completed


Completed

SFF Regulatory Asset Base verification

As and whenrequired

On track


Completed


As and whenrequired

On track


On track

PetroSA

The Energy Regulatorapproved on 29 July2011 that this output isadded to the NERSABusiness Plan as Pet-roSA is also a licenceeof NERSA No tariff ap-plication received bythe end of the firstquarter


As and whenrequired


l No tariff application received





As and whenrequired






Other Regulatory Asset Base verification

As and whenrequired

On track


On track


As and whenrequired

On track


On track

Monitor Non-compli-ers / Outstanding applications

Report on outstanding applications

Quarterly On track

Notify non-compliers Quarterly On track

Training workshops for licencees when requested

Workshops As and whenrequired

AddedOn track

Minutes of the workshop/Notes of the meeting

As and whenrequired

AddedOn track


85




PerformanceResult


Tariff methodologies

Reviewmethodologies

Petroleum pipelines As and whenrequired

Completed

Resolution ofcomplaints

Reports Receive request As and whenrequired

On track

Analyse/process dispute As and whenrequired

On track

Workshop adjudicate withparties

As and whenrequired

l No request for adjudica-tion was received fromany parties

Consideration by EnergyRegulator

As and whenrequired

l No decision requiredduring the year

Implement decision As and whenrequired

l No decision to imple-ment during the year

Implementationof RRMs in pe-troleum pipelines industry: Phase 1licencees

Transnet Receiving of financial reports from licencees

31 July 2011and 30 No-vember 2011

ExternallyDelayed

l Delayed due to the latereceipt of the report fromthe consultants

Analysis of financial reports 30 September2011 and 31January 2012

ExternallyDelayed

l Delayed due to the latereceipt of the report fromthe consultants

Reviewing to ensure projectcost recovery as per approved revenues (to be included in the tariffs)

As and whenrequired

l Not required during theyear

Implementation Reports/Progress reporting

As and whenrequired


Engen Receiving of financial reports from licencees

31 July 2011and 30 No-vember 2011

Completed

Analysis of financial reports 30 September2011 and 31January 2012

Completed


As and whenrequired



As and whenrequired


Chevron Receiving of financial reports from licencees

30 April 2011and 31 August2011

Completed

Analysis of financial reports 30 June 2011and 31 October 2011

Completed


As and whenrequired



As and whenrequired


Implementationof RRMs in petroleumpipelines indus-try: Phase 2 licencees

Shell Receive and Review Implementation Plans from licencees

31 March2012

ExternallyDelayed

l Delayed due to the factthat implementationplans were received late

Receive and Review Implementation Plans from licencees

31 March2012

Removed l The Energy Regulator ap-proved on 29 July 2011that this target is re-moved from the NERSABusiness Plan as it is aduplication of the targetabove

86





PerformanceResult



As and whenrequired

l Not required during the year

BP Receive and Review Implementation Plans from licencees

31 March2012

ExternallyDelayed

l Delayed as the implementa-tion plan was not receivedfrom the licencee


31 March2012

Removed l The Energy Regulator approved on 29 July 2011that this target is removedfrom the NERSA BusinessPlan as it is a duplication of the target above

Implementation Reports/ Progress reporting

As and whenrequired


Total Receive and Review Implementation Plans from licencees

31 March2012

ExternallyDelayed



31 March2012



As and whenrequired


Sasol Receive and Review Implementation Plans from licencees

31 March2012

ExternallyDelayed



31 March2012



As and whenrequired


Other Receive and Review Implementation Plans from licencees

31 March2012

ExternallyDelayed



31 March2012



As and whenrequired


Publication ofstatistics and information report

Publication ofstatistics andinformationreport for thePetroleumPipelines Industry

Collect, Validate and publish Data

As and whenrequired



87





CPI: Historicand forecast

Historical CPI – Monthly and Forecast CPI – Quarterly

The Energy Regulator has approvedon 29 July 2011 that the comple-tion date for this target is changedfrom As and when required to whatis indicated as this is a more accu-rate reflection of the completiondates

On track

Market Return Monthly

The Energy Regulator has approvedon 29 July 2011 that the comple-tion date for this target is changedfrom As and when required to whatis indicated as this is more accuratereflection of the completion date

On track

Risk free rate Quarterly


On track

Beta Annually


Completed

Determine rel-evant data tobe included inanalysis ofWeighted Average Costof Capital(WACC) (storage tariffs)

Annual review of the beta calcula-tion for storage facilities as stated inthe Guidelines


Completed

Report As and when required Removed l The Energy Regula-tor has approvedon 29 July 2011that this target isremoved from theNERSA BusinessPlan because thecapturing and re-porting of informa-tion will be throughthe monthly andquarterly updatingof the information,the Reasons forDecision and theannual guidelines

D. Cross-Cutting Regulatory

88






Review of the Minimum Information Requirements for Tariff Applica-tions (MIRTA)

ReviewMIRTA

Guidelines andtemplates



Refined MIRTA forsmaller licencees



To create energy supply certainty

Security of Supply/Infrastructure capacity

Review andmaintainthe model

Half yearly demand vs. supplybalance report toPPS

30 September 2011and 31 March 2012

Completed

Annual demandvs. supply balancereport to EnergyRegulator


Cross-Cutting Regulatory




To createregulatorycertaintyin the energysector

Monitoring ofcustomer servicelevels

Recognition forservice excel-lence (individualpersons and licencees)

Letter of acknowledgementelectricity

Quarterly Removed l The Energy Regula-tor has approvedon 29 July 2011that this key performance indicator is re-moved from theNERSA BusinessPlan due to a lackof benchmarkingresults on all municipalities

Develop MOU’swith relevant regulators or institutions

In line with thedecision of theEnergy Regulatoron 28 October2010, the EnergyRegulator approved on 29July 2011 thatthe name of thekey performanceindicator ischanged fromContinue to de-velop, implementand or reviewMOU’s with rele-vant regulators orinstitutions towhat is indicated.

Signed MOUs

In line with theapprovedchange in keyperformance indicator name,the Energy Reg-ulator approvedon 29 July2011 that thename of theoutput ischanged fromMonitoring Reports to whatis indicated

Reports

In line with the approved amend-ments to the output, the EnergyRegulator approved on 29July 2011that thename of the targetis changed fromMonitoring Reportsto what is indi-cated

31 October 2011

In line with the ap-proved amendmentsto the output and tar-get the Energy Regu-lator approved on 29July 2011 that thecompletion date ischanged from 30June 2011 and 31December 2011 towhat is indicated

ExternallyDelayed

l Delayed due toNERSA awaitingresponse from therelevant regulatorsand institutions


89





Signed MOUs Identified MOUsapproved andsigned by bothparties


Removed l The Energy Regula-tor approved on 29July 2011 that thisoutput is removedfrom the NERSABusiness Plan as it is a repeat of the approved new output

Reviewed MOUs Approved revisedMOUs


Removed l The Energy Regula-tor approved on 29July 2011 that thisoutput is removedfrom the NERSABusiness Plan as this process will onlycommence once theMOUs have beensigned

Reports on newMOUs

Reports on newMOUs


Removed

Design, develop andimplement aRegulatory Reporting System (RRS)

Functional RRSfor Piped-Gas,PetroleumPipelines andElectricity

Reports on the development ofthe functional RRS

30 June 2011 and31 December 2011

Completed

Deployment toPhase I secondtier licencees

The Energy Regu-lator approvedon 26 January2012 that thename of this out-put is changedfrom Deploymentto Phase II imple-menting licenceesto Deployment towhat is indicatedas phase II of theRRM project represent non-financial data acquisition fromlicencees throughthe RRS. This out-put is still aboutthe rolling out ofthe financial reporting by additional licencees

Reports on deployment toPhase I second tier implementinglicencees

In line with the approved amend-ment to the outputname, the EnergyRegulator ap-proved on 26 Jan-uary 2012 that thename of the tragetis changed fromReports on deploy-ment to Phase IIimplementing licencees to whatis indicated

31 March 2012

The Energy Regulatorapproved on 26 January 2012 thatthe completion dateis changed from 30September 2011 and31 March 2012 toonly 31 March 2012as the Phase I secondtier licencees are cur-rently only being in-troduced to the RRMreporting require-ments

Completed

Develop RRSPhase II designplan for non-financial data

Approved Phase IIdesign plan

31 March 2012 Delayed l Delayed due to Sup-ply Chain Manage-ment processestaking longer thananticipated

90





PerformanceResult


Integrate currentlicensing systemsand RRM report-ing and set up efficient licensingapplication andtracking systems

Create integra-tion plan for licensing systems and thereporting system(RRS)

Approved integration plan

31 March 2012 Removed l The Energy Regulator approved on 29 July 2011that this key performanceindicator is removed fromthe NERSA Business Planfor 2011/12 and placedon the NERSA BusinessPlan for 2012/13 as thiskey performance indicatoris dependent on the completion of a number of systems being developedor enhanced in 2011/12and to ensure that thesesystems are fully deployedand functional before theintegration thereof with the Regulatory Reporting System

Setup efficienttracking systems

Approved trackingsystem


Establish regulatory contacts betweengovernment andregulated entities

Stakeholder list Quarterly updates ofthe list

Quarterly On track

Written reports/presentations

Reports Quarterly On track

Harmonization of tariff method-ologies

Documents setting method-ologies side byside

Approval by the Energy Regulator of the harmonizedmethodologies


l Delayed due to the Electricity Pricing Policy review being undertaken by the DoE

Handbook of regulatorymethodologiesused by NERSA

Available handbook 31 March 2012 ExternallyDelayed

l Delayed due to the Electricity Pricing Policy review being undertaken by the DoE

Regulatory Reporting Man-ual (RRM) Project Implementation

Implementationof RegulatoryReporting Man-uals by targeted licencees

Approval of imple-mentation status bythe Energy Regulator


Regulatory Reporting System(RRS) Stage 2(non-financialdata)

Customized RRSfor non-financial information

Inception meeting with working groupto agree on the additional licenceesthat will form phase2 implementers

As part of themidterm review ofthe implementationof the NERSA Business Plan for2011/2, the EnergyRegulator approvedon 28 October2011 that this targetis added to theNERSA Business Planin order to accuratereflect the activitiesto be undertaken

30 December2011

The Energy Reg-ulator approvedon 26 January2012 that thiscompletion dateis moved from31 July 2011 towhat is indicatedas the approvalof the projectplan took longerthan anticipatedand this resultedin delays

AddedCompleted


91





Inception meeting with steeringcommittee

As part of the midterm reviewof the implementation of theNERSA Business Plan for2011/2, the Energy Regulatorapproved on 28 October2011 that this target is addedto the NERSA Business Plan inorder to accurate reflect theactivities to be undertaken

30 December 2011

The Energy Regulatorapproved on 26 January2012 that this comple-tion date is moved from31 July 2011 to what isindicated as the ap-proval of the projectplan took longer thananticipated and this resulted in delays

AddedCompleted

Formalise resources available/allocation

As part of the midterm reviewof the implementation of theNERSA Business Plan for2011/2, the Energy Regulatorapproved on 28 October2011 that this target is addedto the NERSA Business Plan inorder to accurate reflect the activities to be undertaken

30 December 2011

The Energy Regulatorapproved on 26 January2012 that this comple-tion date is moved from31 July 2011 to what isindicated as the ap-proval of the projectplan took longer thananticipated and this resulted in delays

AddedCompleted

Design high-level conceptualoverview of requirements forsteering committee


29 February 2012

The Energy Regulatorapproved on 26 January2012 that this comple-tion date is moved from30 September 2011 towhat is indicated as theapproval of the projectplan took longer thananticipated and this resulted in delays

AddedCompleted

Isolate NERSA’s real “musthave” non-financial data needs


29 February 2012


AddedCompleted

Finalise draft of non-financialdata requirements for approvaland publication


29 February 2012


AddedDelayed

l Delayed as it wasdecided that thenon-financialneeds must beevaluated by aconsultant beforepublished.

92





Reasons forVariance

Stakeholder workshop


29 February 2012

The Energy Regulator approvedon 26 January 2012 that thiscompletion date is moved from30 September 2011 to what isindicated as the approval ofthe project plan took longerthan anticipated and this resulted in delays

AddedDelayed

l Dependenton the finalisationof the previ-ous target

Public Hearing after commentshave been incorporated


29 February 2012


AddedDelayed

l Dependenton the finalisationof the previous target

Finalised draft non-financialdata requirements taking allstakeholder comments intoconsideration


29 February 2012


AddedDelayed

l Dependenton the final-isation ofthe previoustarget

Approval by the Energy Regulator

29 February 2012

As part of the midterm reviewof the implementation of theNERSA Business Plan for2011/2, the Energy Regulatorapproved on 28 October2011 that this completion dateis changed from 31 March2012 to what is indicated asthe whole key performance indicator must be completed by 31 August 2012 and EnergyRegulator approval on 31March 2012 will be too late


Delayed l Dependenton the finalisationof the previ-ous target


93




Reasons forVariance

Development of RRSPhase 2 Master Plan including tariff module

As part of the midtermreview of the imple-mentation of the NERSABusiness Plan for2011/2, the EnergyRegulator approved on28 October 2011 thatthis target is added tothe NERSA BusinessPlan in order to accu-rate reflect the activitiesto be undertaken

29 February 2012

The Energy Regulatorapproved on 26 January 2012 that this completion date is moved from 30 Sep-tember 2011 to whatis indicated as the approval of the projectplan took longer thananticipated and this resulted in delays

AddedCompleted

Develop Terms of Refer-ence for RRS Phase 2implementation serviceprovider


29 February 2012

It is recommended thatthis completion date is moved from 30 Sep-tember 2011 to 29February 2012 as theapproval of the projectplan took longer thananticipated and this resulted in delays

AddedCompleted

Procure service provider


15 May 2012

The Energy Regulatorapproved on 26 January 2012 that this completion date is moved from 15 December 2011 towhat is indicated asthe approval of theproject plan tooklonger than antici-pated and this resulted in delays

AddedOn track

94






Regulatory Analysisand Research Annual ResearchNotes

As part of themidterm review ofthe implementationof the NERSA Business Plan for2011/2, the EnergyRegulator approvedon 28 October2011 that the nameof this key perform-ance indicator ischanged from Regu-latory Analysis andResearch QuarterlyResearch Notes towhat is indicated asthere are quarterlyduplication of effortswithin the organisa-tion

Annual Report

The Energy Regulatorapproved on 29 July2011 that the outputis changed fromQuarterly Reports towhat is indicated asthis will be the firsttime that the researchnotes will be doneand it was felt thatquarterly will be toorecurrent

In line with the ap-proved amendment tothe key performanceindicator name, theEnergy Regulator ap-proved on 28 Octo-ber 2011 that theoutput name ischanged from Bi-annual Reports towhat is indicated

Approval 31 March 2012

In line with the ap-proved amendment tothe output, the EnergyRegulator approved on29 July 2011 that thecompletion date ischanged from Quar-terly to what is indi-cated

In line with the ap-proved amendment to the key performanceindicator name, theEnergy Regulator ap-proved on 28 October2011 that the comple-tion date is movedfrom Bi-annually towhat is indicated

Delayed l Delayed dueto human resource constraints

To protect theinterests of thepublic and the customers

Implement customer education programme

Reports on customer education campaigns/activities


Feedback reports on issues raised bycustomers and con-sumers on all three industries being regulated by NERSA

Reports Quarterly Removed l The EnergyRegulator ap-proved on 29July 2011 thatthis output isremoved fromthe NERSABusiness Planas it is coveredby the outputabove

Conducting and re-porting on Customereducation forum/platforms for all inthree industries beingregulated by NERSA

Reports Quarterly Removed

Published annual customer educationprogramme for allthree industries beingregulated by NERSA

Approvedcustomereducationpro-gramme

31 March 2012

The Energy Regulatorapproved on 29 July2011 that the comple-tion date is changedfrom 31 March 2011to what is indicated asit is a typing error

Delayed l Delayed dueto human resource constraints

Economic ImpactAssessment of Regu-latory Decisions

Economic Impact Assessment Report

Approvalby theEnergyRegulator

As and when required Completed


E. Organisational

95

Organisational



PerformanceResult


To create an effective organisationthat deliverson its man-date and purpose

Develop Rules for Tribunals

The Energy Regulatorapproved on 29 July2011 that the name ofthis key performance indicator is changedfrom Develop, monitorand/or review Rules forTribunals to what is indicated as these rulesmust first be developedbefore they can be monitored and reviewed

Reports on gaps andthe need to review/amend

Report 31 March2012

Removed l The Energy Regula-tor approved on 29July 2011 that thisoutput is removedfrom the NERSABusiness Plan inline with the approved amend-ment to the key performance indicator name

Approved Rules forTribunals

ApprovedRules

31 March2012

Delayed l Delayed due tohuman resource constraints

Develop Dispute Resolu-tion Framework

The Energy Regulatorapproved on 29 July2011 that the name ofthis key performance indicator is changedfrom Develop, monitorand/or review DisputeResolution Framework towhat is indicated as theframework must first bedeveloped before it canbe monitored and reviewed

Reports on gaps and the need to review/amend

Report 31 March2012

Removed l The Energy Regula-tor approved on 29July 2011 that thisoutput is removedfrom the NERSABusiness Plan inline with the ap-proved amendment to the key perform-ance indicatorname

Dispute ResolutionFramework

ApprovedDisputeResolu-tionFrame-work

31 March2012


Facilitate thereviewing/amendment of the Corporate Governance Handbook

Reports on the review Report 31 March2012


Reviewed/AmendedCorporate Gover-nance Handbook

ApprovedCorpo-rate Gov-ernanceHand-book

31 March2012


Provide legal support to NERSA

Draft/Vet/Amend contracts for all regu-latory and operationalactivities


Draft legal opinionsfor all regulatory andoperational activities


Research on new andexisting legislation


96


Organisational




General Legal Support

The Energy Regulatorapproved on 29 July2011 that this outputis added to the NERSABusiness Plan as it wasaccidentally omitted

Reports Quarterly AddedOn track

Facilitate dispute resolution processes


Facilitate expropriations


Facilitate litigation Reports Quarterly On track

Comment on industry legisla-tion and regula-tion development

Comment on industrylegislation and regula-tion development

Approved NERSAcomments


On track

Participate in publichearings/consultations

Participation inpublic hearings/consultations


l Not required duringthe year

Participate in Parlia-mentary PortfolioCommittees processes

Participation inParliamentary Port-folio Committeesprocesses


On track

Implement communicationstrategy

Effective internal communication programme

Monthly news bulletin

Monthly Delayed l Delayed due tohuman resourceconstraints

Monthly staff meetings

Monthly Delayed l Delayed due tohuman resourceconstraints

Effective and updated intranet


Special days/events arranged


On track

Year end functionarranged

31 November2011

Completed

Effective external communication programme

Stakeholder breakfasts conducted



Stakeholder work-shops conducted


On track

Briefing sessionswith PortfolioCommittee


On track

Effective participation in 12 exhibitions

31 March 2012 Delayed

Feedback reportson issues raised bystakeholders/consumers


On track

Production andflighting of NERSAadvert

31 March 2012 On track


97

Organisational



PerformanceResult


Production of NERSACorporate Video

31 March2012

Delayed l Delayed due to SupplyChain Managementprocesses taking longerthan anticipated

Positive media coverage


On track

Media briefing sessionsconducted



Media interviews conducted


On track

Media statements issued and covered


On track

Effective Media Monitoring

The Energy Regulatorapproved on 29 July2011 that this target isadded to the NERSABusiness Plan as it wasaccidentally omitted

Daily andmonthly

AddedOn track

Updated and userfriendly website

The Energy Regulatorapproved on 29 July2011 that this target isadded to the NERSABusiness Plan as it wasaccidentally omitted

Daily andweekly

AddedOn track

Implement sponsorship policy

Effective participation in sponsoredevents/initiatives

Reports As and when required

On track

Co-ordinate andmanage NERSApublications

PublishedNERSA AnnualReport

Printed Annual Report 31 August2011

Completed

Publishedquarterly publications

Printed quarterly publications

Quarterly On track

Publishedmonthly bulletins

Printed monthly publications

Monthly Removed l The Energy Regulator approved on 29 July 2011that this output is removedfrom the NERSA BusinessPlan as it is a duplicationof an output under the keyperformance indicator Implement communicationstrategy

Publish piped-gas brochure

Annual brochure 31 March2012

Completed

Management of the ContactCentre

Efficient andEffective Contact Centre

Performance reports Quarterly On track

Management ofthe ReceptionArea

Effective andefficient Re-ception Area

Performance reports Quarterly On track

98


Organisational




International and national regulators’ fora

Partici-pation in RERA

Quarterly Reports

The Energy Regulator approved on 29 July2011 that this target isrenamed from Exco meet-ings to what is indicatedin order to consolidatethe quarterly reporting onRERA activities

Quarterly

In line with the ap-proved amendments tothe target, the EnergyRegulator approved on 29 July 2011 tochange the completiondate from 31 March2012 to what is indicated

On track

Subcommittee meetings 31 March 2012 Removed l The Energy Regulatorapproved on 29 July2011 that this targetis removed from theNERSA Business Planin order to consoli-date RERA reportingin the target above

Annual General Meeting 31 March 2012 Removed l The Energy Regulatorapproved on 29 July2011 that this targetis removed from theNERSA Business Planin order to consoli-date RERA reportingin the target above

Partici-pation in AFUR

Quarterly Reports

The Energy Regulator ap-proved on 29 July 2011that this target is re-named from Exco meet-ings to what is indicatedin order to consolidatethe quarterly reporting onAFUR activities

Quarterly

In line with the ap-proved amendments to the target the EnergyRegulator approved on29 July 2011 tochange the completiondate from 31 March2012 to what is indi-cated

On track

Subcommittee meetings 31 March 2012 Removed l The Energy Regulatorapproved on 29 July2011 that this targetis removed from theNERSA Business Planin order to consoli-date AFUR reportingin the target above

Annual General Meeting 31 March 2012 Removed l The Energy Regulatorapproved on 29 July2011 that this targetis removed from theNERSA Business Planin order to consoli-date AFUR reportingin the target above

Partici-pation in AfricaEnergyForum

Report 31 July 2010 Completed


99

Organisational




Partici-pation inSAURA/SARF/SANEA

Exco meetings 31 March 2012 Removed l In line with the decision of the EnergyRegulator on 28 Oc-tober 2010 to removethis output from theNERSA Business Plandue to non commit-ment from externalparties and dismalprospects for successthe Energy Regulatorapproved on 29 July2011 that this outputis removed from theNERSA Business Plan

Subcommittee meetings 31 March 2012 Removed l In line with the decision of the EnergyRegulator on 28 Oc-tober 2010 to removethis output from theNERSA Business Plandue to non commit-ment from externalparties and dismalprospects for successthe Energy Regulatorapproved on 29 July2011 that this outputis removed from theNERSA Business Plan

Annual General Meeting 31 March 2012 Removed

Capacity Buildingfor NERSA Staffon Energy Regu-lation Training

Identifi-cation of newtrainingopportu-nities

Quarterly Reports

The Energy Regulator ap-proved on 29 July 2011that the name of this tar-get is changed from Iden-tification of training needsin consultation with HRand analysis of PDPs towhat is indicated in orderto consolidate the report-ing on this output

Quarterly

In line with the ap-proved amendment tothe target, the EnergyRegulator approved on29 July 2011 that thecompletion date ischanged from 30 June2011 to what is indi-cated

On track

Identification of trainingopportunities and ex-change programmes inconjunction with foreignregulators and traininginstitutions

30 June 2011 Removed l The Energy Regulatorapproved on 29 July2011 that this targetis removed from theNERSA Business Planas it is approved thatthe reporting on theoutput is consolidatedin the target above

Agreed training programme of action

30 June 2011 Removed l The Energy Regulatorapproved on 29 July2011 that this targetis removed from theNERSA Business Planas it is approved thatthe reporting on theoutput is consolidatedin the target above

100


Organisational




TrainingCourses on Protocol and International Relations Conducted


KnowledgeSharingConference/Platform

Approved conceptpaper on KnowledgeSharing Conference/ Platform

30 September 2011

The Energy Regulator approved on 29 July 2011that the completion date ismoved from 30 June 2011to what is indicated inorder to allow for moretime to agree on a themefor the conference and finalise the concept

Completed

Identification of experts for knowledgeConference

30 September 2011 Removed l The Energy Regulator approved on 29July 2011 thatthis target is re-moved from theNERSA BusinessPlan as it formspart of the target below

Conference held 31 March 2012

The Energy Regulator approved on 29 July 2011that the completion date ischanged from 31 Decem-ber 2011 to what is indi-cated, as this will be whenthe conference would havetaken place

Delayed l The conferencewas postponedto August 2012to allow moretime for the callfor papers andother logisticalarrangements.

Establish, expandand maintainNERSA’S interna-tional relations

International engagementstrategy

Review of identified priority countries andforeign policy directivesin consultation withDoE, DIRCO for2011/12

30 September 2011 Delayed l Delayed due tohuman resource constraints

Co-opera-tion with foreign regulators

Identification of proposed areas of cooperation for2011/12

30 September 2011 Completed

MoUs signed 31 December 2011 Delayed l Delayed due tohuman resource constraints


101

Organisational



PerformanceResult


Development of Inter-national EngagementStrategy including procedures and policiesfor international en-gagement

The Energy Regulatorapproved on 29 July2011 that the name ofthe output is changedfrom Implementation ofInternational Engage-ment Strategy includingprocedures and policiesfor international en-gagement to what is in-dicated as the strategycannot be implementedbefore it is developed

Visits to foreign regula-tors to gather informa-tion that will inform thestrategy

The Energy Regulatorapproved on 29 July2011 that the name ofthe target is changedfrom Visits to 2 addi-tional identified foreignregulators to what is indicated as this will be a more accurate reflection of the activities to be undertaken

31 December2011

Delayed • Delayed due tohuman resourceconstraints

International Engage-ment Strategy

The Energy Regulatorapproved on 29 July2011 that this target is added to the NERSABusiness Plan in linewith the approvedamendment to the output



Agreed Programme of action

31 March 2012

The Energy Reg-ulator approvedon 29 July2011 that thecompletion dateis moved from31 December2011 to what isindicated as this will be when the strategy hasbeen completed

Delayed l Delayed due tohuman resourceconstraints

102


Organisational




Implementationof ICT Gover-nance

The Energy Regu-lator approvedon 26 January2012 that thename of this keyperformance in-dicator ischanged from Im-plementation ofICT Strategy towhat is indicatedas the implemen-tation of ICTStrategy is part of a broader ITGovernanceframework

Implementation ofICT governance

In line with theapproved amend-ment to the keyperformance indicator name,the Energy Regu-lator approved on 26 January2012 that thename of the output is changedfrom Implementa-tion plan of theICT strategy towhat is indicated

Approved IT Governancecharter

In line with the approvedamendment to the nameof the output, the EnergyRegulator approved on 26January 2012 that thename of this target ischanged from Approvedimplementation plan towhat is indicated as thistarget, together with therecommended addition ofthe following 6 targetscreates a proper founda-tion for IT governance implementation which ensures that the perform-ance of IT against theplan, policies and strate-gic objectives can bemonitored and evaluated

31 March 2012

The Energy Regulator approved on 26 January2012 that in line with theapproved change to thetarget, the completiondate should be changedfrom 30 September 2011to what is indicated

Completed

Approved IT GovernanceFramework

Given the above the En-ergy Regulator approvedon 26 January 2012 thatthis target is added to theNERSA Business Plan


l Delayeddue tohuman resourceconstraints

Developed AccountabilityFramework




Developed IT Risk Management Plan




Developed IT ControlFramework




Approved IT Policies, Pro-cedures and Standards




103

Organisational




Report on imple-mentation of ITStrategy

Given the abovethe Energy Regula-tor approved on26 January 2012that this target is added to theNERSA BusinessPlan



Alignment of ICT Strategyto next business plan objectives

The Energy Regulator approved on 26 January2012 that the name ofthis output is changedfrom Alignment of NERSAICT with business objec-tives to what is indicatedas the IT Plan must bealigned to the followingyear’s business plan inorder to ensure it enablesproper implementation ofprojects

Approved IT plan

In line with the approved amend-ment to the nameof the output, theEnergy Regulatorapproved on 26 January 2012that the name ofthe target ischanged from Approved align-ment strategy towhat is indicated

31 March 2012

The Energy Reg-ulator approvedon 26 January2012 that thecompletion dateis moved from30 September2011 to what is indicated in line with the approvedamendment to the target


Monitor IT Governancematurity level

The Energy Regulator approved on 26 January2012 that the name ofthis output is changedfrom Monitor the effec-tiveness of implementa-tion to what is indicatedas key performance indi-cators, culminating inperformance reports thatmeasures IT perform-ance, will be included toensure accountability forIT governance

Reports Quarterly from 1 July 2012

In line with theapprovedchange in out-put, The EnergyRegulator ap-proved on 26January 2012that the comple-tion date ischanged fromQuarterly from30 September2011 to what isindicated


Create the institu-tional structuresfor InformationCommunicationsTechnologythrough the organisation toimplement thestrategy

Develop proposal for appropriate ICT institu-tional structure

Approved proposal for appropriate ICTinstitutional structure

30 September2011

Removed l The Energy Regu-lator approved on29 July 2011 thatthis key perform-ance indicator isremoved from theNERSA BusinessPlan as this keyperformance indicator will becovered under thekey performanceindicator Imple-mentation of ICTStrategy

Develop terms of refer-ence and mandate

Approved terms ofreference andmandate

31 December2011

Removed

104


Organisational




Implement existing NERSAdisaster recovery plan andmethodology

Revise IT Disaster Recovery Plan in line with Business Continuity Plan

Revised ITDisasterRecoveryPlan

31 March 2012 Delayed l Delayed due tohuman resourceconstraints

Conduct bi-annualtests at Recovery Site

The Energy Regulator approved on 29 July2011 that the name ofthis output is changedfrom Conduct quarterlytests at Recovery Site towhat is indicated asthis will reflect the actual time interval for tests

Report Bi-Annually

In line with theapprovedchange in outputname the EnergyRegulator ap-proved on 29July 2011 thatthe completiondate is movedfrom Quarterly towhat is indicated

Completed

Ongoing monitoring Report Quarterly Delayed l This target is dependent on thecompletion of theprevious target

Implement the knowledgemanagement strategy asstated in the knowledgemanagement framework,strategy and implementationplan document, in order to create a knowledge management culture atNERSA.

Implementation of knowledge manage-ment strategy

Reports Quarterly Delayed l Delayed due to the change anddevelopment ofthe NERSA docu-ment and recordsmanagement system that is a key component of the implementa-tion of the knowl-edge management culture

Ensure NERSA complies with information and recordsmanagement legislative requirements

The Energy Regulator ap-proved on 26 January 2012that the name of this key performance indicator ischanged from Implementa-tion of approved RecordsManagement Procedures towhat is indicated as the im-plementation of the RecordsManagement Proceduresand the compliance withPromotion of Access to Infor-mation Act will lead to thecompliance of NERSA withinformation and recordsmanagement legislative requirements. This key per-formance indicator will alsobe combined with the keysperformance indicator Ensure NERSA compliancewith the Promotion of Accessto Information Act

Implement the RecordsManagement Policy

The Energy Regulatorapproved on 26 January 2012 that inline with the approvedchange in key perform-ance indicator name,the name of the outputis changed from Func-tional Records Centreto what is indicated

Reports 31 March 2012

In line with the approvedchange in outputname, The En-ergy Regulatorapproved on 26 January 2012that the comple-tion date ischanged fromQuarterly to whatis indicated

Completed


105

Organisational




Implement the Record Man-agement Procedure Manual

In line with the approvedchange in key performance in-dicator name the Energy Regu-lator approved on 26 January2012 that this output is addedto the NERSA Business Plan

Reports 31 March 2012 AddedDelayed

l Delayed as a need for further externalconsultation with theNational IntelligenceAgency has beenidentified

Implement and monitor the fileplan

In line with the approvedchange in key performance in-dicator name the Energy Regu-lator approved on 26 January2012 that this output is addedto the NERSA Business Plan


l Delayed as a need for further externalconsultation with theNational IntelligenceAgency has beenidentified

Publish report to the HumanRights Commission on informa-tion requests

In line with the approvedchange in key performance in-dicator name, the Energy Regu-lator approved on 26 January2012 that this output is addedto the NERSA Business Plan.This will also replace the output“Quarterly and annual reporton information requests” fromthe key performance indicatorEnsure NERSA compliance withthe Promotion of Access to Information Act


l Delayed due tohuman resource constraints

Update and maintain sectionmanual on the website

In line with the approvedchange in key performance indicator name the Energy Reg-ulator approved on 26 January2012 that this output is addedto the NERSA Business Plan.This will also replace the output“Quarterly and annual reporton information requests” fromthe key performance indicatorEnsure NERSA compliance withthe Promotion of Access to Information Act


l Delayed due to Supply Chain Man-agement processestaking longer than anticipated

Conduct EnergyIndustry Surveys

Electricity survey report Report 31 March 2012 Completed

Petroleum Pipelines survey report

Report 31 March 2012 Removed l The Energy Regulatorapproved on 29 July2011 that this outputis removed from theNERSA Business Planas this survey will notbe necessary during2011/12

106


Organisational




Piped-Gassurvey report

Report 31 March 2012 Delayed l Delayed due tohuman resource constraints

Training ofNERSA staff onall NERSA ICTapplications

Report ontraining conducted

Report Quarterly On track

Satisfactionsurvey report


The Energy Regulatorapproved on 29 July2011 that this comple-tion date is movedfrom Quarterly to whatis indicated as thismore accurately reflectthe completion of theoutput


Develop and disseminate Elec-tricity, Petroleumpipelines andPiped-gas statisti-cal publications

Electricity statisticalpublication2010

2006/7, 2007/8 and2008/9 D-Forms datacleaned

The Energy Regulator approved on 29 July 2011that the name of this targetis changed from PublishedElectricity Supply Statisticsto what is indicated as thenew approved target willmore accurately reflect allactivities involved in devel-oping the publication

31 October 2011

In line with the ap-proved amendment tothe target, the EnergyRegulator approved on29 July 2011 that thecompletion date ismoved from 31 March2012 to what is indicated


Electricity statistical draftpublication completed

In line with the approvedamendment of the previoustarget, the Energy Regula-tor approved on 29 July2011 that this target is added to the NERSABusiness Plan

30 November 2011 AddedDelayed

l Dependent on thecompletion of thetarget above

Final publication approved

In line with the approvedamendment of the previoustarget, the Energy Regula-tor approved on 29 July2011 that this target isadded to the NERSA Business Plan

28 February 2012 AddedDelayed


Printers appointed

In line with the approvedamendment of the previoustarget, the Energy Regula-tor approved on 29 July2011 that this target isadded to the NERSA Business Plan

28 February 2012 AddedDelayed



107

Organisational



Reasons forVariance

Soft copy publication available onthe website

In line with the approved amendmentof the previous target, the EnergyRegulator approved on 29 July 2011that this target is added to theNERSA Business Plan


l Depend-ent on the com-pletion ofthe targetabove

Hard copy publication printed anddisseminated to stakeholders

In line with the approved amendmentof the previous target, the EnergyRegulator approved on 29 July 2011that this target is added to theNERSA Business Plan

30 April 2012 AddedDelayed


Piped-gasstatisticalpublica-tion

Data stored on the server

The Energy Regulator approved on29 July 2011 that the name of thistarget is changed from PublishedPiped-Gas statistics to what is indicated as this will assist in disaggregating the target

31 October 2011

The Energy Regulator approved on 29 July2011 that the comple-tion date is changedfrom 31 March 2012 to what is indicated inline with the approved disaggregation of the target

On trackDelayed

l Delays are due to humanresourceconstraints

Draft publication completed

The Energy Regulator approved on 29 July 2011 that this target isadded to the NERSA Business Plan inorder to assist with the disaggrega-tion of the targets on the piped-gaspublication

31 January 2012 AddedDelayed



The Energy Regulator approved on 29 July 2011 that this target isadded to the NERSA Business Plan in order to assist with the disaggre-gation of the targets on the piped-gas publication




The Energy Regulator approved on 29 July 2011 that this target isadded to the NERSA Business Plan inorder to assist with the disaggrega-tion of the targets on the piped-gaspublication




The Energy Regulator approved on 29 July 2011 that this target isadded to the NERSA Business Plan in order to assist with the disaggre-gation of the targets on the piped-gas publication



108


Organisational



PerformanceResult

Reasons forVariance


The Energy Regulator approved on 29 July 2011 that this target isadded to the NERSA Business Planin order to assist with the disaggre-gation of the targets on the piped-gas publication

31 May 2012 AddedDelayed

l Dependenton the com-pletion ofthe targetabove

PetroleumPipelines statistical publication

Data stored on the server

The Energy Regulator approved on29 July 2011 that the name of thistarget is changed from PublishedPetroleum Pipelines Statistics towhat is indicated as the new ap-proved target will more accuratelyreflect all activities involved in developing the publication

31 October2011

In line with the approvedamendment tothe target, theEnergy Regula-tor approved on29 July 2011that the comple-tion date ismoved from 31March 2012 towhat is indicated

Delayed l Delayeddue tohuman resourceconstraints

Draft publication completed

In line with the approved amend-ment of the previous target, the Energy Regulator approved on 29July 2011 that this target is addedto the NERSA Business Plan

31 January2012

AddedDelayed

l Dependenton the completionof the targetabove











31 May 2012 AddedDelayed



109

Organisational



PerformanceResult


Licence ManagementSystem enhance-ments (Phase II)

FunctionalLicenceManage-ment Systemwith report-ing capabil-ity

Specification document for allthree industries

30 September2011

Delayed l Delayed due to human resource constraints

System enhancement for allthree industries

31 March2012

The EnergyRegulator approved on29 July 2011that the com-pletion date ischanged from31 March2011 to whatis indicated asthis was a typing error

Delayed l Delayed due to humanresource constraints

Ensure the population of information andknowledge materials in theKnowledge Centre

Wellstockedknowledgecentre


Marketing of Knowledge Centre services and products

The Energy Regulator ap-proved on 29 July 2011 that this target is added to the NERSA Business Plan as it was accidentally omitted

31 March2012

AddedCompleted

Acquire and maintain elec-tronic database subscriptions

The Energy Regulator ap-proved on 29 July 2011 that this target is added to the NERSA Business Plan as it was accidentally omitted

31 March2012

AddedCompleted

Render circulation desk activities

The Energy Regulator approved on 29 July 2011 that this target is added to the NERSA Business Plan as it was accidentally omitted

31 March2012

AddedCompleted

Evaluation of the usage of theKnowledgeCentre

Evaluation Report 31 March2012


110


Organisational




Ensure NERSA’sCompliancewith the Promo-tion of Access to Information Act

Quarterlyand annualreport on informationrequests

Reports Quarterly Removed l The Energy Regulator approved on 26 January2012 that this key perform-ance indicator is removedfrom the NERSA BusinessPlan as it has been mergedwith the key performanceindicator Implementationof approved Records Man-agement Procedure into a new key performance indicator Ensure NERSAcomplies with informationand records managementlegislative requirements

Ensure thatNERSA IT systems supportNERSA businessprocesses andare in line withNERSA informa-tion policy

StableNERSA ITnetworkmanage-ment anddesktopsupport


FunctionalNERSA Intranet


In-houseSystemsdevelop-ment andsupport

Maintenance of NERSAWebsite

The Energy Regulator approved on 29 July 2011that the name of this targetis changed from Reports towhat is indicated as thismore accurate reflects the activities to take place

31 March 2012

The Energy Reg-ulator approvedon 29 July 2011that the comple-tion date ismoved fromQuarterly towhat is indicatedin line with theapprovedamendment to the target

Completed

Supplier Database

The Energy Regulator approved on 29 July 2011that this target is added tothe NERSA Business Planas the disaggregation ofthe system developmentand support service more accurately reflects the activities to be undertaken


Volumes Reporting System for PetroleumPipeline

The Energy Regulator approved on 29 July 2011that this target is added tothe NERSA Business Planas the disaggregation ofthe system developmentand support service moreaccurately reflects the activities to be undertaken


l Delayed due to human resource constraints


111

Organisational



PerformanceResult


Enhance and give support to Customer Complaints ManagementSystem

The Energy Regulator ap-proved on 29 July 2011that this target is added tothe NERSA Business Planas the disaggregation ofthe system developmentand support service moreaccurately reflects the ac-tivities to be undertaken


Redesigned Licencee Information System (LIS)from mapped Excel D-Forms

The Energy Regulator ap-proved on 29 July 2011that this target is added tothe NERSA Business Planas the disaggregation ofthe system developmentand support service moreaccurately reflects the ac-tivities to be undertaken


Implement an effective and efficient payrollsystem and procedures

Effective payroll system

Monthly reconciliation ofpayroll

Monthly On track

Payroll Verifications Monthly On track

Payroll procedures

Effective Procedures 31 March 2012 Completed

Compile an annual compre-hensive trainingand developmentplan

Personal DevelopmentPlans (PDPs)

Completion of PDPs 30 May 2011 Delayed l Delayed due to per-formance contractingnot completed ontime

Training Local and InternationalTraining

31 March 2012 On track

Training report andWorkplaceskills plan

Submission of annualtraining Report and Workplace Skills Plan to Department of Labour


Assessing whetherstaff live the values

Dipstick survey

Survey conducted 30 September2011

Delayed l The key performanceindicator has been put on hold pending further internal consultation

Motivation tolive the NERSA values

2 motivational speakersper annum

31 August 2011 and 28 February2012

Delayed l The key performanceindicator has been put on hold pending further internal consultation

CEO, Emerg-ing Leaderand Chairper-son’s awards

Awards at year end function

30 November2011

Completed

112


Organisational




Learnership Programme

Certificatein EnergyRegulation

Training Modules 30 April 2012 On track

PerformanceManagement

Recogni-tion and Rewards

Final performance reviews for 2010/11


Payment of performancebonuses and salary increases

25 May 2011 Completed

1st quarterly performancereviews

30 July 2011 Delayed l Some managers did notconduct 1st quarter reviews

2nd quarterly performancereviews

31 October2011

Delayed l Some managers did notconduct 2nd quarter reviews

3rd quarterly performancereviews

31 January 2012 Delayed l Some managers did notconduct 3rd quarter reviews

PerformanceManagementWorkshop

31 March 2012 Delayed l Delayed due to human resource constraints

Recruitment and Selection

Effective Recruit-ment andSelection

90% filled positions

The Energy Regulator ap-proved on 29 July 2011that the traget is changedfrom Completion of recruitment assignmentform to what is indicatedas this will be a consoli-dation of all recruitmentactivities

31 March 2012

In line with theapprovedamendment tothe target, theEnergy Regulatorapproved on 29July 2011 thatthe completiondate is changedfrom As andwhen required towhat is indicated

Delayed l The target of a 90% filledstructure could not beachieved as there was an increase in the number ofresignations during the year

Advertising – internal and external


Removed l The Energy Regulator approved on 29 July 2011that these targets are removed from the NERSABusiness Plan as all the recruitment activities havebeen consolidated under thenewly approved first target

Short listing As and when required

Removed

Interviews As and when required

Removed

Appointment As and when required

Removed

Employee Wellness

Compre-hensive“one stop”wellnesspro-gramme

Wellness interventionsimplemented

The Energy Regulator ap-proved on 29 July 2011that the target is changedfrom Psychological andclinical counseling towhat is indicated as thisprovides a consolidatedoverview of activities tobe undertaken



113

Organisational




Trauma and Stress Management

31 March 2012 Removed l The Energy Regulator approved on 29 July2011 that these targetsare removed from theNERSA Business Plan asall the employee wellnessactivities have been consolidated under thenewly approved first target

Substance abuse 31 March 2012 Removed

Call centre helpline 31 March 2012 Removed

Voluntary testing 31 March 2012 Removed

Discover Walk the Talk 31 July 2012 Removed

Face-to-face consultations


HIV/AidsAwareness

World Aids Day commemoration

1 December2011

Removed

Health andSafety

FunctionalHealth andSafety Committee

Identification of safetyhazards


Conduct inspections Weekly On track

Investigate accidents and incidents


l No accidents and incidents occurred during the year

Conduct safety drills 31 March 2012 Completed

Report on health andsafety matters

Monthly On track

Employment Equity (EE) Plan

EmploymentEquity Planand Report

Monitoring of the EE Plan Quarterly On track

Submission of the Plan and Report to the Department of Labour(DoL)

30 October2011

Completed

Induction InductionProgramme

Induction of new employees

Monthly On track

Induction of staff members returning from block leave

On return ofleave


Statutory report-ing for 2010/2011 in line withPFMA, TreasuryRegulations,GRAP, SCM,PPPFA

Annual FinancialStatements(AFS)

Submission of AFS to the Auditor General, Department of Energyand National Treasury


Asset managementprocess

Complete,accurateasset register

Assets management forums

30 June 2011 Delayed l Delays in receiving the relevant documents from the consultantsCross transfer access

assets amongst otherpublic entities


Electronic fundstransfer (EFT)

Completeelectronicfunds transfer

All Payments aboveR2000 through EFT asper Treasury regulations

30 September2011

Delayed l Placed on hold becausesegregation of dutiescould not be performeddue to vacancies.

114


Organisational




Income collection and debtorsmanagement

Reduceddebtors collectiondays to be inline with the legislation

Monthly debtors meetingswith all debtors to resolveany incorrect billings andpossible disputes

30 September2011

Completed

Review of theprospective listof suppliers

Effectiveprospectivelist of suppliers

Internal Quarterly upgrading of the database

Quarterly Delayed l Delayed due to human resource constraints

Review of theprospective listof suppliers

Effectiveprospectivelist of suppliers

Grading of suppliers on the data base

30 September2011

Delayed l Delayed as the grading of the suppliers is awaitingthe loading of the database on the Intranet

Review of the Integrated Demand Management

Complete integrateddemandmanagementsystem

Consolidating the IDMPsubmissions of all costcentres


Complete market research for all goodsand services

30 June 2011 Removed l The Energy Regulator ap-proved on 29 July 2011that these targets are removed from the NERSABusiness Plan as it is in-cluded in the target above

Complete commodityanalysis for all goods and services

30 June 2011 Removed

Centralisation ofprocurementprocess

Centralisedprocurementprocess

Approval of SCM procedures


Centralised procurementprocess

The Energy Regulator approved on 29 July2011 that the name of this target is changedfrom Efficient and effec-tive data base to what is indicated as this will be a more true reflection of the activities to be undertaken

31 March 2012

In line with theapprovedamendment tothe target, theEnergy Regulatorapproved on 29July 2011 thatthe completiondate is changedfrom 30 June2011 to what is indicated

Delayed l Put on hold until the resource challenges areaddressed since the SCMprocedures are designedfor a centralised SCMmodule.

Sharing the data basewith National Treasury(i.e. Regulated Tenderswith National Treasury)

30 June 2011 Removed l In line with the approvedamendment to the targetabove, the Energy Regula-tor approved on 29 July2011 that this target is removed from the NERSABusiness Plan

Establishing BEEprocurement tar-gets for the or-ganisation

ApprovedBEE procure-ment targetsfor NERSA

Approval of BEE procurement targets

31 January 2012 Delayed l Delayed due to human resource constraints

Improvement ofsecurity in thebuilding

Safe building Benchmark exercise withother public sector build-ings on security risk

30 September2011

Delayed l Delayed as this key per-formance indicator wasdependent on the finalisa-tion of the location of theNERSA offices


115

Organisational



PerformanceResult


Monitoring ofimplementationof the 2011/2012 budget

Monthly cost centre re-ports

Preparation and distri-bution of monthly costcentre reports to allbudget holders

10th of eachmonth

Completed

Quarterly Manage-ment Accounts

Approved Quarterly Management Accounts

1 month after the end of everyquarter

Completed

Preparation ofthe 2012/2013budget

Budget Assumptions and Parameters

Approval of the Budget Assumptions and Parameters by the Finance Subcommitteeand the Energy Regulator

31 August 2011 Completed

Approved Budget for2012/13

Submission of thebudget to the Ministerof Energy

30 September2011

Completed

Government Gazetteof proposed levies for the 2012/13 yearas required by the relevant legislation

Publication of proposed levies for the2012/13 year as re-quired by the relevant legislation

31 October2011

Completed

Development ofa methodologyto coordinatecomments onproposed legislation

Procedure for handling comments onproposed legislation

Draft Operating Procedures



Coordination of comments submitted to DoE and the PPC

Report on commentssubmitted


On track

Participation in public hearings and presentations to PPC

Reports on invitations/presentations made toPPC


On track

Improve efficiency of internal meetings

Consultation Reports Reports As and when required

On track

Terms of Reference

Draft Terms of Refer-ence


Approved schedule ofmeetings


31 December2011

Completed

Coordinate andmonitor the im-plementation ofgood practices;internal systems,processes andprocedures

Review operational delegation matrix

Approved delegationmatrix

31 March 2012 Delayed l Delayed as gapswere identified in the proposed delegation matrix

Monitor implementa-tion of regulator decisions

Decision Implementation matrix

Monthly On track

Implementation ofcompliance initiativesacross the various divisions/departments/units, to ensure a culture of compliance in the organisation

Workshop on governance/ compliance matters

31 March 2012 Delayed l The filling of the Compliance Officer positionhas been put onhold. The positionwill be convertedto a function,rather than a position

116


Organisational



PerformanceResult


Compliance with relevant legislation(e.g. PFMA, Treas-ury Regulations)and good corpo-rate governance

Workshop on governance/compliance matters

31 March 2012 Delayed l The filling of theCompliance Officerposition has beenput on hold. Theposition will be converted to a function, ratherthan a position

Ensure provisionof effective support to EXCO andMANCO

Approved minutes Approved minutes As and when required

On track

Approved scheduleof meetings


31 March 2012 Delayed l The completion of this output is dependent on the finalisation of theterms of reference of Manco and Exco

Report-back mechanism

Staff meetings Monthly Delayed l Delayed due to timeconstraints

Quarterly reviews Quarterly Delayed l Due to time con-straints, quarterly review sessionscould not take place

Provide effectivesecretarial services to theEnergy Regulatorand its subcom-mittees

Minutes of Subcommitteesand Energy Regulator

Approved in line with operating procedures

After every meet-ing

On track

Updated EnergyRegulator codeof conduct

Revised Code of Conduct

To conduct one workshopbefore it is approved


Induction forfull-time andpart-time regula-tor members

Induction Programme

Approved induction programme

31 December2011

Delayed l Delayed due to timeconstraints

Review of theTerms of Refer-ence for Sub-committees of the EnergyRegulator

Revised terms of reference ofSubcommittees

To conduct at least one workshop before approval

31 March 2012 Delayed l Delayed due to human resource constraints

Provide legalsupport to theEnergy Regulator

Legal opinions andlegal support

Legal opinion As and when re-quired


Streamlineprocesses by improving on the structure,form and efficiency of regulatorymeetings

Improved qualityof meetings

Conduct a review of thestructure of meetings

31 December2011

Removed l The Energy Regula-tor approved on 29July 2011 that thiskey performance in-dicator is removedfrom the NERSABusiness Plan as it ispart of the key per-formance indicatorReview of the Termsof Reference forSubcommittees ofthe Energy Regulator

Identify efficiency propos-als on how to use timeand resources more effectively



117

Organisational




Strengthen NERSA'sregulatory practicesby (a) tracking policies to ensurethat they are reviewed when required and (b)publishing approved documents in a central repository

Reduced regulatory riskand improved institutional memory

Review decisionsof the Energy Regulator

31 March 2012

The Energy Regulatorapproved on 29 July2011 that the comple-tion date is movedfrom Quarterly to whatis indicated as it will beprudent to conduct thereview at the end ofthe financial year

Delayed l Delayed due to humanresource constraints

Implement Energy Regulator decision tracking system

31 March 2012 Delayed l Delayed due to humanresource constraints

Table a status report to the Energy Regulator

31 March 2012 Delayed l Delayed due to humanresource constraints

Support the regularreview of gover-nance structures to comply with best practices

Revised governance model

Governance review

31 March 2012 Delayed l Delayed due to the anticipated review ofthe National EnergyRegulator Act

Review ‘reasons fordecision' templatein line with interna-tional best practiceand revise accord-ingly

Revised Reasons for decision template

Research anddraft discussiondocument

31 December 2011 Delayed l Delayed due to humanresource constraints

Submission to theEnergy Regulator

31 March 2012 Delayed l Dependent on thecompletion of the previous target

Review the implementation of improvement opportunities identified in theBenchmarkingstudy

Report Approved Report 31 December 2011 Removed l As part of the midtermreview of the imple-mentation of theNERSA Business Planfor 2011/2, the EnergyRegulator approved on28 October 2011 thatthis key performanceindicator is removedfrom the Business Planas it has been overtaken by events

Skills enhancementproject

Site visits Site visits com-pleted

31 December 2011 Removed l As part of the midtermreview of the imple-mentation of theNERSA Business Planfor 2011/2, the EnergyRegulator approved on28 October 2011 thatthis key performanceindicator is removedfrom the Business Planas it is a duplication ofefforts that is alreadytaking place within thedifferent regulatory divisions

118


Organisational



PerformanceResult


Secondment ofidentified staff

Staff seconded as andwhen required

As and whenrequired

Removed

To conduct audits as per the approvedaudit plan

Approved AnnualPlan

Approved Plan 30 April 2011 Completed

Audit reports Conducting audits asapproved in plan

31 March2012

Completed

To manage the fraudhotline

Investigation reports

Reports As and whenrequired

Completed

Manage the develop-ment and implemen-tation of the2012/13 – 2014/15Strategic Plan and2012/13 BusinessPlan

Approved 3-yearrolling strategicplan and annualbusiness plan

Approved NERSA Strategic Plan (2012/13– 2014/15) and Business Plan (2012/13)

30 September2011

Completed

Annual Planningand MonitoringCycle

Planning Cycle approved by Manco

31 March2012

Completed

Mid-term review Mid-term review report 31 October2011

Completed

Manage the compi-lation of the quarterlyand annual organisa-tional performancereports

Approved quarterlyand annual organisational performance reports

Approved 4th QuarterPerformance Report(2010/11)


Approved 1st QuarterPerformance Report

31 July 2011 Completed

Approved 2nd QuarterPerformance Report

31 October2011

Completed

Approved 3rd QuarterPerformance Report

31 January2012

Completed

Report on perform-ance against pre-determinedobjectives

Approved PerformanceAgainst Pre-DeterminedObjectives Report


Monitor the imple-mentation of theteam-based networkstructure

Projectised Business Plan

Report on number ofproject plans received


Resource Load Document


Revised TBNS Policy (if necessary)

Revised TBNS Policy 31 March2012 (if nec-essary)


Provide projectmanagement sup-port to identifiedlarge projects

Report on assistanceprovided

31 March2012

Completed

Enhance existingproject plans to indicate time utilisation

Revised Project Chartertemplate

31 October2011

Delayed l Dependent on the revision of the TBNS Policy (if needed)

Investigate resource trackingsystem

Report 31 March2012

Completed

Coordinate andmonitor the manage-ment of business risk

Revised StrategicRisk Register

Approved Strategic RiskRegister

31 December2011

Completed

Reports on the implementation of mitigationstrategies

Reports 30 April 2011and 31 Octo-ber 2011

Completed


119

Organisational



PerformanceResult


Reports on imple-mentation ofagreed actionplans on auditfindings

Reports Quarterly Completed

Conduct Riskworkshop with all staff

Workshop 31 March2012


Monitor implementa-tion of the BusinessContinuity Plan forNERSA


Annual Report on theimplementation of theBCP

31 March2012

Completed

Updated BCP (if necessary)

Approved revised BCP (if necessary)

31 March2012

Completed

Implement a Balanced Scorecard for NERSA


Report 31 March2012

Delayed l Dependent on thefinalisation of thedevelopment to ofa Balanced Score-card for NERSA.The developmenthas not been com-pleted as planneddue to a change in scope of the key performance indicator

Conduct a BusinessProcess Analysis atNERSA

ImplementationReport

Report 31 March2012

Delayed l Delayed due to Supply ChainManagementProcesses takinglonger than anticipated

Create and centralisean institutional structure to trackprocess maturity, effort as well as good practicesacross NERSA

Create a dash-board to trackprocess maturity,good practice andeffort

Approved dashboard 31 March2012

Removed l As part of themidterm review ofthe implementa-tion of the NERSABusiness Plan for2011/2, the Energy Regulatorapproved on 28October 2011 thatthis key perform-ance indicator isremoved from theBusiness Plan as it has been over-taken by events

Approved targetsfor organisationalimprovement

Approved targets 31 March2012

Removed

Monitoring the im-plementation of theOperations Model

Monitoring reports Reports 31 March2012

Delayed l Delayed due totime constraints

Language Editing

The Energy Regulatorapproved on 29 July2011 that this keyperformance indica-tor is added to theNERSA Business Planas it was accidentallyomitted

Language editingof NERSA documents

The effective and efficient language editing of internal and external NERSAdocuments (as required)

31 March2012

AddedCompleted

120


Organisational



PerformanceResult


Electricity industrysurveys

The Energy Regulatorapproved on 29 July 2011 that thiskey performance indicator is added to the NERSA Business Plan

2011/12 to2012/13 Datacollection plan

Approved data collection plan

31 July 2011 AddedDelayed


Revised electricityindustry surveys

Analysis of NERSA dataneeds vs. Municipality dataconstraints


Categorization of municipalities for data collection purposes


Revised questionnaires 31 July 2011 AddedCompleted

Fieldwork conductedtimeously

Questionnaires and supporting documentationdistributed timeously to licencees

31 August2011

AddedCompleted

Workshops conductedacross the different districts/regions

31 January2012

AddedCompleted

Visits to municipalities toassist with completion ofD-Forms

31 March2012

AddedDelayed


Reminder letters sent to licencees that have notsubmitted as per the stipulated deadline

30 April 2012 AddedCompleted

Completed questionnairessubmitted to the NERSA

31 May 2012 AddedOn track

Data captured,validated andstored on theserver

All D-Forms and supporting documents received logged and stored on the server

31 March2012

AddedCompleted

Data captured and validated

31 March2012

AddedDelayed


Reports to internalstakeholders

Reports distributedtimeously to internal stakeholders


Licencee contact detailsupdated on the LicenceeManagement System



121

Organisational



PerformanceResult


Non-financial dataneeds

The Energy Regulatorapproved on 29 July2011 that this keyperformance indica-tor is added to theNERSA Business Plan

Non-financial dataneeds report

Electricity Report specifyingdata required incorporat-ing the objectives thereof,source, data format, collection frequency, etc.

30 September2011

AddedCompleted

Petroleum Pipelines Reportspecifying data required incorporating the objec-tives thereof, source, data format, collection frequency, etc.

31 October2011

AddedDelayed

Piped-Gas Report specify-ing data required incorpo-rating the objectivesthereof, source, data format, collection frequency, etc.

30 November2011

AddedCompleted

Centralize datacollected in silosby NERSA employ-ees and stored onindividuals’ PCs,as a test database

Centralized data on theserver as databases

28 February2012

AddedDelayed


Metadata report 31 March2012

AddedDelayed


Propose and develop efficient non-financial datacollection tools

Approved short to long-term non-financial datacollection plan

30 September2011

AddedDelayed


Completed manual datacollection tool for each ofthe three industries

30 November2011

AddedDelayed


Data capturing tool developed for each of the three industries

31 January2012

AddedDelayed


122


Annual Financial Statements

8.Annual Financial Statementsfor the period ended 31 March 2012

123


Vision


Mission

To regulate the energy industry in accordance with government laws and policies, standardsand international best practices in support of sustainable development

Table of Contents

Statement of Responsibility 124

Report of the Auditor General 125

Report of the Audit and Risk Committee 127

Accounting Authority's Report 129

Statement of Financial Position 132

Statement of Financial Performance 133

Statement of Changes in Net Assets 134

Cash Flow Statement 135

Notes to the Annual Financial Statements 136

The Energy Regulator is responsible for the maintenanceof adequate records and the preparation and integrityof the financial statements and related information. TheAnnual Financial Statements presents the state of affairsof the National Energy Regulator of South Africa(NERSA), its financial results, its performance againstpredetermined objectives and its financial position atthe end of the financial year. The financial statementsare prepared in accordance with South AfricanStandards of Generally Recognised AccountingPractices. The financial statements are based onappropriate accounting policies consistently appliedand supported by reasonable and prudent judgmentsand estimates.

The Energy Regulator has set standards andimplemented systems of internal control and riskmanagement that are designed to provide reasonableassurance, but not absolute assurance against materialmisstatements and losses.

NERSA maintains internal financial controls to provideassurance regarding:n The maintenance of proper accounting records;

andn Reliability of financial information used within the

business or for publication.

These standards and control systems are contained inthe Corporate Governance Handbook of NERSA, whichis reviewed and amended periodically.

The Energy Regulator has reviewed NERSA’s assets,liabilities and cash flows for the period ended 31 March2012. On the basis of this review, and in light of thecurrent financial position, the Energy Regulator hasevery reason to believe that the National Energy Regulator of South Africa (NERSA) will be a going

concern in the foreseeable future. For this reason, theEnergy Regulator adopted the going concern basis inpreparing the financial statements.

The Energy Regulator has reviewed NERSA’s systems ofinternal control and risk management for the periodfrom 01 April 2011 to 31 March 2012. The EnergyRegulator believes that NERSA’s systems of internalcontrol and risk management were effective for theperiod under review.

The annual financial statements were approved by theEnergy Regulator in terms of section 51(1)(f) of thePublic Finance Management Act, 1999 (Act No1 of1999) on 26 July 2012 and are signed on its behalf by:

Phindile NzimandeChief Executive Officer (CEO)Date: 26/07/2012

Cecilia KhuzwayoChairpersonDate: 26/07/2012

124


Statement of Responsibility


Introduction

1. I have audited the financial statements of theNational Energy Regulator of South Africa set outon pages 132 to 154, which comprise thestatement of financial position as at 31 March2012, the statement of financial performance,statement of changes in net assets and the cash flowstatement for the year then ended, and the notes,comprising a summary of significant accountingpolicies and other explanatory information.

Accounting Authority’s responsibility for thefinancial statements

2. The accounting authority is responsible for thepreparation and fair presentation of these financialstatements in accordance with South AfricanStandards of Generally Recognised AccountingPractice (SA Standards of GRAP) and therequirements of the Public Finance ManagementAct of South Africa, 1999 (Act 1 of 1999) (PFMA),and for such internal control as the accountingauthority determines is necessary to enable thepreparation of financial statements that are freefrom material misstatement, whether due to fraudor error.

Auditor-General’s responsibility

3. My responsibility is to express an opinion on thesefinancial statements based on my audit. I conductedmy audit in accordance with the Public Audit Act ofSouth Africa, 2004 (Act No. 25 of 2004) (PAA), theGeneral Notice issued in terms thereof andInternational Standards on Auditing. Thosestandards require that I comply with ethicalrequirements and plan and perform the audit toobtain reasonable assurance about whether thefinancial statements are free from materialmisstatement.

4. An audit involves performing procedures to obtainaudit evidence about the amounts and disclosuresin financial statements. The procedures selecteddepend on the auditor’s judgement, including the

assessment of the risks of material misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditorconsiders internal control relevant to the entity’s preparation and fair presentation of the financialstatements in order to design audit procedures thatare appropriate in the circumstances, but not for thepurpose of expressing an opinion on theeffectiveness of the entity’s internal control. An auditalso includes evaluating the appropriateness ofaccounting policies used and the reasonablenessof accounting estimates made by management, aswell as evaluating the overall presentation of thefinancial statements.

5. I believe that the audit evidence I have obtained issufficient and appropriate to provide a basis for myaudit opinion.

Opinion

6. In my opinion, the financial statements present fairly,in all material respects, the financial position of theNational Energy Regulator of South Africa as at 31March 2012, and its financial performance andcash flows for the year then ended in accordancewith SA Standards of GRAP and the requirementsof the PFMA.

Emphasis of matter

7. I draw attention to the matter below. My opinion isnot modified in respect of this matter.

Restatement of corresponding figures

8. As disclosed in note 7 to the financial statements,the corresponding figures for 31 March 2011 havebeen restated as a result of an error discoveredduring 31 March 2012 in the financial statementsof the National Energy Regulator of South Africa at,and for the year ended, 31 March 2011.

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Report of the Auditor General REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON NATIONAL ENERGY REGULATOR OF SOUTH AFRICA REPORT ON THE FINANCIAL STATEMENTS

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

10. In accordance with the PAA and the General Noticeissued in terms thereof, I report the followingfindings relevant to performance againstpredetermined objectives, compliance with lawsand regulations and internal control, but not for thepurpose of expressing an opinion.

Predetermined objectives

11. I performed procedures to obtain evidence aboutthe usefulness and reliability of the information inthe annual report on predetermined objectives asset out on pages 41 to 121 of the annual report.

12. The reported performance against predeterminedobjectives was evaluated against the overall criteriaof usefulness and reliability. The usefulness ofinformation in the annual performance reportrelates to whether it is presented in accordance withthe National Treasury annual reporting principlesand whether the reported performance is consistentwith the planned objectives. The usefulness ofinformation further relates to whether indicators andtargets are measurable (i.e. well defined, verifiable,specific, measurable and time bound) and relevantas required by the National Treasury Framework formanaging programme performance information.

The reliability of the information in respect of theselected objectives is assessed to determine whetherit adequately reflects the facts (i.e. whether it is valid,accurate and complete).

13. There were no material findings on the annualreport on predetermined objectives concerning theusefulness and reliability of the information.

Compliance with laws and regulations

14. I performed procedures to obtain evidence that theentity has complied with applicable laws andregulations regarding financial matters, financialmanagement and other related matters. My findingson material non-compliance with specific mattersin key applicable laws and regulations as set out inthe General Notice issued in terms of the PAA areas follows:

Annual financial statements

15. The financial statements submitted for auditing werenot prepared in accordance with the prescribedfinancial reporting framework as required by section55(1)(a) of the PFMA. Material misstatements ofintangible assets and employee costs identified by the auditors in the submitted financial statementwere subsequently corrected, resulting in thefinancial statements receiving an unqualified auditopinion.

Internal control

16. I considered internal control relevant to my audit ofthe financial statements, annual performance reportand compliance with laws and regulations. Thematters reported below under the fundamentals ofinternal control are limited to the significantdeficiencies that resulted in the findings on thefinancial statements included in this report.

Financial and performance management

17. Manual controls and computer controls are notadequate as they have not prevented nor detectedthe errors in the financial statements.

OTHER REPORT

Investigations completed during the financial year

18. An investigation was conducted by an independentconsulting firm on request of the entity. Theinvestigation was initiated based on the allegationof possible misconduct by an employee in theprocurement of services. The investigation resultedin the suspension of employee who hassubsequently resigned.

Investigations in progress

19. An investigation is being conducted to probe thepayment for attendance at board meetings of theentity. The investigation aims to establish how muchshould be paid and whether previous paymentswere made in accordance with approved policies.The investigation was still ongoing at the reportingdate.

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127

Report of the Audit and Risk CommitteeWe are pleased to present our report for the financial year ended 31 March 2012.

Audit Committee Members and Attendance

The Audit and Risk Committee consists of the members listed hereunder and should meet 4 times per annum asper its terms of reference. During the current year 5 meetings were held.

Audit and Risk Committee Responsibilities

The Audit and Risk Committee reports that it has complied with its responsibilities arising from section 27.1 of theTreasury Regulations.

The Committee also reports that it has adopted appropriate formal terms of reference as its audit and risk committeecharter, has regulated its affairs in compliance with the charter and has discharged all its responsibilities ascontained therein.

Effectiveness of Internal Controls

The systems of controls are designed to provide cost effective assurance that assets are safeguarded and thatliabilities and working capital are effectively managed. In line with the Public Finance Management Act (PFMA),(Act No.1 of 1999) and King III Report on Corporate Governance requirements, Internal Audit provides the Auditand Risk Committee with assurance that the internal controls are appropriate and effective. This is achieved bymeans of the risk management process, as well as the identification of corrective actions and suggestedenhancement to the internal controls and processes.

From the various reports of the Internal Auditors, the Audit Report on Financial statements, and the managementletter of the Auditor General South Africa, it was noted that no significant or material non compliance withprescribed policies and procedures have been reported. Accordingly, we can report that the systems of internalcontrol for the period under review were efficient and effective.

The quality of quarterly management reports submitted in terms of the PFMA and Treasury Regulations

The Audit and Risk Committee is satisfied with the content and quality of quarterly reports prepared and issued bythe Energy Regulator during the year under review.

Evaluation of Financial Statements

The Audit and Risk Committee has:

n reviewed and discussed the audited financial statements to be included in the annual report, with the AuditorGeneral SA and the Energy Regulator;

n reviewed the Auditor General SA's management letter and management's response thereto;n reviewed changes in accounting policies and practices; andn Reviewed significant adjustments resulting from the audit.

Name of Member Position Number of Meetings Held Number of Meetings Attended

Ms K. Mthimunye Chairperson 5 5

Ms G. Whittington Banda** Member 5 4

Mr M. Nkhabu External Member 5 3

Ms M. Joubert External Member 5 4

Mr O. Komane* Member 1 1

* Joined NERSA on 1 November 2011** Ms Whittington Banda’s term of office in the Committee came to an end with the appointment of Mr O Komane on 1 November2011

The Audit and Risk Committee concurs and accepts the Auditor General's conclusions on the annual financialstatements, and is of the opinion that the audited annual financial statements be accepted and read together withthe report of the Auditor General SA.

Khomotso MthimunyeChairperson of the Audit and Risk CommitteeDate: 26 July 2012

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Annual Financial Statementsfor the period ended 31 March 2012

Accounting Authority's Report

1 Introduction

The Energy Regulator presents its annual financial statements that form part of the annual report of the NationalEnergy Regulator of South Africa (NERSA) for the year ended 31 March 2012.

The National Energy Regulator (NERSA) is a regulatory authority established as a juristic person in terms of Section3 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),Gas Act, 2001 (Act No. 48 of 2001) and Petroleum pipelines Act, 2003 (Act No. 60 of 2003). It is listed as anational public entity in terms of the schedule 3A of the Public Finance Management Act (PFMA), 1999(No 1 of1999).

2 Regulator Members and Secretary of NERSA

The Energy Regulator consists of nine Regulator Members, five of whom are part-time and four of whom are full-time (including the CEO), as appointed by the Minister of Energy. The part-time and full-time Regulator Membersare appointed for a period of four and five years respectively.

The Regulator Members are:

In addition to the Regulator Members the Energy Regulator has appointed the following external members to itsgovernance committees:

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Ms C Khuzwayo Appointed 1 January 2010 Chairperson

Mr J Lesejane Appointed 1 January 2010 Deputy Chairperson

Ms P Nzimande Appointed 1 May 2011 Full-time Member: CEO

Mr T Bukula Re-appointed 1 April 2011 Full-time Member: Electricity Regulation

Dr R Crompton Re-appointed 1 April 2011 Full-time Member: Petroleum Pipelines Regulation

Ms E Teljeur Re-appointed 1 April 2011 Full-time Member: Piped-Gas Regulation

Ms K Mthimunye Appointed 1 January 2010 Part-time Member

Ms G Whittington Banda Appointed 1 January 2010 Part-time Member

Mr O Komane Appointed 1 November 2011 Part-time Member

Ms M Joubert Re-appointed 1 March 2010 External Member: Audit and Risk Committee

Ms N Joubert Re-appointed 1 March 2010 External Member: Human Resources Committee

Mr J Mabaso Re-appointed 1 March 2010 External Member: Human Resources Committee

Mr M Nkhabu Re-appointed 1 March 2010 External Member: Audit and Risk Committee

The acting Secretary of NERSA is Mr. Bothito Chokoe and his business and postal addresses are as follows:

Business Address:Kulawula House526 Madiba StreetArcadiaPretoria

Postal Address:P O Box 40343ArcadiaPretoria0007

3. Organisational structure

The Minister of Energy appoints both Part-time and Full-time Regulator members. The Energy Regulator actsindependently and reports to Parliament and the Minister of Energy in terms the Public Finance Management Act(PFMA), 1999 (No 1 of 1999).The Full-time Regulator Members consist of the CEO, the member primarilyresponsible for electricity regulation, the member primarily responsible for piped-gas regulation and the memberprimarily responsible for petroleum pipelines regulation.

4. Principal Activities

The Energy Regulator is the regulatory authority over the energy industry, and currently regulates electricity, piped-gas and petroleum pipelines industries in terms of the Electricity Regulation Act, 2006 (Act No. 4 of 2006), GasAct, 2001 (Act No. 48 of 2001) and Petroleum Pipelines Act, 2003 (Act No. 60 of 2003) respectively.

5. Operating results and review of operations

The net deficit for NERSA for the year amounted to R33 million. The summary for the financial results is detailedbelow.

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Relevant financial information

Actual R'000

Budget R'000

Levy Income 141 636 976 147 408 375

Other Income 189 536 -

Finance Income 4 742 585 7 500 000

Expenditure (179 425 456) (210 591 101)

Net Deficit (32 856 715) (55 682 726)

Capital Expenditure (2 310 529) (12 430 600)


2012 2012

91 066 035 123 905 710

Approved Commitments 7 017 933 3 308 348

Cash Flow Mitigating Reserve 25 374 450 22 527 151

Reserves Accumulated by National Electricity Regulator over ten year period refunded to the Electric-ity industry in 2012/13 and 2013/14 in equal amounts

26 864 629 40 296 944

Unallocated surplus to be refunded to the industries in 2012/2013 and 2013/2014 3 102 255 57 773 267

Unallocated surplus of 2011/12 to be refunded to the industries in future. 28 706 769 -


2012R

2011R

Accumulated Surplus 91 066 035 123 905 710

6. NERSA Accumulated Surplus

The accumulated surplus reported as at 31 March 2012 consists of the following:

As per the PFMA, entities are not allowed to retain surplus funds without the prior approval of the Minister ofFinance. The accumulated surplus reflected above relates to the underspending by the Energy Regulator in previousfinancial periods. The surplus will be refunded to the relevant industries through a reduction of levies payable forperiods 2012/2013 and 2013/2014.


7. Levies

NERSA is funded as follows to cover its expenditure:

Electricity

A levy is imposed on the holders of the title to electricity as it enters the system licensed by NERSA in terms ofSection 5B of the Electricity Act, 1987 (No. 41 of 1987).

Piped Gas

A levy is imposed on the holders of the title to gas as it enters the system licensed by NERSA in terms of Section2 of the Gas Regulator Levies Act, 2002 (No. 75 of 2002).This levy is based on Giga Joules.

Petroleum Pipelines

A levy is imposed on the holders of the title to petroleum as it enters the system licensed by NERSA in termsof Section 2 of the Petroleum pipelines Levies Act, 2004 (No. 28 of 2004). This levy is based on litres.

The above levies are approved as part of the annual budget process.

8 Materiality and significance framework

A materiality and significance framework policy has been developed for reporting any act of misconduct,losses, irregular and fruitless and wasteful expenditure, as well as for significant transactions envisaged persection 54 (2) of the PFMA that requires Ministerial approval.

9 Events after balance sheet date

The Energy Regulator is not aware of any material event which occurred subsequent to the compiling of theannual financial statements which may significantly affect the position of the organisation or the results ofits operations.

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Industry 2012/2013 2013/2014 Total

Electricity reserves from NER 13 432 314 13 432 314 26 864 629

Electricity 2 342 552 - 2 342 553

Piped-Gas 379 851 - 379 851

Petroleum Pipeline 79 851 - 9 851

16 524 570 13 432 314 29 966 884

# These amounts were approved in the 2011/2012 budget.

The reduction per industry is as follows:

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Statement of Financial Position

Notes 2012R

2011R

ASSETS

Non-current assets 43 284 110 49 171 560

Property, plant and equipment 2.1 37 724 554 40 568 857

Intangible Assets 2.2 5 559 557 8 602 703

Current assets 96 886 267 119 308 684

Inventory 3 188 412 165 492

Trade and other receivables 4 13 886 777 20 188 265

Cash and cash equivalents 5 82 811 078 98 954 928

TOTAL ASSETS 140 170 377 168 480 244

RESERVES AND LIABILITIES

Reserves 111 466 292 144 305 967

Accumulated surplus 91 066 035 123 905 710

Revaluation reserve 20 400 257 20 400 257

Current liabilities 28 704 085 24 174 277

Trade and other payables 6 28 704 085 24 174 277

TOTAL RESERVES AND LIABILITIES 140 170 377 168 480 244


133


Statement of Financial Performance

Notes 2012R

2011R

ASSETS

Revenue 8 141 636 976 155 197 364

141 636 976 155 197 364

Other income 189 536 239 851

Operating expenditure (179 425 456) (163 712 154)

Finance Cost 9 (356) (5 797)

Net deficit from operations 10 (37 599 300) (8 280 736)

Finance income 11 4 742 585 5 920 806

Net deficit for the year (32 856 715) (2 359 930)

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Statement of Changes in Net Assets

Notes Accumulated SurplusR

Revaluation ReserveR

Total

Balance as at 31 March 2010 129 562 202 20 804 454 150 366 656

Devaluation of building (2 491 061) (2 491 061)

Fair value assets 2 086 864 2 086 864

Net deficit for the year (2 359 930 ) (2 359 930)

Prior Period corrections 7 (3 296 562) - (3 296 562)


Fair valuing of assets 17 040 17 040

Net deficit for the year (32 856 715) - (32 856 715)



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Cash Flow Statement

Notes 2012R

2011R

Cash receipts from customers 147 813 805 159 879 502

Cash paid to suppliers and employees (166 501 152) (162 520 865)

Cash applied to operations 12 (18 687 347) (2 641 363)

Interest received 4 742 585 5 914 517

Interest paid (356) (5 797)

Net cash inflows/(outflows) from operating activities (13 945 118) 3 267 357

CASH FLOWS FROM INVESTING ACTIVITIES

Acquisition of furniture, motor vehicle, equipments and software (2 246 452) (8 333 931)

Improvements to buildings - (1 665 409)

Proceeds from disposal of assets 47 720 31 810

Net cash outflows from investing activities (2 198 732) (9 967 530)

CASH FLOWS FROM FINANCING ACTIVITIES

Net decrease in cash and cash equivalents for the year (16 143 850) (6 700 173)

Cash and cash equivalents at the beginning of the year 98 954 928 105 655 101

Cash and cash equivalents at end of the year 82 811 078 98 954 928

Notes to the Annual Financial Statements

1. Accounting Policies

1.1 Basis of preparation

The Annual Financial Statements have been prepared in accordance with South African Statements ofGenerally Recognised Accounting Practice (GRAP), issued by the Accounting Standards Board (ASB) inaccordance with the Section 55 (1) (b) of the Public Finance Management Act (Act 1 of 1999).

As a consequence of the requirements of paragraphs 20 and 21 of Directive 5 Determining the GRAPReporting Framework which stipulates that IFRSs should not be applied if they are in conflict with the ASB'sFramework for the Preparation and Presentation of Financial Statements or existing Standards of GRAP, therequirements of GRAP 23 Revenue from Non-exchange Transactions (Transfers and Taxes) have beenconsidered in formulating an appropriate accounting policy (i.e. determining the appropriate recognitionand measurement requirements to be used) to account for its grant, transfers and other non-exchangerevenue.

Assets and revenue recognised as a consequence of a transfer are measured at the fair value of the assetsrecognised as at the date of recognition. Monetary assets are measured at their nominal value unless thetime value of money is material, in which case present value is used, calculated using a discount rate thatreflects the risk inherent in holding the asset. Non-monetary assets are measured at their fair value, whichis determined by reference to observable market values or by independent appraisal by a member of thevaluation profession. Receivables are recognised when a binding transfer arrangement is in place but cashor other assets have not been received.

1.2 Ring Fencing Methodology

Section 13 (2) and (3) of the National Energy Regulator Act, 2004 (Act No.40 2004) require that the EnergyRegulator keeps separate accounts for the electricity, piped-gas and petroleum pipelines regulatory functionsand that the costs of the Energy Regulator must be shared between the electricity, piped-gas and petroleumpipeline regulatory industries in proportion to the costs incurred by the Energy Regulator in respect of eachof those regulatory functions.

All costs of the Energy Regulator are shared between electricity, piped gas and petroleum pipelines industriesusing a ring fencing methodology. The primary accounting principles upon which the ring-fencingmethodology is based on the following:n Costs that can be directly attributable to a specific regulatory industry will be charged directly to that

industry.n Costs that are not directly attributable to a specific regulatory industry, but are incurred as common

costs in order to support the three regulatory industries, will be allocated between the three regulatoryindustries using a basis of allocation that fairly distributes the costs. During the year under review thedistribution of these costs was as follows:

l Electricity 58%l Piped Gas 21%l Petroleum Pipelines 21%

136




1.3 Property, plant and equipment

Land and Building

The Land and building are reflected as separate assets and complies with the GRAP 17.

The land and building is carried at a revalued amount being its fair value at the date of the revaluation inaccordance with GRAP17. The revaluation is performed every three years except where there have beenmaterial improvements to the building in which case a revaluation exercise will be conducted at the end ofthe year in which those improvements have been effected. An increase to the carrying amount of land andbuilding arising from the revaluation is credited directly to net assets under the heading revaluation surplus;however, the increase is recognised in surplus or deficit to the extent that it reverses a revaluation decreasefor the same asset previously recognised as an expense.

Land is not depreciated. The building is depreciated on the straight line method to allocate the revaluedamount to the residual value over the estimated useful life of the building which was 24 years at the dateof the last revaluation.

Other Assets

All other assets are stated at cost less accumulated depreciation and any accumulated impairment losses.Each part of an item of the asset with a cost that is significant in relation to the total cost of the asset isdepreciated separately. The depreciation is calculated on a straight line basis to write off the cost of theasset over its estimated useful life. The method is reviewed each financial year end to reflect the pattern inwhich the asset’s future economic benefits are expected to be consumed.

In the case of computer programs purchased, all computer operating programs are classified as Property,Plant and Equipment, while all other programs (software) are classified as Intangible Assets (see AccountingPolicy 1.4)

Assets are depreciated as follows:

n Office Furniture and Equipment 10 yearsn Computer Software 2 yearsn Computer Hardware 3 yearsn Motor Vehicles 5 years

Leased Assets

Leases in terms of which NERSA assumes substantially all the risks and rewards of ownership are classifiedas finance leases. Leases where the lessor retains the risks and rewards of ownership of the underlying assetare classified as operating leases.

1.4 Intangible Assets

Intangible Assets that are acquired are stated at cost less accumulated amortisation and impairment losses(see accounting policy 1.13). Subsequent expenditure on capitalised intangible assets is capitalised onlywhen it increases the future economic benefits embodied in the specific asset to which it relates.

Amortisation is charged to the Statement of Financial Performance on a straight line basis over the usefullives of intangible assets. The method is reviewed each financial year end to reflect the pattern in whichasset’s future economic benefits are expected to be consumed. The method is reviewed each financial year.

1.5 Inventory

Inventory is stated at the lower of cost and net realisable value.

The cost of inventories is based on the first-in first-out principle and includes expenditure incurred in acquiringthe inventories and bringing them to their existing location and condition.

137

1.6 Revenue Recognition

Revenue is recognised on an accrual basis in accordance with the substance of the relevant agreementsbased on the provisions of the National Energy Regulator Act, 2004 (Act No.40 of 2004).

The following Acts have specific reference in this regard:

Act

n Section 5B of the Electricity Act, 1987 (No.41 of 1987)n Section 2 of the Gas Regulator Levies Act, 2002 (No. 75 of 2002)n Section 2 of the Petroleum Pipelines Levies Act, 2004 (No. 28 of 2004)n Revenue is measured at the fair value of the consideration received or receivable and comprises of the

net invoiced values funded from levies imposed by and other services rendered in terms of the NationalEnergy Regulator Act.

1.7 Employee Benefits

Short -term employee benefits

The cost of all short-term employee benefits is recognised during the period in which the employee rendersthe related service.

The provisions for employee entitlements to salaries and annual leave represent the amount which NERSAhas a present obligation to pay as a result of the employees' services provided as at the reporting date. Theprovisions have been calculated at undiscounted amounts based on current salary rates.

Defined contribution plans

NERSA operates a defined contribution plan, which is administered by the Sanlam Pension Fund. The planis funded by payments from the employer and employees.

Obligations for contributions to defined contribution plans are recognised as an expense as they areincurred.

1.8 Financial Instruments

Financial assets and financial liabilities are recognised on the Statement of Financial Position when NERSAhas become a party to the contractual provisions of the instrument.

1.9 Trade and other receivables

Trade receivables are stated at their fair value as reduced by appropriate allowances of estimatedirrecoverable amounts.

1.10 Trade and other payables

Trade and other payables are stated at fair value.

1.11 Provisions

Provisions are recognised when NERSA has a present obligation as a result of past events and it is probablethat this will result in an outflow of economic benefits that can be reliably estimated.

1.12 Lease Rentals

Rental income from operating leases is recognised on a straight line basis over the term of the relevantlease.

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Operating lease payments are recognised as an expense on a straight-line basis over the lease term, exceptwhere another systematic basis is more representative of the time pattern in which economic benefits fromthe leased asset are consumed.

1.13 Impairment

At each Statement of Financial Position date, NERSA reviews the carrying amount of its tangible andintangible assets to determine whether there is any indication that those assets may be impaired. If any suchindication exists, the recoverable amount (highest of the assets fair value less costs to sell and its value inuse) of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is notpossible to estimate the recoverable amount of individual asset, the recoverable amount is determined forthe cash-generating unit to which the asset belongs.

If the recoverable amount of an asset (cash generating unit) is estimated to be less than its carrying amount,the carrying amount of the asset (cash generating unit) is reduced to its recoverable amount. Impairmentlosses are immediately recognised as an expense, unless the relevant asset is carried at a revalued amountunder another standard, in which case the impairment loss is treated as a revaluation decrease under thestandard.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash generating unit) isincreased to the revised estimate of its recoverable amount, so that the increased carrying amount does notexceed the carrying amount that would have been determined had no impairment loss been recognised forthe asset (cash generating unit) in prior years. A reversal of an impairment loss is recognised as incomeimmediately, unless the relevant asset is carried at a revalued amount under another standard, in whichcase the reversal of the impairment loss is treated as a revaluation increase under that other standard.

1.14 Taxation

No provision for South African normal taxation has been made as NERSA is exempted in terms of section10 (1) (CA) (1) of the Income Tax Act.

1.15 Commitments

Commitments represent goods/services that have been approved and /or contracted, but where no deliveryhas taken place at the reporting date.

Commitments are not recognised in the Statement of Financial Position as a liability or as expenditure inthe Statement of Financial Performance but are included in the disclosure notes.

1.16 Prior period errors

Where necessary, comparative figures have been restated to conform with the changes in presentation inthe current year and in the event of a change in accounting policy or prior period error.

1.17 Irregular, fruitless and wasteful expenditure

Irregular expenditure means expenditure incurred in contravention of, or not in accordance with therequirements of applicable legislation, including the PFMA. Fruitless and wasteful expenditure meansexpenditure that was made in vain and would have been avoided had reasonable care been exercised. Allirregular fruitless and wasteful expenditure is charged against income in the period in which it is incurred.

139

140



2.1 Property, plant and equipment

Land

R

Building

R

Motor Vehicles

R

Office Equipment

R

Computer Hardware

R

Total

Carrying amount at 31 March 2010

Gross carrying amount

Accumulated depreciation

Additions

Assets fair valued

Reclassification

Reclassification - depreciation

Useful life adjustment

Revaluation/ (Devaluation)

Disposals

Disposals - depreciation

Depreciation




Additions

Fair value adjustment

Disposal cost

Disposal Depreciation

Depreciation




2 000 000

2 000 000

-

-

-

-

-

-

8 300 000

-

-

-

10 300 000

-

10 300 000

-

-

-

-

-

10 300 000

10 300 000

-

392 548

593 509

(200 961)

522 137

-

-

-

- (189 290)

125 544

(140 781)

710 158

926 356

(216 198)

-

-

-

(189 297)

520 861

926 356

(405 495)

1 884 143

4 670 264

(2 786 121)

1 569 203

583 678

1 036 767

(778 136)

207 307

- (141 320)

91 049

(560 981)

3 891 710

7 718 592

(3 826 882)

5 600

17 040

(12 700)

7 848

(727 801)

3 181 697

7 728 532

(4 546 834)

2 085 442

5 234 696

(3 149 254)

1 930 098

87 642

(1 036 767)

778 136

1 431 498

-

(688 701)

542 374

(1 487 733)

3 641 989

5 526 968

(1 884 979)

899 962

-

(44 946)

14 779

(1 895 196)

2 616 588

6 381 984

(3 765 396)

38 465 836

48 193 886

(9 728 050)

5 686 847

671 320

-

-

1 638 805

(2 526 667)

(1 019 311)

758 967

(3 106 940)

40 568 857

51 006 075

(10 437 218)

905 562

17 040

-

(57 646)

22 628

(3 731 887)

37 724 554

51 871 031

(14 146 477)

32 103 703

35 695 417

(3 591 714)

1 665 409

-

-

-

-

(10 826 667)

-

-

(917 445)

22 025 000

26 534 159

(4 509 159)

-

-

-

-

(919 593)

21 105 407

26 534 159

(5 428 752)

The land and building is situated at 526 Madiba Street, Arcadia, Pretoria and is stated at a the revalued amount. The last revaluationwas done by an independent sworn appraiser on 31 March 2011 based on the market conditions, market rental, office space and the condition of improvement amounted to R 32, 325, 000. Had the land and building been carried at cost it would be carried at R 12, 114, 194. (2011: R 13, 319, 089).


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2.2 Intangible Assets

2012R

2011R

Carrying amount - Opening balance 8 602 703 4 464 498

Gross carrying amount 12 269 990 7 957 496

Accumulated depreciation (3 667 287) (3 492 998)

Additions 1 404 967 4 312 493

Disposals - Amortisation

Amortisation (4 448 112) (174 289)

Carrying amount - Closing balance 5 559 557 8 602 703

Gross carrying amount 13 674 956 12 269 990

Accumulated depreciation (8 115 399) (3 667 287)

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2012R

2011R

3. Inventory

Stationery 188 412 165 492

2012R

2011R

4. Trade and other receivables

Trade receivables 12 878 037 18 571 947

Other receivables 1 008 740 1 367 917

Staff debtors 77 994 723 505

Accrued Income 6 403 -

Other receivables 519 579 155 337

Prepayments 404 764 489 075

13 886 777 19 939 864

Reversal of prior year discounting of receivables - 248 401

13 886 777 20 188 265

Included in the trade receivables balance are debtors with a carrying amount of R 35 781 (2011: R 473 690) which are past duedate at the reporting date for which the entity has not provided as the amounts are still considered recoverable.

Ageing of trade receivables past due but not impaired

90-120 days 40 473 690

120 days + 35 741 -

35 781 473 690

The Energy Regulator considers that the carrying amount of all receivables approximates their fair values. The fair value calculationpertaining to trade debtors is based on the assumption that all outstanding debtor payments will be received within 60 days of yearend.


143


5. Cash and cash equivalents

Cash and cash equivalents comprise of short-term, highly liquid investments that are held with registered financial institutions with maturities of three months or less and that are subject to insignificant interest rate risk. The carrying amount of this investment approximates its fair value. Cash and cash equivalents further include cash on hand.

2012R

2011R

Reserve bank - Corporation for Public Deposits 72 751 309 83 752 335

Standard Bank current account 10 055 371 15 199 765

Petty cash 4 398 2 828

82 811 078 98 954 928

The effective interest rate on short-term bank deposits was 5.44% p.a.

2012R

2011R

6. Trade and other payables

Trade creditors 1 257 305 1 471 263

Accruals 27 446 780 22 687 884

Creditors 8 616 854 4 338 247

Nominated Bonus 219 400 353 178

Leave Pay 3 672 439 3 195 371

Performance Bonus 14 938 087 14 801 088

Discounting of payables - prior year reversal - 15 131

28 704 085 24 174 277

6.1 The leave pay accrual relates to NERSA's estimated liability arising as a result of services rendered by employees.

6.2 The performance bonus accrual relates to performance bonuses payable to NERSA employees for services rendered by them from01 April 2011 to 31 March 2012.

144



7. Prior period adjustments

The correction of errors is in respect of expenditure amounting to R305 142 recorded in the 2011/12 financial year but relate to the2010/2011 financial year. In addition, revenue of R617 346 relating to the 2010/11 financial year was processed in 2011/12 financial year. Amortisation and depreciation of assets was incorrectly calculated in the previous year. The opening balance has beenappropriately restated and the correction resulted in the following:

2012R

2011R

Increase in operating expenditure - (305 142)

Increase in depreciation/amortisation - (3 608 766)

Increase in revenue - 617 346

Increase in deficit - (3 296 562)

Increase in accounts receivable 617 346

Increase in accumulated depreciation (3 608 766)

Increase in accounts payable (305 142)

Decrease in accumulated surplus (3 296 562)

2012R

2011R

8. Revenue

Revenue comprises invoiced levies on three industries as follows:

Levies received from Electricity 67 837 403 86 972 600

Levies received from Piped-Gas 42 173 143 28 169 408

Levies received from Petroleum Pipelines 31 626 431 40 055 355

141 636 976 155 197 364

2012R

2011R

9. Finance cost

Interest due to late payment 356 5 797

356 5 797


145


10. Breakdown of the deficit from operations

2012R

2011R

Deficit from operations was calculated after taking the following into account:

Auditors' Remuneration 1 597 999 1 823 879

Depreciation / Amortisation 8 179 999 3 281 229

- Buildings 919 593 917 445

- Motor vehicles 189 297 140 781

- Office equipment 727 801 560 981

- Computer hardware 1 895 196 1 487 733

- Computer software /Intangible Assets 4 448 112 174 289

Regulator Members remuneration 8 425 991 9 739 257

Compensation of employees

-Includes Executive management remuneration

Salaries 89 394 573 81 601 582

- Basic Salaries 76 057 554 68 426 967

- Performance awards 13 337 019 13 174 615

Social Contributions 13 009 097 12 422 366

- Pension 8 598 177 7 967 948

- Medical Aid 3 649 687 3 367 643

- Leave Pay 519 224 848 380

- UIF 242 009 238 396

2012R

2011R

11. Finance income

Interest received 4 742 585 5 920 806

4 742 585 5 920 806

146



12. Cash generated from operations

2012R

2011R

Deficit for the year (32 856 715) (2 359 930)

Adjustments for:

Depreciation 8 179 999 (321 579)

Interest income (4 742 585) (5 914 517)

Interest expense 356 5 797

Loss/(profit) on disposal of assets (35 018) 260 344

Profit on valuing of fixed assets (fair valuing) 17 040 1 849 389

Fair value adjustments on assets - (2 677 567)

Proceeds from insurance included under financing activities (47 720) -

Donation Income non cash (11 080) -

Changes in working capital 10 808 376 6 516 701

Decrease/(Increase) in inventory (22 920) 58 527

Decrease/(Increase) in trade and other receivables 6 301 488 5 637 838

Increase in trade and other payables 4 529 808 820 336

(18 687 347) (2 641 362)


147


13. Energy Regulator Members' Remuneration

13.1 Remuneration for the year ended 31 March 2012

Salary

R

Car Allowance

R

Reimbursiveallowances

R

Medical

R

Pensioncontribu-tions and

UIF R

Total

R

Ms P Nzimande (CEO) * 1 707 277 110 000 46 968 - 210 681 2 074 926

Mr T Bukula ** 1 265 765 50 000 100 307 80 976 160 608 1 657 656

Dr R Crompton ** 1 354 952 9 180 38 465 32 610 160 608 1 595 815

Ms E Teljeur ** 1 277 817 51 577 57 512 - 160 608 1 547 514

5 605 811 220 757 243 252 113 586 692 505 6 875 911

* Appointed 1 May 2011 ** Re-appointed 1 April 2011

The following bonuses for 2010/11 financial year were paid in the 2011/12 financial year to the Full Time Regulator Members.

Ms P Nzimande (CEO) -

Mr T Bukula 131 823

Dr R Crompton 117 176

Ms E Teljeur 117 176

366 175

ScheduledMeetings

R

SpecialAssign-ments

R

Reimbur-sive al-

lowances R

Total

R

NERSA Part-Time Regulator Members

Ms CB Khuzwayo (Chairperson) (Appointed 1 January 2010) 211 418 206 090 19 057 436 565

Mr MJ Lesejane (Deputy Chairperson) (Appointed 1 January 2010) 139 890 61 534 7 096 208 520

Ms KR Mthimunye (Member) (Appointed 1 January 2010) 198 444 26 768 19 093 244 305

Ms GM Whittington Banda (Member) (Appointed 1 January 2010) 325 162 96 540 40 910 462 612

Mr O Komane (Member) (Appointed 1 November 2011) 44 080 - 840 44 920

NERSA Part-Time External Regulator Members

Ms M Joubert (Re-appointed 1 March 2010) 0 0 0 0

Ms N Joubert (Re-appointed 1 March 2010) 56 858 25 492 808 83 158

Mr J Mabaso (Re-appointed 1 March 2010) 40 388 9 022 3 840 53 250

Mr M Nkhabu (Re-appointed 1 March 2010) 16 470 - 280 16 750

Total NERSA Part-Time Energy Regulator members 1 032 710 425 446 91 924 1 550 080

Total NERSA Energy Regulator members remuneration 8 425 991

148



13.2 Remuneration for the year ended 31 March 2011

Salary

R

Car Allowance

R


R

Medical

R


UIF R

Total

R

Mr SS Mokoena (CEO) * 1 771 602 240 000 16 749 90 543 227 521 2 346 415

Mr T Bukula 1 433 769 50 000 24 353 74 853 152 166 1 735 141

Dr R Crompton 1 545 728 68 000 2 938 30 150 152 166 1 798 983

Ms E Teljeur 1 584 601 54 000 37 395 - 152 166 1 828 163

6 335 700 412 000 81 436 195 546 684 020 7 708 702

* Contract ended 31 March 2011

The following bonuses were paid (in the 2010/11 financial year) to the Full Time Regulator Members with regards to the 2008/2009*and 2009/2010^ financial years

Mr SS Mokoena (CEO) 269 729*

Mr T Bukula 123 690^

Dr R Crompton 123 690^

Ms E Teljeur 123 690^

640 799

ScheduledMeetings

R

SpecialAssign-ments

R

Reimbur-sive al-

lowances R

Total

R

NERSA Part-Time Regulator Members

Ms CB Khuzwayo (Chairperson) (Appointed 1 January 2010) 421 256 219 423 40 045 680 724

Mr MJ Lesejane (Deputy Chairperson) (Appointed 1 January 2010) 216 028 86 483 40 221 342 732

Ms KR Mthimunye (Member) (Appointed 1 January 2010) 209 669 125 149 42 703 377 521

Ms GM Whittington Banda (Member) (Appointed 1 January 2010) 396 087 81 159 61 848 539 094

NERSA Part-Time External Regulator Members

Ms M Joubert (Re-appointed 1 March 2010) - - - -

Ms N Joubert (Re-appointed 1 March 2010) 27 450 10 980 172 38 602

Mr J Mabaso (Re-appointed 1 March 2010) 21 960 5 490 2 216 29 666

Mr M Nkhabu (Re-appointed 1 March 2010) 21 960 - 256 22 216

Total NERSA Part-Time Energy Regulator members 1 314 410 528 684 187 461 2 030 555

Total NERSA Energy Regulator members remuneration 9 739 257

* Ms M Joubert does not receive any remuneration from NERSA due to her employment contract not allowing it.


149



14. Executive Management Remuneration 31 March 2012

Salary

R

Car Allowance

R


R

OtherContribu-

tions

R


UIF R

Total

R

Mr M Ncetezo 1 125 833 120 000 138 623 1 497 41 065 1 427 019

Ms N Sithole 1 193 378 42 000 139 915 29 310 55 451 1 460 054

Ms B Chaunzwa* 790 416 85 551 97 981 50 214 42 669 1 066 830

Ms P Mathibela** 884 761 - 94 950 1 248 47 206 1 028 164

Ms N Maseti 863 214 60 000 110 493 39 390 40 130 1 113 228

Total 4 857 602 307 551 581 962 121 659 226 521 6 095 295

* Resigned 6 February 2012 ** Resigned 31 January 2012

The following bonuses were paid (in the 2011/12 financial year) to Executive Management with regard to the 2010/11 financial year.

Mr M Ncetezo 207 351

Ms N Sithole 209 285

Ms B Chaunzwa 198 448

Ms P Mathibela 207 987

823 071

150



14.1 Executive Management Remuneration 31 March 2011

Salary

R

Car Allowance

R

Pension Contribu-

tions

R

OtherContribu-

tions

R

Reimbur-sive al-

lowances

R

Total

R

Mr M Ncetezo 1 044 446 120 000 128 703 1 497 20 102 1 314 749

Ms N Sithole 1 102 691 42 000 130 367 27 207 11 555 1 313 821

Ms B Chaunzwa 817 222 100 800 106 942 50 591 2 765 1 078 319

Ms P Mathibela 957 616 - 106 435 1 497 37 301 1 102 849

Ms. N. Maseti * 344 500 25 000 44 499 15 849 - 429 848

Total 4 266 476 287 800 516 946 96 462 71 723 5 239 587

* Appointed 1 November 2010

The following bonuses were paid (in the 2010/11 financial year) to Executive Management with regard to the 2009/2010 financialyear:

Mr M Ncetezo 188 501

Ms N Sithole 228 406

Ms B Chaunzwa 168 308

Ms P Mathibela 91 499

676 714


15. Retirement Benefit Costs

NERSA has made provision for a pension plan covering for all its employees. The plan is governed by thePension Fund Act, 1956 (Act no. 24 of 1956). NERSA operates defined contribution plan. The plan is fundedthrough payments from the employer and the employees.

These payments are charged to the statement of financial performance in the year to which they are incurred.The total cost of R9, 248,817 charged to the statement of financial performance represents employee andemployer contributions paid to the plan. The liability of NERSA is limited to the contributions made.

16. Risk Management

NERSA's overall risk management program focuses on the unpredictability of financial markets and seeks tominimise potential adverse effects on the NERSA's financial performance. NERSA does not use derivativefinancial instruments to hedge risk exposures. Risk management is performed by management under policiesapproved by the Energy Regulator.

16.1 Liquidity risk

NERSA’s risk to liquidity is as a result of the funds available to cover future commitments. NERSA managesliquidity risk through an ongoing review of future commitments and credit facilities. Cash flow forecasts areprepared and related expenditures are monitored.

NERSA has a cash-flow risk mitigation reserve to overcome timing differences between the start of the financialyear and the start of levy payment by the industries. The reserve target is 3 months employment cost for allstaff members and 4.5% of the annual operating expenditure budget less employment costs.

16.2 Interest rate risk

NERSA's policy is to manage interest rate risk so that fluctuations in variable rates do not have a materialimpact on surplus (deficit). NERSA's exposure to interest rate risk and the effective interest rates on financialinstruments at the statement of financial position date are as follows:

151


152



Fair values of financial assets and financial liabilities

Weighted average rate

interestR

1 year or less

R

Non Interest

R

Total

R

Assets

Cash - 4 398 4 398

Short-term investments 5.44% 72 751 309 - 72 751 309

Current Account 3.75% 10 055 371 - 10 055 371

Trade receivables 8.50% 12 878 037 1 008 740 13 886 777

Total financial assets 95 684 717 1 013 138 96 697 855

Liabilities

Trade payables - 28 704 085 28 704 085

Total financial liabilities 28 704 085 28 704 085

16.3 Counterparty risk

Counterparty risk refers to the risk that a counterparty will default on its obligations resulting in financial loss to the entity. NERSA collectsits revenue based on three acts namely; Section 5B of the Electricity Act, 1987 (No.41 of 1987); Section 2 of the Gas Regulator LeviesAct, 2002 (No. 75 of 2002) and Section 2 of the Petroleum Pipelines Levies Act, 2004 (No. 28 of 2004). The risk of non payment islargely mitigated by the existence of the relevant legislation in this regard.

17. Commitments

2012R

2011R

Capital commitments

Computer Hardware 77 045 -

Intangibles (Computer Software) 601 177 -

678 223 -

Commitments for operating expenditure

Total commitments for operating expenditure at year end 6 339 710 3 308 348

Total commitments at year end 7 017 933 3 308 348


153


18. Going Concern

NERSA has carried out an assessment of the organisation's ability to continue operating as a going concern. One of the areas that werelooked at in conducting the above assessment was the organisation's ability to finance its operations in the short term, taking into accountthe legal processes involved in the approval and payment of levies in terms the relevant acts. Cash forecasts were conducted incorporatingthe levies from electricity, piped-gas and petroleum pipelines and there is reasonable expectation that the cash will be received. TheEnergy Regulator therefore concludes that the organisation will be able to continue as a going concern for the foreseeable future.

19. Irregular expenditure

In previous financial years, The National Energy Regulator (NERSA) Procurement Policy thresholds were not in alignment with the SupplyChain Management (SCM) Practice Note 8 of 2007/08 and with the Treasury Regulations 16A pertaining to the obligation to obtain atax clearance certificate. In the year under review certain internal SCM we not followed and resulted in the irregular expenditure below.

2012R

2011R

Opening balance 85 242 26 662 580

Add: Irregular expenditure 402 485 985 693

Less: Amounts condoned (402 485) (27 563 031)

Irregular expenditure awaiting condonation 85 242 85 242

Analysis of expenditure awaiting condonation per age analysis classification

Current year - 85 242

Prior year 85 242 -

Total 85 242 85 242

20. Operating Leases

Operating Lease commitment

NERSA has entered into operating lease agreements for the use of office equipment and parking. The future minimum lease payments are as follows:

2012R

2011R

1 year or less 3 400 111 3 364 411

2 - 5 years 8 019 595 6 627 764

11 419 706 9 992 175

Operating Lease Income

The minimum future lease receipts under non cancellable operating leases are with respect to the use of the NERSA premises andamount to:

2012R

2011R

1 year or less 58 464 28 837

2 - 5 years 264 587 -

323 051 28 837

154



21. Related Parties

Executive Authority

The Executive Authority to whom NERSA reports is the Minister of Energy. No transactions took place between NERSA and the Ministryand the Department of Energy for the period under review.

22. Contingent liabilities

2012R

2011R

Claims against Nersa 1 000 000 810 891

The claim relates to the court case that is pending after the service provider took NERSA to court due to dissatisfaction with the outcome of the tender process.

23. Budget Information

ACTUAL 2012

R

BUDGET 2011

R

REVENUE 146 569 096 154 908 375

Levy Income 141 636 976 147 408 375

Other Income 4 932 120 7 500 000

EXPENDITURE 179 425 811 210 591 101

Remuneration 110 829 661 124 891 411

Other operating costs 53 453 564 59 166 999

Consultants 15 142 586 26 532 691

Net Deficit for the period (32 856 715) (55 682 726)

24. Fruitless and Wasteful Expenditure

2012R

2011R

Payment of interest to Telkom due to invoices beingreceived after due date and consequently paid late. 356 5 797

155

Notes

156


Notes

National Energy Regulator (NERSA)Kulawula House526 Madiba Str

PO Box 40434, Arcadia, 0007 South Africa

Tel: +27(0) 12 401 4600Fax: +27(0) 12 401 4700

RP 252/2012ISBN: 978-0-621-41156-0

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