NERSA Strategic Plan 201213 201617 and Annual Performance

NERSA Strategic Plan (2012/13 – 2016/17) and Annual Performance Plan (2013/14 – 2015/16) 23 April 2013 1

CONTENT (1) A. Introduction B. Framework for Strategic Plans and Annual Performance Plans C. Planning Concepts D. Vision, Mission, Values and Regulatory Principles E. Mandate F. Achievements (2012/13) I. Electricity Industry Regulation II. Piped-Gas Industry Regulation III. Petroleum Pipelines Industry Regulation 2

CONTENT (2) G. Strategic Plan (2012/13 – 2016/17) I. Strategic Outcome Oriented Goals II. Contribution to Service delivery through the link to Twelve Government Outcomes III. Compliance with other Government Strategies IV. Strategic Objectives V. Programmes VI. Programme Strategic Objectives H. Challenges, NERSA’s Programmes I. III. IV. V. Response Electricity Industry Regulation Piped-Gas Industry Regulation Petroleum Pipelines Industry Regulation Cross-Cutting Regulatory Organisational and Link to 3

CONTENT (3) I. Annual Performance Plan (2013/14 – 2015/16) I. III. IV. V. Electricity Industry Regulation Piped-Gas Industry Regulation Petroleum Pipelines Industry Regulation Cross-Cutting Regulation Organisational J. Budget and Funding (2013/14) I. Ring-fencing Methodology II. Budget and Funding (2013/14) III. Programme Budgets (2013/14) K. Conclusion 4

A. INTRODUCTION 5

INTRODUCTION • The National Energy Regulator (NERSA), a Schedule 3 A Public Finance Management Act, 1999 (Act No. 1 of 1999) Public Entity was established on 1 October 2005 in terms of the National Energy Regulator Act, 2004 (Act No. 40 of 2004) to regulate: o Electricity industry (Electricity Regulation Act, 2006 (Act No. 4 of 2006)) o Piped-Gas industry (Gas Act, 2001 (Act No. 48 of 2001)) o Petroleum Pipelines industry (Petroleum Pipelines Act, 2003 (Act No. 60 of 2003)) • In executing its mandate NERSA endeavours to balance the interest of both licensed entities and end users/consumers 6

B. FRAMEWORK FOR STRATEGIC PLANS AND ANNUAL PERFORMANCE PLANS 7

FRAMEWORK FOR STRATEGIC PLANS AND ANNUAL PERFORMANCE PLANS (1) • Published by National Treasury in August 2010 • Applicable to all national and provincial departments, constitutional institutions and public entities in the development of their strategic plans • Applicable from 2012/13 for Schedule 3 A Public Entities • NERSA is required to: o Produce and table a Strategic Plan with a five-year planning horizon; o Produce and table an Annual Performance Plan including forward projections for a further two years, with annual and performance targets, where appropriate; and o Identify a core set of indicators needed to monitor institutional performance. 8

FRAMEWORK FOR STRATEGIC PLANS AND ANNUAL PERFORMANCE PLANS (2) • In line with the Framework NERSA published a Strategic Plan (2012/13 – 2016/17) • According to the Framework a “Strategic Plan may be changed during the five-year period that it covers. However, such changes should be limited to revisions related to significant policy shifts or changes in the service-delivery environment” • Upon revision it was found: o There were no significant policy shifts or changes; and o There were no significant gaps in the approved Strategic Plan. • Strategic Plan was not amended. 9

C. PLANNING CONCEPTS 10

PLANNING CONCEPTS 11

D. MISSION, VISION, VALUES AND REGULATORY PRINCIPLES 12

VISION “To be a world-class leader in energy regulation” MISSION “To regulate the energy industry in accordance with government laws and policies, standards and international best practices in support of sustainable development” 13

VALUES • • Passion Spirit of Partnership Excellence Innovation Integrity Responsibility Professionalism 14

REGULATORY PRINCIPLES Underpinned by NERSA’s legal mandate • Transparency • Neutrality • Consistency and Predictability • Independence • Accountability • Integrity • Efficiency 15

E. MANDATE 16

MANDATE (1) NERSA’s Mandate is anchored in: • 4 Primary Acts: o o National Energy Regulator Act, 2004 (Act No. 40 of 2004) Electricity Regulation Act, 2006 (Act No. 4 of 2006) Gas Act, 2001 (Act No. 48 of 2001) Petroleum Pipelines Act, 2003 (Act No. 60 of 2003) • 3 Levies Acts: o Gas Regulator Levies Act, 2002 (Act No. 75 of 2002) o Petroleum Pipelines Levies Act, 2004 (Act No. 28 of 2004) o Section 5 B of the Electricity Act, 1987 (Act No. 41 of 1987) 17

MANDATE (2) • 3 Facilitating Acts: o Public Finance Management Act, 1999 (Act No. 1 of 1999) (PFMA) o Promotion of Access to Information Act, 2000 (Act No. 2 of 2000) (PAIA) o Promotion of Administrative Justice Act, 2000 (Act No. 3 of 2000) (PAJA) 18

F. ACHIEVEMENTS (2012/13) 19

I. ELECTRICITY INDUSTRY REGULATION • Tariffs o Approved an average annual increase of 8% in the revenue requirements for Eskom for the next five years; and o Received 183 out of 186 (98%) municipal and private distributor tariffs applications for 2012/13 and approved all for implementation. • Generation o Approved 47 Renewable Energy Generation licences (within 90 days from application instead of the 120 days legislated timeframe); and o Approved 7 licences under the Short Term Power Purchase Programme (STPPP) as part of the short term mitigation programme during maintenance of Eskom generation fleet. • Distribution o 9 distribution licences were issued for connection facilities between the Eskom delivery point and IPP generation facilities. • Other o Assessed and concurred with three determinations of the Minister of 20 Energy in terms of Section 34 of the Electricity Regulation Act, 2006 (Act No. 40 of 2006).

II. PIPED-GAS INDUSTRY REGULATION • Pricing and Tariffs o Approved the maximum prices of piped-gas for Sasol Gas in terms of section 21(1)(p) of the Gas Act, (Act No. 48 of 2001), for the period 26 March 2014 to 30 June 2017 for various customer categories / classes; o Approved the transmission tariffs for Sasol Gas in terms of section 4(h) of Gas Act, (Act No. 48 of 2001), for the period 26 March 2014 to 30 June 2015; and o Approved preliminary tariff assessment for Transnet Pipelines’ gas multi-year tariff determination for the Lilly Pipeline for the periods 2013/14, 2014/15 and 2015/16. • Licensing o Granting of 5 licences for the construction of gas distribution facilities, 2 licences for trading in gas and 1 licence for the operation of a gas facility; and o Amending 5 gas trading licences and 5 licences for the operation of gas facilities. 21

III. PETROLEUM PIPELINES INDUSTRY REGULATION • Tariffs o Approved an increase of 8. 53% in allowable revenue for Transnet Petroleum Pipelines for the period 2013/14; and o Made decisions on 60 storage and loading facilities. • Licensing o Approved 8 construction licences and 3 operation licences; o Amended 7 construction and storage licences; and o Revoked 13 storage licences. • Other o Investigated 67 suspected unlicensed activities – only 4 of these do not require a licence. All the others indicated that they will apply for a licence 22

G. STRATEGIC PLAN (2012/13 – 2016/17) 23

I. STRATEGIC OUTCOME ORIENTED GOALS (1) • The strategic outcome oriented goals of NERSA are cascaded from the mandate and reflect the 12 National outcomes as well as those of the Department of Energy. These goals attest to NERSA’s role in facilitating the achievement of the national socio-economic and sociopolitical development agenda. The strategic outcome oriented goals are: 1. To facilitate Security of Supply in order to support sustainable socioeconomic development in South Africa; 2. To facilitate investment in infrastructure in the energy industry to support sustainable socio-economic development in South Africa; 24

I. STRATEGIC OUTCOME ORIENTED GOALS (2) 3. To promote competitive and efficient functioning of the energy industry in order to sustain socio-economic development in South Africa; 4. To facilitate affordability of and accessibility to the energy industry to balance economic interests of all stakeholders in support of socioeconomic development of South Africa and a better life for all; and 5. To position and establish NERSA as a credible and reliable regulator in order to create regulatory certainty. 25

II. CONTRIBUTION TO SERVICE DELIVERY THROUGH THE LINK TO THE TWELVE NATIONAL OUTCOMES • The strategic outcome oriented goals of NERSA are linked to the following 12 National outcomes: 2. A long and healthy life for all South Africans; 4. Decent employment through inclusive economic growth; 6. An efficient, competitive and responsive economic infrastructure network; 8. Sustainable human settlements and improved quality of household life; 10. Environmental assets and natural resources that are well protected and continually enhanced; and 26 12. An efficient, effective and development oriented public service and an empowered, fair and inclusive citizenship.

OUTCOME 2: A LONG AND HEALTHY LIFE FOR ALL SOUTH AFRICANS • NERSA contributes through: o Offering advice/comment with regards to cleaner fuels; o Driving renewable energy programmes and promoting the introduction of renewables and gas into the energy mix; o In determining electricity pricing, NERSA has set aside 3. 2 c/k. Wh in the second Multi-Year Price Determination (MYPD 2) for the Electrification Cross-subsidy; o Taking affordability into consideration when setting and/or approving tariffs and prices; o Implementing inclining block tariffs to protect the low income electricity consumers; and o Regulating in a manner which facilitates security of supply. 27

OUTCOME 4: DECENT EMPLOYMENT THROUGH INCLUSIVE ECONOMIC GROWTH • NERSA contributes through: o Licensing and the setting and/or approving of tariffs and prices. In this manner NERSA creates pre-conditions towards the achievement of this outcome; o Approving renewable energy licensees to ensure that the socioeconomic development commitments specified in the Do. E bidding process are met; and o Promoting companies that are owned and controlled by Historically Disadvantaged Individuals (HDIs) to become competitive. 28

OUTCOME 6: AN EFFICIENT, COMPETITIVE AND RESPONSIVE ECONOMIC INFRASTRUCTURE NETWORK • NERSA contributes through: o Regulating in a manner which facilitates security of supply; o Setting rules and frameworks that facilitate the building of new infrastructure; o Setting and/or approving cost reflective tariffs and prices that encourage investment; o Facilitating 3 rd party access to facilities; and o Monitoring compliance and undertaking technical audits leading to regulatory efficiency. 29

OUTCOME 8: SUSTAINABLE HUMAN SETTLEMENTS AND IMPROVED QUALITY OF HOUSEHOLD LIFE • NERSA contributes through: o o o Facilitating access to electricity / energy services; Facilitating reliability of supply; Monitoring maintenance of infrastructure; Compliance monitoring to licence conditions; and Dispute resolution, including mediation, arbitration and handling of complaints. 30

• OUTCOME 10: ENVIRONMENTAL ASSETS AND NATURAL RESOURCES THAT ARE WELL PROTECTED AND CONTINUALLY ENHANCED NERSA contributes through: o Incorporating compliance with the National Environmental Management Act, 1998 (Act No. 107 of 1998) into licence conditions; o Promoting energy efficiency in licencees and in the NERSA building; o Saving of electricity (MYPD 1 and MYPD 2); o We have concurred with determinations made by the Minister of Energy in line with section 34 of the Electricity Regulation Act, 2006 (Act No. 4 of 2006) regarding Open Cycle Gas Turbines in order to give effect to the Integrated Resource Plan (IRP); o Monitoring the implementation of the IRP; and 31 o Facilitating the transition to a low carbon economy.

OUTCOME 12: AN EFFICIENT, EFFECTIVE AND DEVELOPMENT ORIENTED PUBLIC SERVICE AND AN EMPOWERED, FAIR AND INCLUSIVE CITIZENSHIP • NERSA contributes through: o Transparent Processes; o All Decisions and Reasons thereof are made public through being published on the web site; o The Public is invited to make comments prior to decisions being made (written or in public hearing); o Customer education; o Training and development of staff and stakeholders; o Clean Energy Education and Empowerment; and 32 o Corporate Social Investment – Luvuyo House, Techno Girl.

III. COMPLIANCE WITH OTHER GOVERNMENT STRATEGIES • NERSA’s Strategic Plan was not revised in 2013/14 (no amendment in legislation); • Other Government Strategies such as National Development Plan (NDP), Industrial Policy Action Plan (IPAP) and the Strategic Infrastructure Programme (SIP) were not completed at the time of finalisation of the Strategic Plan (2012/13 – 2016/17); and • All of these will be taken into consideration in the new planning cycle starting in June 2013. 33

IV. STRATEGIC OBJECTIVES • The strategic objectives of NERSA, expressed as the desired end state of the energy industry are stated as: o A Regulatory environment that facilitates investment in energy infrastructure; o Ensuring energy supply that is certain and secure for current and future user needs; o Ensure that fair competition exists within the energy industry; o Ensure that regulatory certainty exists within the energy industry; o Ensure that energy is accessible and affordable for all citizens; and o Ensure that NERSA is established and positioned as a credible and reliable regulator. 34

V. PROGRAMMES • In order to achieve its outcome oriented goals NERSA will deliver on its strategic objectives through the following structured programmes: 1. 2. 3. 4. 5. 6. Setting and/or approving tariffs and prices; Licensing and registration; Compliance monitoring and enforcement; Dispute resolution including mediation, arbitration and the handling of complaints; Setting of rules, guidelines and codes for the regulation of the three industries; and Establishing NERSA as an efficient and effective regulator. 35

VI. PROGRAMME STRATEGIC OBJECTIVES Programme Strategic Objective Setting and/or approval of tariffs and prices To set and approve tariffs and/or prices that facilitate affordability and accessibility whilst balancing the economic interests of all stakeholders Licensing and registration To control entry and ensure orderly development of the industry Compliance monitoring and enforcement To monitor and enforce compliance to legislation and licence conditions in order to ensure the efficient operation of licensed activities within the legislative framework Dispute resolution including mediation, arbitration and handling of complaints To create a fair balance between the needs of all stakeholders Setting of rules, guidelines and codes for regulation To ensure the setting of appropriate rules, guidelines and codes of best practices in the quest to promote uniformity and standardise practices in the regulation of the three energy industries Establishing NERSA as an efficient and To facilitate the effectiveness and efficiency of effective regulator NERSA as a regulator in the energy industry 36

H. CHALLENGES, NERSA’s RESPONSE AND LINKS TO PROGRAMMES 37

I. Electricity Industry Regulation 38

Challenge (1) NERSA’s Response Programme Demand Supply Streamlining Independent Power Producer (IPP) licensing process Energy Efficiency and Demand Side Management Energy Conservation Scheme for emergency conditions Create space for maintenance of the generation fleet Assessment and evaluation of projects in Eskom’s approved Transmission Development Plan Licensing and Registration Transport and reliability Setting of rules, guidelines and codes Licensing and Registration Setting of rules, guidelines and codes 39

Challenge (2) NERSA’s Response Distribution and reticulation Compliance framework implementation and monitoring Cost of supply studies for electricity distributors Access, affordability and investments Customisation of the Inclining Block Tariffs (IBTs) Monitoring the implementation of MYPD 3 Municipal tariff approvals Establishment of consumer forums Programme Compliance monitoring and enforcement Setting of rules, guidelines and codes Setting and/or approval of prices and tariffs Establishing NERSA as an efficient and effective regulator 40

II. Piped-Gas Industry Regulation 41

Challenge (1) NERSA’s Response Programme Lack of credible gas anchor customers Development of a gas market o. Monitor trends in alternative sources of supply o. Continue the dialogues on impediments to gas infrastructure investment Sending correct price signals o Implement maximum pricing methodology o Market value pricing investigations o Enforce pricing provisions of the Agreement Establishing NERSA as an efficient and effective regulator Ensure that prices are equitable and competitive for all categories / classes of customers Setting and/or approval of prices and tariffs Compliance monitoring and enforcement 42

Challenge (2) NERSA’s Response Programme Entry to and competition within the gas market Promote entry and competition o. Licence construction applications o. Compliance framework implementation and monitoring o. Third Part Access enforcement and advocacy Licensing and Registration Compliance monitoring and enforcement Loss of credibility and regulatory reputation can deter development of the gas market Create regulatory certainty Establishing NERSA as an efficient and effective regulator 43

III. Petroleum Pipelines Industry Regulation 44

Challenge (1) Construction delays have resulted in increased capital costs which will attract higher tariffs NERSA’s Response o Determining “prudently incurred” costs in the increased capital costs due to infrastructure construction delays o Monitor impact on Transnet’s financial state Tariff increases may Setting of appropriate tariffs incentivise other modes in line with the published of transport (road and methodology rail) when pipelines need higher volumes Security of supply of Monitoring security of inland petroleum to the inland supply areas Programme Setting and/or approval of prices and tariffs Establishing NERSA as an efficient and effective regulator 45

Challenge (2) NERSA’s Response Programme Applicants for storage construction licences need to find areas of low/no competition to remain competitive Evaluation of storage construction licence applications Monitoring and inspection of licences issued Identification of and appropriate action against unlicensed facilities Common carriage and 3 rd party access: monitoring facilitation and enforcement Licensing and registration Promotion of 3 rd party access Compliance Monitoring and Enforcement 46

IV. Cross-Cutting Regulatory 47

Challenge (1) Information Asymmetry NERSA’s Response Implementation of the Regulatory Reporting Manuals (Financial and Non-Financial) Advise policy makers of NERSA Regulator views, policy gaps and communication with NERSA’s mandate Policy Maker Coordinate NERSA activities Memoranda of with other regulators with Understanding concurrent jurisdiction Consumer Advocacy o Consumer Education o Improve access of customers to public hearing notices Programme Establishing NERSA as an efficient and effective regulator 48

Challenge (2) NERSA’s Response Programme Assess NERSA’s o Regulatory Impact Establishing NERSA as processes and Analysis / Assessment an efficient and effective methodologies against best o Benchmarking of regulator in world practices through regulatory decisions regulatory analysis, o Harmonisation of research, benchmarking regulatory processes and auditing 49

V. Organisational 50

Challenge (1) Legislative amendment o. National Energy Regulator Amendment Bill o. Electricity Regulation Amendment Bill o. Independent System and Market Operator Bill Possible change in institutional character Attraction and retention of requisite skills NERSA’s Response Programme Institutional and Organisational Review Establishing NERSA as an efficient and effective regulator o Improved Human Resource Policies, Procedures and Systems o Culture recalibration o Conditions of Service Establishing NERSA as an efficient and effective regulator 51

Challenge (2) NERSA’s Response Programme Enabling technology o Business Process Analysis o Improvement of IT systems and processes o Knowledge Management o Organisational culture development o Refurbishment of the NESRA building Stakeholder perception survey Establishing NERSA as an efficient and effective regulator Conducive working environment Image of NERSA Establishing NERSA as an efficient and effective regulator 52

I. ANNUAL PERFORMANCE PLAN (2013/14 – 2015/16) 53

I. ELECTRICITY INDUSTRY REGULATION 54

NUMBER OF KPI’S PER PROGRAMME 55

Programme 1: Setting and/or approval of tariffs and prices • • • Municipal tariff approvals; Implementation of inclining block tariffs; Free Basic Electricity; Monitoring the implementation of MYPD 3; and Structural adjustment approvals. 56

Programme 1: Setting and/or approval of tariffs and prices (1) Programme KPI % of tariff applications of all licensed distributors approved Annually published Guidelines for Municipal tariff increases and Benchmarks Number of metros’ Regulatory Reporting Manual (RRM) implementation plans approved % of licensed distributors for residential customers with Approved Inclining Block Tariffs (IBTs) Annually approved Free Basic Electricity Rate for Eskom Target for 2013/14 100% Published Guidelines for Municipal tariff increases and Benchmarks for 2014/15 6 80% Free Basic Electricity Rate for 2013/14 approved and communicated 57

Programme 1: Setting and/or approval of tariffs and prices (2) Programme KPI Target for 2013/14 Annual report on Eskom’s actual revenue recovery Annually approved Regulatory Financial Approved Eskom’s Regulatory Financial Reports of Eskom Reports for 2012/13 Annual approved report on Eskom’s actual revenue recovery Annually approved retail tariffs (ERTSA) Approved Eskom’s retail tariffs (ERTSA) of Eskom for 2014/15 58

Programme 2: Licensing and Registration • Processing of licence applications 59

Programme 2: Licensing and Registration Programme KPI % of licence applications processed within statutory time frames Target for 2013/14 80% of licence applications processed within 120 days from application 60

Programme 3: Compliance Monitoring and Enforcement • Conducting of compliance audits; and • Monitoring implementation of action plans arising from compliance audits. 61

Programme 3: Compliance monitoring and enforcement Programme KPI Target for 2013/14 Number of licencees audited per annum 10 to determine their level of compliance with licence conditions Number of audit reports on the state on 10 compliance of licencees with licence conditions Number of corrective action plans 5 received from non-complying licencees monitored Annual report on state of compliance in the electricity industry published 62

Programme 4: Dispute resolution, including mediation, arbitration and handling of complaints • Resolution of complaints 63

Programme 4: Dispute resolution, including mediation, arbitration and handling of complaints Programme KPI % of complaints processed within statutory timelines Annual report on the trends regarding to and status of complaints in the electricity industry published Target for 2013/14 75% of complaints processed within 120 days from receipt Annual report on the trends regarding to and status of complaints in the electricity industry published 64

Programme 5: Setting of rules, guidelines and codes for the regulation of the electricity industry • Grid Code administration; • Audits of Transmission development plans; • Audits on Energy Efficiency and Demand Side Management (EEDSM) and compliance with the MYPD; and • Reports on performance and progress of Renewable Energy. 65

Programme 5: Setting of rules, guidelines and codes for the regulation of the electricity industry (1) Programme KPI Target for 2013/14 % of applications from the ESI relating to fair and equitable access to electricity infrastructure requiring exemptions to the South African distribution and transmission grid code, considered in line with legal requirements 80% % of applications from the ESI relating to fair and equitable access to electricity infrastructure requiring amendment to the South African distribution and transmission grid code, considered in line with legal requirements 80% Updated grid code Annually published updated Grid Code 66

Programme 5: Setting of rules, guidelines and codes for the regulation of the electricity industry (2) Programme KPI Target for 2013/14 Number of approved audit reports that details the assessment and evaluation of projects in Eskom’s approved Transmission Development Plan for compliance with the South African Grid Code Number of approved audit reports for the review of EEDSM and compliance with the MYPD 1 Number of action plans for the annual EEDSM audits 1 Number of reports on the performance and progress of Renewable Energy 4 1 67

Programme 6: Establishing NERSA as an efficient and effective regulator • Establishment of end-user forums 68

Programme 6: Establishing NERSA as an efficient and effective regulator Programme KPI Number of end-user forums established Target for 2013/14 5 69

II. PIPED-GAS INDUSTRY REGULATION 70

NUMBER OF KPI’S PER PROGRAMME 71

Programme 1: Setting and/or approval of tariffs and prices • Approval of maximum prices; • Approval of transmission and storage tariffs; • Report on Sasol Gas compliance with all pricing provisions in terms of Schedule One to the Agreement; and • Calculation of aggregate prices. 72

Programme 1: Setting and/or approval of tariffs and prices (1) Programme KPI Target for 2013/14 Finalised number of maximum prices applications approved within 120 days from the date of publishing the (final) price application Finalise maximum price applications for all licensees other than Sasol Gas within 120 days from the date of publishing the (final) price application Finalised number of transmission and storage tariffs applications within 120 days from the date of publication of the tariff application Decision on Transnet transmission tariff and all storage licensee tariff applications within 120 days of the date of publication of the (final) tariff application Draft/consultation (Gauteng) gas transmission pipeline tariffs for Sasol Gas Number of days for providing a report on Sasol Gas compliance with all pricing provisions in terms of Schedule One to the Agreement Report on Sasol Gas compliance with all pricing provisions contained in Schedule One to the Agreement to be completed within 110 73 days after receipt of the relevant information

Programme 1: Setting and/or approval of tariffs and prices (2) Programme KPI Target for 2013/14 Number of days for completing the Approval of aggregate prices of gas for 2012 calculation of aggregate prices of in each province within 120 days after receipt gas for each province in line with of the relevant information legal requirements 74

Programme 2: Licensing and Registration • Processing of licence and registration applications and implementation of decisions; • Investigation of industry investigated to identify unregistered import and production activities; and • Reporting on the implementation of the gas to power component of Integrated Resource Plan (IRP 2010). 75

Programme 2: Licensing and Registration Programme KPI % of all licence applications finalized according to licensing procedures Number of days taken to finalise registration applications Annual reports on the implementation of gas to power in IRP Target for 2013/14 50% 100% of registration applications are processed within 60 days and approved within 90 days. Draft implementation framework developed and communicated 76

Programme 3: Compliance Monitoring and Enforcement • • Assessment of volume balance reports; Conducting of audits on ROMPCO pipeline; Conducting investigations / inspections; and Reports on uncommitted capacity. 77

Programme 3: Compliance Monitoring and Enforcement Programme KPI Target for 2013/14 Number of monthly volume balance reports assessed and discrepancies investigated 12 Number of audits on the ROMPCO pipeline conducted 2 Number of investigations / inspections conducted 4 Quarterly monitoring reports on RRM Compliance Full year financial reports submitted by 50% of licensees included in the pilot project Evaluation reports on uncommitted capacity in transmission pipelines ROMPCO + 1 78

Programme 4: Dispute resolution, including mediation, arbitration and handling of complaints • Resolution of received complaints; and • Finalisation of investigations. 79

Programme 4: Dispute resolution, including mediation, arbitration and handling of complaints Programme KPI % of complaint investigations completed within 9 months and non-compliance notices issued (where applicable) % of initiated investigations completed within 9 months and non-compliance notices issued (where applicable) Target for 2013/14 50% 80

Programme 5: Setting of rules, guidelines and codes for the regulation of the pipedgas industry • Developed, approved and implemented HDI scorecard. 81

Programme 5: Setting of rules, guidelines and codes for the regulation of the piped-gas industry Programme KPI Developed, approved and implemented HDI scorecard Target for 2013/14 Approved HDI scorecard implementation framework 82

Programme 6: Establishing NERSA as an efficient and effective regulator • Proposed amendments to legislation engagements with policy maker; and • Stakeholder workshops. and other 83

Programme 6: Establishing NERSA as an efficient and effective regulator Programme KPI Ongoing engagements with policy makers Number of stakeholder workshops and media engagements Target for 2013/14 Continued engagement policy makers and comment on legislative amendments where applicable 4 84

III. PETROLEUM PIPELINES INDUSTRY REGULATION 85

NUMBER OF KPI’S PER PROGRAMME 86

Programme 1: Setting and/or approval of tariffs and prices • Setting of pipeline tariffs (Transnet and others); • Approval of storage and loading facility tariffs. 87

Programme 1: Setting and/or approval of tariffs and prices Programme KPI Number of pipelines tariffs applications approved % of licensed storage and loading facilities’ tariffs approved Target for 2013/14 Approved Transnet pipeline tariffs for 2014/15 Approved tariffs for Chevron 40% Updated published storage tariff Published storage tariffs Annual Report on benchmarking of storage tariffs Conduct a benchmark study on storage tariffs Updated published financial and information Financial and tariff information published on NERSA website 88

Programme 2: Licensing and Registration • Processing of licence applications; and • Investigation of suspected unlicensed activities. 89

Programme 2: Licensing and Registration Programme KPI % of licences approved within statutory deadlines Number of suspected unlicensed facilities investigated Target for 2013/14 100% 5 90

Programme 3: Compliance Monitoring and Enforcement • • • Infrastructure utilisation reports; Completion of assessment reports; HDSA reporting; Storage allocation reporting; and Reporting on specified licensees’ implementation of the pipelines and loading facilities access principles. 91

Programme 3: Compliance Monitoring and Enforcement Programme KPI Number of infrastructure utilisation reports % of reports analysed and ready for noting within 60 days Published status report on HDSA indicators based on a % of licensees Published storage allocation mechanisms based on a % of licensees Number of reports on the analysis of specified licensees’ implementation of the pipelines and loading facilities access principles Target for 2013/14 2 90% 70% 2 92

Programme 4: Dispute resolution, including mediation, arbitration and handling of complaints • Resolution of complaints 93

Programme 4: Dispute resolution, including mediation, arbitration and handling of complaints Programme KPI % of complaints received investigated and concluded in line with legal requirements Target for 2013/14 100% of complaints received investigated and reported on within 60 days. 94

Programme 5: Setting of rules, guidelines and codes for the regulation of the petroleum pipelines industry • Publish licensing guidelines; • Publish tariff guidelines for storage facilities; • Review and publish Frequently Asked Questions document on tariff applications; • Publish guidelines for calculation of Starting Regulatory Asset Base; • Publish Minimum Information Requirements for Tariff Applications; and • Reporting on contributions towards alignment between 95 different Acts and government policies and regulations.

Programme 5: Setting of rules, guidelines and codes for the regulation of the petroleum pipelines industry (1) Programme KPI Target for 2013/14 Approved licensing guidelines published Updated licensing guidelines published on NERSA website Approved tariff guidelines for storage Updated annual tariff guidelines for facilities published storage facilities published on NERSA website Approved annually reviewed FAQ Approved reviewed FAQ published on published NERSA website Approved guidelines to determine the Guidelines to determine the SRAB of storage facilities published Approved Minimum Information Approved updated MIRTA published on Requirements for Tariff Applications NERSA website (MIRTA) published 96

Programme 5: Setting of rules, guidelines and codes for the regulation of the petroleum pipelines industry (2) Programme KPI Number of reports on contributions towards alignment between Petroleum Pipelines Act and Petroleum Pipelines Levies Act and government policies and regulations Target for 2013/14 Quarterly 97

Programme 6: Establishing NERSA as an efficient and effective regulator • Approved implementation plan for the findings and recommendations in the Report on investigated infrastructure and bottlenecks in the petroleum pipelines infrastructure in Durban; and • Report on the inland supply forecast. 98

Programme 6: Establishing NERSA as an efficient and effective regulator Programme KPI Approved implementation plan for the findings and recommendations in the Report on investigated infrastructure and bottlenecks in the petroleum pipelines infrastructure in Durban Number of reports on the inland supply forecast Approved RRM for non-financial information (NFI) Volume 7 Target for 2013/14 Implementation plan for the findings and recommendations in the Report on investigated infrastructure and bottlenecks in the petroleum pipelines infrastructure in Durban Biannual Finalised RRM for NFI 99

IV. CROSS-CUTTING REGULATION 100

NUMBER OF KPI’S PER PROGRAMME 101

Programme 6: Establishing NERSA as an efficient and effective regulator • • • Benchmark report on regulatory decisions by category; Impact of regulatory decisions; Research on new sources of energy; Stakeholder engagement and education; and Approved proposals / comments on policy changes. 102

Programme 6: Establishing NERSA as an efficient and effective regulator (1) Programme KPI Benchmark report on regulatory decisions by category Report on the impact of regulatory decisions Research reports on new sources of energy Published quarterly newsletters Number of stakeholder engagement and education programmes conducted Target for 2013/14 Benchmark report on regulatory decisions by category Approved framework for conducting impact assessment Research reports Quarterly newsletters published 25 103

Programme 6: Establishing NERSA as an efficient and effective regulator (2) Programme KPI Approved proposals / comments on policy changes Target for 2013/14 Approved proposals / comments on policy changes (if and when necessary) 104

V. ORGANISATIONAL 105

NUMBER OF KPI’S PER PROGRAMME 106

Programme 6: Setting of rules, guidelines and codes for the regulation of the electricity industry • • • Implementation of Annual Performance Plan; Organisational structure filled; Training and Development; Customer satisfaction; Unqualified audit; and Payment of creditors. 107

Programme 6: Establishing NERSA as an efficient and effective regulator (1) Programme KPI % of targets in the Annual Performance Plan met % of organisational structure filled % of staff undergoing training and development Level of (%) customer satisfaction Result of annual audit % of creditors paid within 30 days after all relevant documentation have been received Target for 2013/14 Baseline to be determined in 2012/13 95% 80% 68% Unqualified 100% 108

J. BUDGET AND FUNDING (2013/14) 109

RING-FENCING METHODOLOGY • According to Section 13 of the National Energy Regulator Act, all accounts for the three regulated industries have to be ring-fenced o all direct costs attributable to an industry are allocated to that industry o the ratio of the staff compliment attributed to the industry-specific functions is used to allocate the remaining (common) costs to the respective industries o the common costs allocation ratio for electricity, piped-gas and petroleum pipelines industries is 58%: 21% 110

BUDGET AND FUNDING FOR 2013/14 Expenditure Income Levies Electricity R 159 225 099 R 137 043 936 0. 05468 c/k. Wh Piped-Gas R 56 942 531 R 48 808 067 30. 166 c/GJ Petroleum Pipelines R 59 739 715 R 50 933 740 0. 28777 c/l Other Total R 39 121 602* R 275 907 345 *Over recovery from previous years from regulated industries – approved by National Treasury 111

NATIONAL ENERGY REGULATOR OF SOUTH AFRICA Budget per programme 2013/14 Programme PROG 1 - Setting and/or approval of tariffs and prices PROG 2 - Licensing and Registration PROG 3 - Compliance monitoring and enforcement PROG 4 - Dispute resolution including mediation, arbitration and the resolution of complaints PROG 5 - Setting of rules, guides and codes for regulation PROG 6 - Establishing NERSA as an efficient and effective organisation Total per Industry Electricity Piped-Gas Petroleum Pipelines Total per Programme 51 820 027 12 358 916 26 623 264 90 802 206 23 216 712 7 867 285 11 974 737 43 058 734 15 477 808 7 867 285 8 708 092 32 053 185 10 318 539 1 866 190 3 110 072 15 294 801 40 070 485 10 697 091 3 776 296 54 543 872 18 321 528 16 285 764 5 547 255 40 154 547 159 225 099 56 942 531 59 739 715 275 907 345 112

K. CONCLUSION 113

CONCLUSION • NERSA would like to thank the Portfolio Committee for the opportunity to present its Strategic Plan and Annual Performance Plan; • Ongoing refinement of processes is taking place; • NERSA is conscious of the regulatory burden it imposes; • NERSA is striving for regulatory certainty to create a conducive environment for attracting and ensuring orderly investment; • Filling legislative gaps is a priority; and • Regulatory challenge - balance the interests of suppliers and customers. 114

THANK YOU visit us at www. nersa. org. za 115