1. 1 PROGRESS REPORT ON CABINET DECISION

2. 2 Background Progress report on Cabinet decision Status of the Bill Issues under discussion in the intergovernmental task team National Pricing System Issues under discussion on the National Pricing System Way forward Speedy resolution of key issues Outline

3. 3 In October 2006 Cabinet approved: –The establishment of the 6 wall to wall REDs as public entities; –That Eskom must be a shareholder in the REDs during the transition period and reduce its shareholding over a period of time. Cabinet also noted the: –Introduction of the EDI Restructuring Bill to facilitate the establishment of the REDs; and –Drafting of a National Electricity Pricing System. –That DME through EDI Holdings to oversee the establishment of these REDs; –That a strategy need to be developed to deal with capital investment requirements for the REDs; and –That a roadmap will be put in place to move from the current state to the final REDs model. Background

4. 4 Progress report on the Cabinet decision Drafting of the EDI Restructuring Bill. –Policy issues on the EDI Restructuring are currently under discussion in the intergovernmental task team comprising of National Treasury, DPLG, DPE and DME; and –The first draft of the EDI Restructuring Bill is at an advance stage waiting for finalization of the policy directives from the intergovernmental task team. Issues under discussion in the intergovernmental task team. –Eskom and local government compensation as it reduces its shareholdings in the REDs; –Governance of the REDs during the transitional period; –Incentives schemes for municipalities to join the REDs; –Assets transfer framework.

5. 5 Progress report on the Cabinet decision (cont.) National pricing system –Department has initiated a process of developing the National pricing framework; and –The Department is currently running workshops with Eskom, NERSA and other municipalities to investigate short falls to the current pricing framework. Issues under discussion on the National Pricing System –Current pricing system and its weakness; –Method of dealing with cross subsidies; –Ring fencing and pricing of electricity; and –Cost reflectivity and transparency.

6. 6 Way forward DME is in a process of looking into establishment of REDS as in such a manner that they will assist the municipalities to execute their Constitutional mandate regarding electricity The Department will expedite the resolutions of key policy issues so as to finalise the EDI Restructuring legislation. Minister will undertake road shows to ensure that all stakeholders are aware of the intentions of the EDI Restructuring. The National Pricing System will be finalised during the course of the year to ensure that the pricing methodology is harmonised for the whole industry.

7. 7 Thank you