compliance monitoring report of drakenstein local municipality … · compliance monitoring report...

COMPLIANCE MONITORING

REPORT OF DRAKENSTEIN

LOCAL MUNICIPALITY

Monitoring Date: 03 September 2015

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All enquiries and correspondence to be directed to the Head of Department,

unless indicated otherwise, by means of a formal letter signed by the Head

of Department: Electricity Licensing, Compliance and Dispute Resolution.

Tel: 012 401 4794

National Energy Regulator

Kulawula House

526 Madiba Street

Arcadia

Pretoria

PO Box 40434

Arcadia

0007

Tel: +27 (0)12 401 4600

Fax: +27 (0) 12 401 4700

www.nersa.org.za

DISCLAIMER

The content of this report is based on information and evidence obtained from both

the licensee and site verification of plant condition conducted during the monitoring

process. Should this report not be accurate, the licensee must, in writing and within

fourteen (14) days of receipt of this report, advise NERSA about such inaccuracies.

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TABLE OF CONTENTS

EXECUTIVE SUMMARY................................................................... 4

1. INTRODUCTION ........................................................................... 5

2. METHODOLOGY .......................................................................... 6

3. NERSA AND DRAKENSTEIN LOCAL MUNICIPALITY DELEGATES ................................................................................. 6

4. GENERAL INFORMATION ON DRAKENSTEIN LOCAL MUNICIPALITY ............................................................................. 6

5. AUDIT FINDINGS ......................................................................... 7

6. DRAKENSTEIN’S PERFORMANCE ON NERSA COMMUNICATION ....................................................................... 8

7. PROGRESS ON THE IMPLEMENTATION OF THE CORRECTIVE ACTION PLAN ...................................................... 8

8. PLANT CONDITION DURING AUDIT VS. MONITORING TIME 12

9. CONCLUSIONS .......................................................................... 17

10. RECOMMENDATIONS ............................................................. 17

11. NEXT STEP .............................................................................. 17

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EXECUTIVE SUMMARY

The National Energy Regulator (NERSA) conducted a compliance audit on

Drakenstein Local Municipality (‘the Licensee’) from 11 to 13 September 2013 to

determine its level of compliance with the licence conditions. The objective was to

determine the compliance of Drakenstein Local Municipality with the legal, financial

and technical conditions of the electricity distribution licence. After the audit,

findings were recorded in a draft report and forwarded to the Licensee for

management comments with regard to the correctness of the findings in order to

make the report final.

Drakenstein Local Municipality complied with some of the conditions of the

electricity distribution licence, but there were instances of non-compliance that

needed management intervention to prevent deterioration of the network. On

07 January 2014, Drakenstein Local Municipality sent the management comments

to NERSA. These were received well within the prescribed time frame. The report

was then considered final by NERSA and Drakenstein Local Municipality was then

requested to send NERSA a signed, time-bound corrective action plan (CAP) to

address the highlighted instances of non-compliance.

On 03 July 2014, Drakenstein Local Municipality sent a signed CAP for NERSA’s

perusal and it was found to be acceptable as it addressed the issues highlighted

by the audit. NERSA instituted a monitoring regime to ensure and enforce the

implementation of the CAP developed by Drakenstein Local Municipality. On

03 September 2015, NERSA conducted a monitoring exercise on the

implementation of the CAP at Drakenstein Local Municipality. This exercise was

conducted in order to determine the progress made in the implementation of the

CAP. NERSA is of the view that addressing the issues raised during the audit will

help Drakenstein Local Municipality to be a more efficient and effective licensee.

This is a report on all the findings as per the audit and presents the status quo in

terms of progress made to address the non-compliances highlighted during the

audit. During the monitoring exercise, NERSA conducted site inspections to verify

progress made in the implementation of the CAP. It must be noted that significant

progress has been made by Drakenstein Local Municipality to improve the network

conditions and business systems of the Municipality. The level of improvement is

presented in detail in Section 7 of the report.

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1. INTRODUCTION

1.1 Overview

The National Energy Regulator (NERSA) is required to monitor and assess

whether the electricity suppliers comply with the conditions of their licences. The

Energy Regulator approved a compliance monitoring framework for electricity

distributors in 2011, which acts as a guide on how compliance audits and

monitoring must be conducted. The framework is also supported by the Electricity

Regulation Act, 2006 (Act No. 4 of 2006) (‘the Act’), Section 4 (a) (vii), which states

that ‘the Regulator must enforce performance and compliance; and take

appropriate steps in the case of non-performance’. The National Energy Regulator

conducts the compliance audits on licensed electricity distributors annually.

The National Energy Regulator regulates the energy industry in accordance with

Government laws and policies, standards and international best practices in

support of sustainable development. The organisation issues licences to electricity

distributors and therefore requires audits to be conducted against key licence

obligations. It is the National Energy Regulator’s mandate to monitor and enforce

compliance with the licence conditions as per the Act. This monitoring process

enforces and ensures improvement and sustainability of the licensees for the

betterment of the Electricity Supply Industry (ESI), which will lead to improved

quality of supply and service to customers.

1.2 Monitoring and Enforcement Objectives

The key objectives of the compliance monitoring and enforcement of the

corrective action plans are to:

a) enforce implementation of the corrective action plans;

b) help the licensee not to lose sight of critical matters that need to be

corrected;

c) help the licensee to start doing self-monitoring in terms of their performance

against licence conditions;

d) help the licensee to ensure that the quality of service and supply does not

decline; and

e) inform the Energy Regulator of the progress made by the licensee in the

implementation of the corrective action plans.

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2. METHODOLOGY

A corrective action plan template was developed and sent to Drakenstein Local

Municipality (‘the Licensee’) to populate all the non-compliances highlighted

during the audit, together with the intended corrective action plans (CAPs) with

target dates of implementation. This is to be used by the National Energy

Regulator to monitor the progress made and to establish whether the timelines

of the CAP were realistic in terms of addressing the issues highlighted during

the audit.

The CAP was sent to NERSA; signed by the relevant officials of the Licensee.

NERSA accepted the CAP and initiated a monitoring process that robustly

monitors progress. Progress is checked against target dates and remedial

actions are implemented on an ongoing basis. Proof and supporting documents

were requested and presented to the National Energy Regulator’s officials

during the monitoring process. Site verification was also done to compare the

current plant condition to the plant condition during the audit.

3. NERSA AND DRAKENSTEIN LOCAL MUNICIPALITY DELEGATES

NERSA was represented by the following officials:

Mr Velly Malaza Senior Distribution Compliance Engineer

Ms Bulelwa Gobe Compliance Monitoring Engineer

Mr Matodzi Mudau Compliance Monitoring Technician

Ms Vuyelwa Poswa Dispute Resolution Officer

Mr Bennie van Heerden Financial Compliance Officer

Drakenstein Local Municipality was represented by:

Mr Deon Louw Executive Manager Infrastructure

Mr Marahwaan Fredericks Electro Technical Engineering Services

Mr Paul de Vries Superintendent

4. GENERAL INFORMATION ON DRAKENSTEIN LOCAL MUNICIPALITY

Drakenstein Local Municipality is the electricity distribution licence holder for the

supply area with licence number NER/D/WC 023 and supplies electricity to

Paarl, Saron, Wellington and Witzenberg.

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It has 42,578 customers, which are categorised as follows: 29,234 prepaid

domestic; 8,720 domestic credit meters; 4,604 commercial and 20 industrial

customers.

There are five bulk intake points under the Drakenstein Local Municipality’s area

of supply and it has a total installed capacity of 172 MVA. The total geographical

area of Drakenstein Municipality is approximately 3,287km².

5. AUDIT FINDINGS

At the time of the audit, the following was highlighted to the Licensee as areas

that need attention and improvement:

(i) Vegetation management at some substations was not satisfactory.

(ii) The service dates of the firefighting equipment in the substations had

expired.

(iii) The condition of most mini-substations was acceptable, but some

safety signs had faded.

(iv) Some mini-substations’ enclosures were rusted and had visible signs

of oil leaks.

(v) Cable trenches in some of the substations were open.

(vi) The Parys Substation was used as a storage room.

(vii) There were no updated single line diagrams in the substations.

(viii) The batteries need attention as some of the battery solution levels

were below the indicated marks.

(ix) There were no updated visitor’s books in the substations.

(x) Signs of oil leaks were present at the transformers in some of the

substations.

(xi) The transformer and cooling fan at Suid-end Substation had been

stolen.

(xii) The pole-mounted transformers Q4/41 and Q4/33 as well as all the

transformers on the same supply line were old, leaking oil and not in

a good condition.

(xiii) Earth wires had been stolen on the pole-mounted transformers.

(xiv) There was a broken insulator on transformer Q4/33.

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6. DRAKENSTEIN’S PERFORMANCE ON NERSA COMMUNICATION

In September 2013, NERSA conducted a compliance audit on Drakenstein

Local Municipality to determine its level of compliance with its licence conditions.

This audit was followed by a number of emails from the National Energy

Regulator to Drakenstein Local Municipality’s Electricity Distribution

Department. The table below shows the communication between NERSA and

the Licensee.

Table 1: Communication Record

7. PROGRESS ON THE IMPLEMENTATION OF THE CORRECTIVE ACTION

PLAN

The Drakenstein Local Municipality displayed commitment in terms of the

implementation of the CAP during the monitoring exercise. The inspected

substations’ buildings were very clean and well kept.

During the monitoring, it was observed that all the old furniture that had been

stored at the Parys Substation during the audit had been removed. It was

however also observed that the condition of Parys Substation’s High Voltage

(HV) plant equipment still needs attention since Transformer No. 4 still had oil

leaks and Transformer No. 2 was also leaking oil, however, plans were in place

to address these issues through a service provider that was awarded a two-year

contract to conduct maintenance on the plant equipment.

The table below depicts the details of the progress made in addressing the

instances of non-compliance at the time of the monitoring of the implementation

of the CAP submitted to NERSA.

NERSA REQUEST DATE OF

REQUEST

LICENSEE

RESPONSE

DATE OF

RESPONSE

Request for Management

comments on draft report

29/10/2013 Positive response 07/01/2014

Reminder on Comments 05/12/2013 Positive response 05/12/2013

Request for Corrective Action Plan 10/03/2014 CAP sent and signed 03/07/2014

Monitoring notification 19/08/2015 Positive response 19/08/2015

Monitoring exercise 02/09/2015 Positive response 02/09/2015

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Table 2: Progress on CAP Implementation

Non-compliance Corrective

action

Target date

for starting of

action

Target date

for

completion

Progress Condition during

monitoring day

Vegetation

management.

Programme in

place for

vegetation

management.

April 2014 Ongoing Vegetation was

cut and an

additional team

from the Parks

Department has

received

authorisation

according to the

ORHVS

requirements to

access the

substations under

supervision to

assist with the

cutting of grass.

Due to the rain

causing the

vegetation to grow

back quickly,

although in some

instances

chemicals were

used, it was

decided to first

install a plastic

cover as a base,

then the normal

HV yard stones in

all the substations

to reduce

vegetation growth

during the

upgrading of the

current substation

fencing with the

new anticlimbing

and anti-cutting

fence technology

and put in

electronic sensors

to curb the break-

ins.

Improved vegetation

management

MSS enclosures

rusted and signs

of oil leaks.

MSS to be

changed.

July 2014 August 2014 Replaced. There

is also a tender to

refurbish all old

MSSs.

The rusted and

leaking MSSs were

replaced with new

ones. A project to

replace similar

MMSs is ongoing.

Safety signs. New signs and

stencils

ordered.

June 2014 January 2015 Completed. The

faded warning

signs were

replaced with new

signs.

Safety signs in

place. Compliant.

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Open cable

trenches.

Concrete

slabs ordered

to cover

trenches.

July 2014 December

2014

Not done yet. A

tender has been

put out for this and

is in progress and

this will follow after

the substation has

been fenced

securely with the

new fencing

technology.

Some trench covers

were closed. The

Suid-end and

Dwarsrivier

substations still had

open cable trenches

in the HV yard. Not

compliant.

Service date of fire

equipment.

All equipment

checked and

brought up to

date.

May 2014 May 2014 Completed Fire extinguishers

were serviced and

up to date on all

inspected

substations.

Complete and

compliant.

Parys Substation

used as

storeroom.

Materials

removed and

placed in

substation

store room.

October 2013 0ctober 2013 Completed Completed. The old

furniture has been

removed. Compliant.

No single line

diagrams at

substations.

Single line

diagrams to

be drawn for

substations by

planning.

June 2014 June 2015 Completed Single line diagrams

were in place in all

inspected

substations.

Compliant.

Suid-end SS

cooling fan stolen.

Work to be

programmed

for

maintenance.

Immediately

after the audit

(2014/15)

2015/16

financial year

Transformer No. 2

will be done (two

transformers were

written off)

At the Suid-end

Substation the old

broken fan was

replaced.

The written off

transformers are

scheduled to be

replaced.

(Transformer

replacement

pending)

Low battery

solution levels

Battery

solutions now

checked every

two weeks as

per

programme.

October 2013 Ongoing Completed and

inspections are

now conducted

every two weeks.

Batteries in good

condition.

Compliant.

Oil leaks on

transformers at

some substations

Remedial

programme in

place to

ensure oil

leaks are

attended to.

July 2014 June 2015 Not attended to.

Contractor has

been appointed for

the 20MVA

transformer and

the tender has

been awarded for

a two-year

contract. The

contractor is to

start soon with

transformer

maintenance.

Oil leaks on

transformers still

need attention. Not

compliant.

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No visitor’s books

at substations.

New books

placed in each

substation.

October 2013 October 2013 Completed. Visitor’s books were

available and were

up to date in all

inspected

substations.

Compliant.

Oil leaks on pole-

mounted

transformers,

stolen earth, and

insulator broken.

Work to be

programmed

for

maintenance.

July 2014 July 2014 Some of the pole-

mounted

transformers that

were leaking oil at

the time of the

audit were

replaced. The rest

(approximately 20)

are scheduled to

be done this

financial year

(2015/16). Stolen

earth replaced.

Pole-mounted

transformers with oil

leaks were replaced

and earths

connected on the

existing steel pole.

The broken insulator

has not yet been

done. Twenty (20)

transformer are still

pending.

Not budgeting

sufficient funds

(6% of total

expenditure).

NERSA tariff

guideline will

be brought to

the attention

of the CFO for

correction

during the

2014/15

financial

year’s budget.

Financial year

2014/15

Ongoing Completed. Now

adhering to the

NERSA guideline.

The maintenance

budget has risen

by 6% but

inflationary it is still

less due to cost of

materials.

No proof was

provided.

Areas do not

correspond with

the physical areas

that Drakenstein

supplied.

A plan

indicating the

area of supply

of Drakenstein

Municipality

must be drawn

up by end of

June 2014.

June 2014 Letter will be

forwarded to

NERSA in order to

update the

licensing data to

reflect the correct

area of supply

details.

The Distribution

Licensing

Department has not

received letter from

Drakenstein Local

Municipality.

Vacant positions Unfilled critical

Positions e.g.

Head of

Electricity.

2015/16

financial year

Ongoing The Municipality

approval is to

allow certain

amount of funds in

the Municipal

budget to fill

vacant positions,

the critical

positions are filled

first. Some

positions for the

Electricity

Department will be

advertised in a

week’s time from

the monitoring day

and one

advertisement

closed three

weeks ago.

Some management

positions were filled.

No proof was

provided. Ongoing.

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The table above indicates that Drakenstein Local Municipality implemented the

majority of the activities in the CAP. This will improve their level of compliance

with the distribution licence conditions. At the time of the monitoring, about 60%

of the CAP had been implemented by the Licensee. The remainder of the CAP

is in the process of being implemented as some tenders had just been finalised

and other tenders were close to finalisation at the time of the monitoring, for

example the substation fencing tender and the maintenance of HV plant

equipment. During the office session of the monitoring, the supporting

documentation to substantiate the above feedback was provided to NERSA

officials.

The electricity bulk account of Drakenstein Local Municipality was still up to date

at the time of the monitoring and the Licensee had implemented the 2015/16

financial year tariffs as approved by NERSA.

8. PLANT CONDITION DURING AUDIT VS. MONITORING TIME

The following photos depict the condition of the network equipment during the

audit compared to the condition during the monitoring process.

The Parys Substation yard was in good condition. Parys Substation still in good condition.

A blown insulator at Parys Substation. Insulator replaced at Parys Substation.

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Open cable trenches in the switch room. Open cable trenches still not covered.

Old furniture in the Parys Substation switch room. Old furniture removed at Parys Substation.

Oil leaks on transformer 4 at the Parys Substation Still oil leaks on transformer 4 at the Parys Substation

Paint deteriorated and oil leaks at the Parys Substation. Conditions still the same at the Parys Substation.

Bad vegetation management at the Suid-end Substation. Improvement on vegetation management at the Suid-end Substation

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Bad vegetation management at Suid-end Substation. Improvement on vegetation management at Suid-end Substation.

Open cable trenches in the Suid-end Substation yard. Still open cable trenches in the Suid-end Substation

Open cable trench in the Suid-end Substation Cable trenches closed at Suid-end Substation.

Suid-end Substation’s yard stone is not sufficient. Still the same in the Suid-end Substation yard.

Missing cable trench cover in Dwarsrivier Substation. Cable trenches closed at Dwarsrivier Substation

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Open cable trenches in the Dwarsrivier Substation yard. Conditions still the same at Dwarsrivier Substation.

Low battery levels in Dwarsrivier Substation. Well-maintained batteries in Dwarsrivier Substation.

Signs of oil leaks. Mini-substation replaced with new mini-substation.

Rusted enclosure of mini-substation. Rusted enclosure replaced.

Faded warning signs in 2013 Replaced in 2015.

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Earth wires stolen on poles. Earth wires covered with steel pipe.

Earth wires stolen on pole-mounted transformers. Earth wires moved to the top of the steel pole and drilled.

Old pole transformers in a very bad condition. Transformer Q4/41 replaced.

Old pole-mounted transformers in a very bad condition. Transformer Q4/33 replaced.

Broken insulator. Insulator still broken.

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The photos indicate that the condition of Drakenstein Local Municipality’s

network has improved since the audit. A great amount of work has been done

to correct the substandard network, including the replacement of transformers

and mini-substations.

9. CONCLUSIONS

Drakenstein Local Municipality has implemented the CAP. The NERSA audit

team noted the dedication and commitment of Drakenstein Local Municipality to

improve its level of compliance. This commitment is commendable.

10. RECOMMENDATIONS

It is recommended that the Drakenstein Local Municipality fully implement all

the outstanding projects in the CAP. The Licensee should develop and conduct

a self-monitoring regime to ensure that the level of compliance does not

deteriorate.

11. NEXT STEP

There are a few items that still need to be concluded according to the CAP. In

line with the above, the Energy Regulator expects the implementation of the

corrective action plan to continue until all these items have been fully

addressed. Once the remaining projects in the CAP have been concluded,

Drakenstein Local Municipality must send a closeout report to the National

Energy Regulator.

The National Energy Regulator will continue to engage with Drakenstein Local

Municipality on the implementation of the corrective action plans until all the

instances of non-compliance have been addressed. Further engagements on

the compliance issues will be communicated on a continuous basis. It is

expected that the Licensee will now implement a self-monitoring regime to

ensure that the improved areas do not deteriorate.

All communication should be forwarded to the Head of Department, unless

indicated otherwise, by means of a formal letter signed by the Head of

Department:

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The Head of Department

Licensing, Compliance and Dispute Resolution: Electricity

National Energy Regulator

PO Box 40343

Arcadia

0007

Fax: +27 (0)12 401 4700

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