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  • COMPLIANCE MONITORING REPORT OF NELSON

    MANDELA BAY METROPOLITAN MUNICIPALITY

    Monitoring Date: 19 November 2013

  • Page 2 of 19

    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 and Compliance

    Tel: 012 401 4794

    National Energy Regulator of South Africa

    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 as per the information

    collected from the licensee, the licensee must in writing within fourteen (14) days

    of receipt of this report advise NERSA about such inaccuracies.

  • Page 3 of 19

    TABLE OF CONTENTS

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

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

    2. METHODOLOGY ............................................................................................. 5

    3. NERSA AND NMBMM DELEGATES ............................................................... 6

    4. GENERAL INFORMATION ON NMBMM ......................................................... 6

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

    6. NMBMMS PERFORMANCE ON NERSA COMMUNICATION ....................... 8

    7. PROGRESS ON THE IMPLEMENTATION OF THE CORRECTIVE ACTION PLAN .................................................................................................................... 9

    8. PLANT CONDITION DURING AUDIT VS. MONITORING TIME ................... 14

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

    10. RECOMMENDATIONS ................................................................................ 18

    11. NEXT STEP .................................................................................................. 18

  • Page 4 of 19

    EXECUTIVE SUMMARY The National Energy Regulator of South Africa (NERSA) conducted a compliance audit on Nelson Mandela Bay Metropolitan Municipality (NMBMM or the Licensee) from 09 to 12 October 2012 to determine their level of compliance with the licence conditions. The objective was to determine the compliance of NMBMM 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. On 21 January 2013, NMBMM sent the management comments. The report was then considered final by NERSA and NMBMM was requested to send NERSA a signed time-bound corrective action plan (CAP) to address the highlighted non-compliances. NERSA instituted a monitoring regime to ensure and enforce the implementation of the CAP developed by NMBMM. On 19 November 2013, NERSA conducted a monitoring exercise on NMBMM to determine progress made in the implementation of the CAP. NERSA is of the view that addressing issues raised during an audit will help NMBMM to be an efficient and effective licensee. This report depicts all the findings as per the audit and presents the status quo in terms of progress made at the time of the monitoring to address the non-compliances highlighted during the audit. It must be noted that tangible and noticeable progress in addressing the non-compliances mentioned in the report has been made. The progress made is on both the soft issues and the core technical issues of the electricity business. These include, among others, the appointment of additional personnel, development of a proper asset management policy for the electricity business, the replacement of obsolete switchgear and transformers, repairs and installation of security systems at substations and the repairs of steel towers. The progress made indicates the level of dedication and a will to comply with licence conditions of NMBMM by taking into consideration the recommendations made by NERSA.

  • Page 5 of 19

    1. INTRODUCTION

    1.1 Overview

    The National Energy Regulator of South Africa (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), Chapter 4 (a) (vii), which states that the Regulator must enforce performance and compliance; and take appropriate steps in the case of non-performance. NERSA conducts the compliance audits on licensed electricity distributors annually. NERSA 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 NERSAs 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:

    enforce implementation of the corrective action plans;

    help the licensee not to lose sight of critical matters that need to be corrected;

    help the licensee to start doing self monitoring in terms of their performance against licence conditions;

    help the licensee to ensure that the quality of service and supply does not decline; and

    inform the Energy Regulator of the progress made by the licensee in the implementation of the corrective action plans.

    2. METHODOLOGY

    A corrective action plan (CAP) template was developed and sent to the licensee to populate all the non-compliances highlighted during the audit, together with the intended CAPs with target dates of implementation. This is to be used by NERSA to monitor the progress made and to establish whether the timelines on the CAP were realistic and addressing the issues highlighted during the audit.

  • Page 6 of 19

    The CAPs were sent to NERSA after being signed by the relevant officials of the Licensee. NERSA agreed on the CAP and instigated a monitoring process which 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 NERSA officials during the monitoring process. Some site verification was also done to compare the current plant condition to the plant condition during the audit.

    3. NERSA AND NMBMM DELEGATES

    NERSA was represented by the following officials:

    Ms B Gobe Compliance Monitoring Engineer

    Ms V Poswa Dispute Resolution Officer

    Mr V Malaza Senior Distribution Compliance Engineer

    Nelson Mandela Bay Metropolitan Municipality was represented by:

    Mr C Hempel Acting Director Distribution

    Mr T Ferndale Acting Director Projects

    Ms S Adams Acting Assistant Director Commercial Services

    Mr M Booysen Assistant Director Commercial Services

    Mr SM Luzipho Chief Accountant

    4. GENERAL INFORMATION ON NMBMM

    Nelson Mandela Bay Metropolitan Municipality (NMBMM or the Licensee) is the

    electricity distribution license holder for Nelson Mandela Bay Metropolitan supply

    area with Licence Number NER/D/NMandela and supplies electricity to Port

    Elizabeth; Uitenhage; Despatch; Seaview and Blue Horizon Bay.

    At the time of the audit it had 247,380 customers, which were categorised as

    follows: 209,393 prepaid domestic; 29,757 domestic credit meters; 8,188

    commercial and 42 industrial customers. There are five bulk intake points under

    the Nelson Mandela Bay Metropolitan area of supply and it had a total installed

    capacity of 2,300MVA. The total geographical area of Nelson Mandela Bay

    Metropolitan Municipality is approximately 1,888km.

  • Page 7 of 19

    5. AUDIT FINDINGS

    At the time of the audit, the following was highlighted to the Licensee as areas that need attention and improvement:

    a) The available staff was not adequate for proper execution of the Electricity Departments duties as 40% of the approved positions were vacant.

    b) The position of responsible/accountable person in accordance with section 16(1) of the OHS Act was vacant. The Directorate had no Health and Safety Officer and coordination was done by the Health Directorates, Occupational Health and Safety division.

    c) As part of the approval process for tariffs for the 2011/12 financial year, an above the guideline increase of 25.82% was approved to be used during the 2012/13 financial year for maintenance and refurbishment and to ensure that the municipality puts appropriate mea