eskom : distribution division (electrification)

1

Eskom : Distribution Division

(Electrification)

Select Committee : 08 March 2005 Presented by: Mongezi Ntsokolo Managing Director (Distribution Division)

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CONTENTS

Distribution Business Model Electrification

National Electrification fund allocation principles Electrification 1994 and onwards 2004/5 Plan Status Feedback Challenges Municipal Infrastructure Grant : Eskom Perspective

Free Basic Electricity Black Economic Empowerment General Service Delivery

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ESKOM HOLDINGS: DIVISIONAL MANDATES

Generation

Transmission

Eskom Enterprises

Corporate

Distribution

To design, build & refurbish Eskom’s assets, act as a catalyst for globalisation for the group and to be the custodian of Eskom’s non-regulated businesses. Eskom Enterprises will also offer strategic and commercial lifecycle services to the line divisions

To optimally operate and maintain the plant lifecycle of Eskom’s South African generation capacity assets.

To assure regulatory compliance, ensure effective group wide governance, develop policies for compliance assurance and to provide strategic services.

To optimally operate and maintain the lifecycle of the South African transmission network.

To manage the retail business and optimally operate and maintain, the SA Distribution network, while playing an active role in the restructuring of the EDI.

Key Customers

Key CustomersTo proactively manage contestable client relationships and to trade energy from Generation and international sources to contestable clients in SA (consumers of >100GWh) and customers abroad

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South African Electricity Industry

Eskom

Industry

Business

ResidentialPhysical Energy Flow

Financial Flow

Mu

nic

ipalities

Currently, South Africa operates in the traditional mode of vertical

integration with financial and physical flows following the same path

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DISTRIBUTION STRATEGIC INTENT

Within the Mandate and resulting Distribution Business Model, Distribution has defined its Strategic Intent:

Eskom Distribution will lead in: the provision of electricity services and customer satisfaction through empowered, sustainable regional businesses,

for the benefit of our country.

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DISTRIBUTION DIVISION – BUSINESS MODEL

Customer CategoriesWires Business (Engineering/Network)

Retail Business(Customer Service)

Overall management of network infrastructure in

delivery of electricity to end user

Functional Areas:

• Construction of network infrastructure;

• Installation of meters;

• Inspection, testing, upgrade & maintenance of equipment

• Technical customer connections & disconnections

Purchase electricity from the wholesale market and sell to

end user/ Redistributors

Residential

Traction

Agriculture

Commercial

Redistributors

Prepaid

Mining & Industrial

Functional Areas:

• Sales & Marketing

• Energy Trading

• Customer Service

• Pricing & Tariff Planning

• Call Centre

• Billing

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DISTRIBUTION REGIONS

Cape Town UniCityeKurhuleni MetroNelson Mandela MetroJohannesburg MetroeThekwini MetroTshwane Metro

RED 1

RED 4

RED 2

RED 3

RED 6

RED 5

RED 1 (New Western)RED 2 (New North Western)RED 3 (New Southern)RED 4 (New Central)RED 5 (New Eastern)RED 6 (New Northern)

RED 1 (New Western)RED 2 (New North Western)RED 3 (New Southern)RED 4 (New Central)RED 5 (New Eastern)RED 6 (New Northern)

Metro per RED Boundary Model

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CONTENTS




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The Integrated National Electrification Programme (INEP) recommends to

the National Electrification Advisory Committee (NEAC) based on the

following criteria: Focus on backlog

Apply a rural bias

Prioritise on Integrated Sustainable Rural Development Strategy (ISRDS) Nodal Zones

Maximise on available infrastructure

Past Performance

Government priorities and initiatives such as Integrated Infrastructure Development

Regional capacity e.g. resource

NATIONAL ELECTRIFICATION FUND ALLOCATION PRINCIPLES

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CONTENTS




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HOUSEHOLD ELECTRIFICATION - HISTORY

SOUTH AFRICACOST PER

CONNECTIONS (R)RURAL

CONNECTIONSURBAN

CONNECTIONSTOTAL

CONNECTIONS

1994 3,176 187,530 66,853 254,383

1995 3,370 226,065 87,114 313,179

1996 3,417 261,438 45,609 307,047

1997 3,159 241,880 43,662 285,542

1998 3,008 198,197 93,155 291,352

1999 2,899 173,625 125,622 299,247

2000 2,647 133,672 122,351 256,023

2001 2,532 105,587 103,948 209,535

2002 2,614 107,718 103,910 211,628

2003 3,384 117,108 58,288 175,396

2004 4,207 126,477 43,893 170,370

GRAND TOTAL 1,879,297 894,405 2,773,702

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ELECTRIFICATION SUCCESS : CUMULATIVE CONNECTIONS

0

500

1000

1500

2000

2500

3000

3500

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

638

952

1280

1545

1836

2136

2392

2601

2813

29883159

Th

ou

san

ds

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PROVINCEuntil1994

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 TOTAL

E Cape 60,967 46,984 71,157 76,892 74,445 61,787 39,041 28,913 26,235 33,362 29,331 549,114

Free State 37,024 18,984 14,193 23,518 25,099 12,567 5,972 6,734 9,681 6,237 4,542 164,551

Gauteng 119,077 46,973 25,393 14,192 26,354 29,660 26,121 17,615 17,796 10,728 11,579 345,488

KZN 141,063 49,567 43,309 31,529 32,735 23,644 24,605 26,488 36,959 36,174 34,875 480,948

Limpopo 91,485 68,465 62,663 54,476 65,686 69,477 59,970 49,215 58,405 44,183 50,889 674,914

Mpumalanga 93,605 37,947 42,048 34,829 13,114 3,052 24,612 19,473 7,437 5,825 10,868 292,810

N West 65,631 24,665 37,267 41,832 45,210 81,768 59,208 40,357 34,150 24,777 16,879 471,744

N Cape 4,651 6,835 9,024 2,340 2,818 1,313 2,458 4,135 8,214 3,283 4,373 49,444

W Cape 25,791 12,759 1,993 5,934 5,891 15,979 14,036 16,605 12,751 10,827 7,034 129,600

TOTAL 639,294 313,179 307,047 285,542 291,352 299,247 256,023 209,535 211,628 175,396 170,370 3,158,613

PROVINCIAL HOUSEHOLD ELECTRIFICATION HISTORY

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PROVINCIAL SCHOOLS ELECTRIFICATION HISTORY

PROVINCE 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004GRAND TOTAL

E CAPE 105 41 180 95 214 149 75 7 220 390 326 1,802

FREE STATE 92 95 89 41 44 43 31 64 73 42 52 666

GAUTENG 48 75 84 29 146 12 25 6 15 2 3 445

KZN 141 82 172 99 193 86 64 45 215 256 196 1,549

LIMPOPO 192 340 89 140 80 104 111 58 246 195 364 1,919

MPUMALANGA 88 228 176 22 23 11 13 6 24 54 116 761

NORTH WEST 128 67 123 101 39 70 89 131 177 136 104 1,165

N CAPE 64 36 58 6 42 5 1 12 5 10 28 267

W CAPE 29 26 57 16 170 3 2 3 6 9 7 328

TOTAL 887 990 1,028 549 951 483 411 332 981 1,094 1,196 8,902

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PROVINCIAL CLINICS ELECTRIFICATION HISTORY

PROVINCE 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004GRAND TOTAL

E CAPE 4 1 2 28 0 0 1 1 4 3 5 49

FREE STATE 8 4 1 0 0 0 4 0 0 0 0 17

GAUTENG 1 1 0 0 0 0 0 0 0 0 0 2

KZN 5 0 0 0 0 13 0 0 41 0 2 61

LIMPOPO 5 23 5 0 0 0 0 1 0 13 3 50

MPUMALANGA 7 0 0 0 0 0 1 0 0 0 3 11

NORTH WEST 7 0 8 0 1 0 0 4 8 1 4 33

N CAPE 7 1 0 0 0 0 0 3 0 3 2 16

W CAPE 6 7 0 0 0 0 0 1 0 0 0 14

TOTAL 50 37 16 28 1 13 6 10 53 20 19 253

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CONTENTS




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SUMMARY OF 2004/5 PLAN

46,094140,455186,639159,982573,241733,223 TOTAL

1,78811,05712,8456,39926,19032,589 Gauteng

9,47515,75925,23431,72968,741100,470 North West

18.89546,09965,08439,981157,466197,447 Limpopo

-388,5008,4627,37915,42422,803 Mpumalanga

6,58016,33022,91034,320121,106155,526 Kwa-Zulu Natal

573,8783,9351,6669,04010,706 Free State

8,05327,67835,73140,360136,032176,392 Eastern Cape

2,1804,7336,9131,41627,58529,001 Northern Cape

-8966,4215,525-3,36811,6578,289 Western Cape

VARIANCEYTD

ACTUAL(Jan 05)

BUDGETYear End

(March ’05)VARIANCE

YTDACTUAL(Jan 05)

BUDGETYear End

(March ’05)PROVINCE

CONNECTIONSCAPEX - R'000

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SUMMARY OF 2004/5 PLAN

Province

Capital R'000 Year to date Expenditure as % of rojection

Year End Projected

Capital R'000

Year to Date Expenditure as % of Year

End Projected

Capital

Connections YTD Connections as % of

YTD Connections

Projection

Year End Projected

Connections

YTD Actual Connections as % of Year

End Projected Connections

YTD Actual YTD Projection

YTD Actual YTD Projection

Western Cape 11,657 7,359 158.4% 8,289 140.6% 6,421 4,200 152.88% 5,525 116.22%

Northern Cape 27,585 28,748 96.0% 29,001 95.1% 4,733 6,081 77.83% 6,913 68.47%

Eastern Cape 136,032 138,095 98.5% 176,333 77.1% 27,678 30,007 92.24% 35,851 77.20%

Free State 9,040 9,579 94.4% 10,706 84.4% 3,878 3,285 118.05% 3,935 98.55%

Kwa-Zulu Natal 121,106 132,293 91.5% 155,526 77.9% 16,330 18,706 87.30% 22,910 71.28%

Mpumalanga 15,424 19,582 78.8% 23,343 66.1% 8,500 6,925 122.74% 8,462 100.45%

Limpopo 157,466 163,260 96.5% 197,447 79.8% 46,099 48,854 94.36% 65,084 70.83%

North West 68,741 84,346 81.5% 100,470 68.4% 15,759 14,961 105.33% 25,234 62.45%

Gauteng 26,190 28,545 91.7% 32,589 80.4% 11,057 10,375 106.57% 12,845 86.08%

Sub Total 573,240 611,806 93.7% 733,703 78.1% 140,455 143,394 97.95% 186,759 75.21%

14% VAT 80,254 85,653 93.7% 102,718 78.1%

Total National Government 653,493 697,459 93.7% 836,421 78.1% 140,455 143,394 97.95% 186,759 75.21%

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ALLOCATION OF ESKOM 2004/5 REGAZETTED FUNDING PER PROVINCE

PROVINCE %

Western Cape 1.13

Northern Cape 3.95

Eastern Cape 24.04

Free State 1.46

KZN 21.20

Mpumalanga 3.18

Limpopo 26.91

North West 13.69

Gauteng 4.44

TOTAL 100.00

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2004/5 PROJECTION

The target for end March 2005 includes all special and roll over projects form the previous financial year.

The year to date performance stands at 75.3% of year end target. This rate of delivery is satisfactory. The biggest backlog on the YTD performance is in the Limpopo

province. Plans are in place to address the shortcomings in the Limpopo

province especially. It is important to note that to complete all the projects in the 2004/5

financial year, it is expected that the programme will be overspent.

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CONTENTS




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BACKLOG OVERVIEW OF ESKOM’s AREA OF SUPPLY

PROVINCE

HOUSEHOLD BACKLOG

Nodal Zones (Rural) R’000

TOTAL ELECTRIFICATION 8 YEAR ACCELARATED PLANNING ESTIMATES

March 2005 March 2012Households

R’000Infrastructure

R’000Grand Total

R’000

Western Cape 103,065 120,028 3,684 540,124 0 540,124

Northern Cape 32,131 38,273 21,287 172,228 12,514 184,742

Eastern Cape 561,556 721,462 2,166,794 3,562,220 527,253 4,089,472

FreeState 136,640 158,544 300,551 713,446 0 713,446

KwaZulu Natal 557,572 787,058 1,270,292 3,886,100 558,954 4,445,054

Mpumalanga 94,905 121,238 0 560,726 76,918 637,644

Limpopo 287,308 351,225 491,432 1,624,415 156,007 1,780,422

North West 124,799 148,417 0 667,878 85,929 753,807

Gauteng 432,651 742,133 0 3,664,284 83,426 3,747,710

Grand Total 2,330,627 3,188,378 4,254,040 15,391,421 1,501,001 16,892,421

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ELECTRIFICATION CHALLENGES

Current funding expectations exceeding available funds Universal Access to electricity by 20012/13 - funding Integrated planning involving all stakeholders (Provincial, DME,

Eskom & Municipalities) Aligned policies to facilitate implementation process (e.g. un-

proclaimed, land usages) Harmonization of government initiatives e.g. electrification and

housing programmes Implementation of the Expanded Public Works Programme (EPWP)

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GOING FORWARD

Align municipal requirements with available funding Energy forum to:

confirm prioritised 2005/6 plan confirm the 2006/7 plan based on current electrification levels

Develop universal access master plan (Draft by June 2005, Plan by October 2005) Stakeholder alignment Identify number of un-electrified households per municipality. Assess electrical network capacity requirements Quantify resource requirements (funding & capacity)

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CONTENTS




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ASSUMPTIONS

Cash Flow through Municipality Eskom will not challenge the decision The distributor with the money gets the targets Cash flow will follow: National Treasury - Municipality -

Eskom. Who gets the money owns the networks and is

responsible for the O&M

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BENEFITS TO ESKOM

Closer relationships between Regions and Municipalities

Should bulk funding be separated from connection funding, Bulk Infrastructure could be accelerated.

Top-up funding from Municipalities by optimising the funds within the MIG’s.

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RISKS

More decision makers Due to increased number of municipalities acting independently, the following risks

might occur:- Quality Assurance; Public and contractor safety; Sustainability and network performance; Cost increase. Different design standards which will increase maintenance cost and spares keeping

More stakeholder management will be required to get agreement on how to implement the programme

Eskom might be requested to operate and maintain on behalf of the municipalities through service agreement contracts. This is not Eskom Distribution core business to be a service provider

Optimisation of bulk infrastructure will be problematic and a lot of wheeling will take place between network owners

Will in-fills on Eskom networks still be possible

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ESKOM’s PROPOSALS / VIEWS

Separate bulk infrastructure from Household connections Appoint Eskom to co-ordinate Bulk Infrastructure creation Whoever build the household infrastructure must use

National accepted Standards All work done by Eskom will be at cost and cash up-front Eskom will not be able to commit to any targets at

Programme level but will contract at project level only DME to ensure medium to long-term team planning

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CONTENTS




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FBE Approach

FBE Approach National Task Team, comprising of DPLG, DME, National Treasury,

Eskom, NER, DPE and SALGA Negotiated One National Contract, and one National Tariff country wide

Criteria As per “indigenous criteria” of the specific Municipality/Metro or Prepaid < 20A circuit breaker or conventional < 150 KWhrs consumption

per month Funds flow directly to Municipality through equitable share fund Eskom enters into Funding Agreements with Municipalities/Metros Eskom claims monthly from Municipalities/Metros as per National Tariff.

Excess claimed from National Government annually

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FUNDING AGREEMENT STATUS

FBE Customers across 235 Municipalities

Funding agreements

Agreements Extensions

Signed 196 1

Not Signed 38 N/A

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MUNICS NOT SIGNED

SOUTHERN REGION Engcobo Makana Mbashe

NORTH WEST Dihlabeng Emthanjeni Ekurhuleni Dipaleseng Phumelela Beaufort West Gariep

CENTRAL Mafikeng Ditsobotlo Zeerust Naledi

WESTERN Stellenbosch Saldanha Bay Matsikama Langerberg Overstrand Laingsberg

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MUNICS NOT SIGNED cont…..

KZN Msinga Dannhauser Edumbe Abaqulusi Ulundi Umhlabuyalingana Jozini Big 5 Munic Umhlatuze KwaDukuza Ingwe

NORTHERN Umjindi Govan Mbeki Emalahleni

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Rolled out non-FBE Compliant Method

SOUTHERN Inxuba Yethemba

NORTH WEST Nala Lesidi Metsimaholo

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FBE STATUS

“Customers approved by municipality” are as per Funding Agreements and received from municipalities.

“Configured customers” are customers that can collect their tokens.

The difference between “Approved Customers” and “Configured Customers” is mainly due to data quality.

Municipalities Customers

FBE roll out

Number of Customers

Customers approved by municipality

Configured

Actual 141 1,885.998 866,445 498,802

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FBE STATUS

Action to increase token collection Install “Auto Vend” software. Software will be installed at all vendors by end of January 2005. This will issue FBE tokens to customer on first buying of token if FBE token was not yet issuedIncreased customer awareness through targeted communication campaignsCustomer education on “Key Change Tokens”Significant increase in vending facilities Research new distribution channels e.g. distribution via SMS messaging

FBE Tokens Collected 2004

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

66,341 93,533 197,228 204,843 204,754 214,882 242,075 261,110 220,759 238,340 226,481 232,034

11% 16% 17% 17% 15% 14% 15% 15% 12% 10% 9% 9%

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GENERIC ISSUES RAISED BY MUNICIPALITIES

No Indigent Register Political repercussions should they give FBE whilst many

are without electricity Awaiting Council Resolution No funds available Municipality not ready to sign, wants to use own method

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FBE – WAY FORWARD

Communication structure between stakeholders: Workshops per District Municipalities Energy forums Agreed accountable persons for both Eskom and Municipalities

All contracts to be signed Resolve all data quality issues for FBE Confirm current configured FBE customers as per Eskom database with

municipalities Propose use of Eskom data base in absence of indigent register Improve turnaround time for configuration on system Increase FBE token collection External Factors

Municipal Budget Limitations FBE to farm workers

Get agreement on invoicing process and details required

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CONTENT




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BEE PROCUREMENT HISTORY

YEAR BEE SMME BWOTotal

EmpowermentOther Total

2002 R1767,3m Included in BEE R100,4m R1867,7m (53%) R1687,8m R3555,5m

2003 R973,8m R945,5m R266,5m R2185,8m (57%) R1662,0m R3847,8m

2004 R917,9m R903,0m R344,9m R2165,8m (59%) R1537,4m R3703,2m

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CONTENTS




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ISSUES IMPACTING SERVICE DELIVERY

Ageing networks Standards of networks in takeover areas Illegal connections

Revenue losses Safety of public and staff

Debt management

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GENERAL SERVICE DELIVERY IMPROVEMENTS

Increased Regional capacity to plan and execute services Implemented a new customer service system Investment of R1352m on network strengthening and refurbishment

during 2004 Intensified maintenance and vegetation management Regional Customer Executives appointed to improve service to

municipalities Increasing number of Vending stations Focused training on service delivery improvement Focused action to get all customers legally connected to network

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REVIEW OF VENDING

Deployment criteria: Vending station within 5 kilometers One station for every 3000 customers

Review service at vending point: Checking queuing times at vending stations Determining tolerance for queuing

Review vending process: Upfront vending Expansion of footprint Cell phone vending

eskom : distribution division (electrification)

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