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Electrification: An Integrated Implementation Approach

[Eskom’s Overview]

Presentation to the Parliamentary Select Committee on Finance

22nd August 2006

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Contents

1. Brief Introduction/Background

2. Integrated National Electrification Programme [Eskom’s Area of

Supply]

3. Alignment of Projects with IDP Process

4. Electrification Challenges

5. Universal Access to Electricity [2012]

6. Free Basic Electricity

POWER STATIONSPOWER STATIONSGENERATIONGENERATION

TRANSMISSION LINESTRANSMISSION LINES

TRANSMISSION TRANSMISSION SUBSTATIONSSUBSTATIONS

DISTRIBUTION DISTRIBUTION LINESLINES

SERVICE CONNECTIONSERVICE CONNECTIONRETICULATION HV LINERETICULATION HV LINE

(11 & 22kV)(11 & 22kV)

TRANSMISSION (400/275 kV)TRANSMISSION (400/275 kV)

RETICULATION LV LINERETICULATION LV LINE(380/220V)(380/220V)

DISTRIBUTION SUBSTATIONSDISTRIBUTION SUBSTATIONS

Electricity is Generated by burning of fossil fuels (coal, oil, or natural gas), use of nuclear technology and hydro capability

High Voltage electricity is carried between Generation and required Distribution through Transmission networks (or Transmission grids) The distribution networks

collect ‘stepped down’ electricity from the transmission networks and deliver it to Redistributors /End Users

DISTRIBUTION DISTRIBUTION (132/33 kV)(132/33 kV)

The Eskom Regulated Business is currently organised in a vertically integrated structure whereby electricity is produced, transported and delivered to end users. The functional outputs of these activities are managed by Generation, Transmission and Distribution Business Divisions.

Customer consumption is measured at the point of supply in KWh. This information is used to measure and bill consumption levels utilised/sold

The voltage levels of electricity are further transformed to meet Distribution requirements

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Business Overview – An Integrated View

MUNICIPALITIESMUNICIPALITIES

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Eskom Holdings : Divisional Mandates

Generation

Transmission

EnterprisesDivision

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 Customer

Division

To 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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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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Red 1

Red 2

Red 3

Red 4

Red 5

Red 6

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Contents

1. Brief Introduction/Background

2. Integrated National Electrification Programme [Eskom’s Area of

Supply]

3. Alignment of Projects with IDP Process

4. Electrification Challenges

5. Universal Access to Electricity [2012]

6. Free Basic Electricity

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Electrification - Energy White Paper

Mentions the following key issues:

Electrification Planning Unit [INEP BPU] National Electrification Fund [NEF] Economic Development Infrastructure creation Economic Nodal Areas identified/priorotised Integrated National Electrification Programme

[INEP]

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Eskom’s Electrification Programme

3,3m households have been electrified since 1994 Approx. R9b capital expenditure – average cost

R3,900 per connection National Government subsidised INEP since 2001 R893m allocated for 2006/7 programme 110 000 connections to be realised in 2006/7 [after

adjustments (target was 160 000 connections] Connections mainly in rural areas Capacity building programmes achieved through

ESDEF Rural Development initiatives in Nodal areas

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Contents

1. Brief Introduction/Background

2. Integrated National Electrification Programme [Eskom’s Area of

Supply]

3. Alignment of Projects with IDP Process

4. Electrification Challenges

5. Universal Access to Electricity [2012]

6. Free Basic Electricity

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The (INEP BPU) makes recommendations for the approval of the Integrated National Electrification Plan [INEP] to the National Electrification Advisory Committee (NEAC) comprising of inter alia DME, National Treasury, SALGA, AMEU, DWAF, IDT, DPLG and Eskom based on the following criteria:

Focus on backlog and apply a rural bias

Prioritise based on Integrated Sustainable Rural Development

Strategy (ISRDS) Nodal Zones

Maximise on available infrastructure

Past performance taken into account

Government priorities and initiatives such as Integrated

Infrastructure Development considered

Regional capacity e.g. resources

National Electrification Fund Allocation Principles

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NEF Process for Allocation of Funding to Provinces

Use same criteria as in NEAC

Adjust programme as per DME requirements and in line with the change process

Provincial consultation done through:Provincial IDP/MIG Forums chaired by Provincial Local Govt officialsProvincial Energy Forums [where applicable]

Final funding allocations to Municipalities are based on the approved budget by DME and are consistent with IDP agreements signed between Eskom and Municipalities

Project Life Cycle principles observed

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Contents

1. Brief Introduction/Background

2. Integrated National Electrification Programme [Eskom’s Area of

Supply]

3. Alignment of Projects with IDP Process

4. Electrification Challenges

5. Universal Access to Electricity [2012]

6. Free Basic Electricity

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Challenges

Different challenges for current and proposed

programme compared to the 1994 programme Limited Infrastructure [mostly in rural areas] Integration with Government priorities

A phased process for step-up programme Step-up of programme – 18 months lead time required Average lead time for bulk infrastructure – 27 months Availability of resources, funding, material, suppliers etc.

Ensure availability of adequate capacity Electrical infrastructure in former TBVC states and self

governing territories requires major upgrading and strengthening

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Challenges

Harmonisation of electrification and housing programmes Balancing cost against social economic requirements e.g. job creation Ensure availability of data and structural information Cater for household growth as part of step-up programme Development of policies regarding implementation issues such as un-proclaimed areas, land usages etc. Ensure political support in ensuring the speeding-up of housing allocation/tender processes etc. Integration of supply technologies Finalisation of the EDI restructuring Availability of funding up front [R2,5 billion per annum]

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Contents

1. Brief Introduction/Background

2. Integrated National Electrification Programme [Eskom’s Area of

Supply]

3. Alignment of Projects with IDP Process

4. Electrification Challenges

5. Universal Access to Electricity [2012]

6. Free Basic Electricity

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National Backlog to date

A current backlog of electrification connections of 3.4 million households.

An estimated requirement of 5 million connections by 2012.

If electrification continues at the current rate: 43% of current backlog (excluding growth) will be electrified by

2012. 29% of backlog (including growth) will be electrified by 2012.

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Universal Access Consideration Step-up programme planning to be phased in (+/- 18 Months) Master plan needs to be in place Cost per connection (Based on existing Eskom trends)

R4,970 from 2006/7 R5,522 from 2008 to 2010 R6,075 for 2011 to 2012

High cost per connection to be influenced by : Less infrastructure available Catering for higher supply technology e.g. 10A, integrated

development programmes Low density/long line length

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Universal Access Considerations

Cost for social economic developments e.g. job creation,

BEE should be made available separately (Community

based construction -Department of Labour)

Eskom needs to identify risks and consequences of step-up programme

Focus Universal Access as follows [shifting target]

Western Cape - 2007/8 Northern Cape, Free State - 2008/9 North West and Mpumalanga - 2009/10 Universal Access for the rest – target 2012

Once universal access is reached – business as usual

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Context ……….

Farm worker houses included as part of connections The following were not factored in

Non grid concessions/connections Local economic development planning Land restitution issues Emerging farmers [electrification, support and

development] Impact of Municipal Infrastructure Grants (MIG) Schools and clinics electrification

Planning Targets should be negotiated with Municipalities to ensure alignment

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Contents

1. Brief Introduction/Background

2. Integrated National Electrification Programme [Eskom’s Area of

Supply]

3. Alignment of Projects with IDP Process

4. Electrification Challenges

5. Universal Access to Electricity [2012]

6. Free Basic Electricity

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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 “indigent policy ” of the specific Municipality/Metro 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 to be claimed from National Government annually

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Funding Agreement Status[Status end of June 2006]

FBE Customers across 242 Municipalities

Funding agreements

Agreements Extensions

Signed 232 222

Not Signed 10 10

•Discussions to sign agreement still underway with 4 Munics•New contracts are being signed for the new municipal year, starting July 2006.

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FBE Status [Status end of June 2006]

“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

Potential Number of Customers

(2.5A To 20A)

Customers approved

by municipality

Configured

Actual 222 2,011,542 1,272,849 1,061,935

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FBE – Munics Have Not Rolled Out

Name of MunicMunic Code Province Non Roll Out Reasons

       

Dipaleseng MP 306 Mpumalanga Configuration

Lesedi GT 423 Gauteng Configuration

Ditsobotla NW 384 North West List Outstanding

Umzumbe KZ 213 KwaZulu Natal List Outstanding

Masinga KZ 244 KwaZulu Natal List Outstanding

Umziwabantu KZ 214 KwaZulu Natal List Outstanding

Umhlabuyalingana KZ 271 KwaZulu Natal List Outstanding

KwaSani KZ 5a2 KwaZulu Natal List Outstanding

Greater Kokstad KZ 5a4 KwaZulu Natal List Outstanding

Zeerust NW 385 North WestPreferred Launch date

Munics that have signed agreement and have not rolled out

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Munics With No Agreements

Name of Munic Munic Code Province Status

Still Negotiating With Eskom      

       

Lekwa Teemane NW 386 North West Negotiating

Edumbe KZ 261 KwaZulu Natal Negotiating

Abaqulusi Kz 263 KwaZulu Natal Negotiating

Nala FS 785 Free State Own Distribution

       

Disengaged from negotiations     Reason

       

Metsimaholo FS 204 Free State FBE Tariff High

Naledi FS 171 Free State Not Ready

Overstrand  WC 032 Western Cape Not Ready

Khra Hais  Nc 083  Northern Cape Wants to increase and

      decrease cus. nos. monthly

Matsikama WC 011 Western Cape Do not accept FBE Policy

Govan Mbeki MP 307 Mpumalanga Not ready

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FBE – Munics In Arrears

Region Municipality Municipality Code Amount

Northern Greater Tzaneen NP333 R 19,735.35

Northern Total   R 19,735.35

Eastern Umzimkhulu ECO5b1 R 24,005.18

Eastern The Umsunduzi KZ225 R 3,168.96

Eastern Total   R 27,174.14

Central Moshaweng NW1A1 R 34,306.56

  Maquassi Hills NW404 R 423,086.97

  Mamusa NW393 R 24,968.22

  Lekwa NW396 R 58,081.31

Central Total   R 540,443.06

Southern Qaukeni EC153 R 97,578.57

Southern Total   R 97,578.57

Grand Total     R 684,931.12

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Thank You !!