Parliamentary Portfolio Committee Minerals and Energy The LP Gas Industry

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Parliamentary Portfolio Committee Minerals and
Energy The LP Gas Industrys Low Income
Household Programme
8 June 2005
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Presentation content

1. Introductory remarks
2. The Case LP Gas as a household fuel
3. The Initiative Three million households
4. The Future Challenges and action areas
5. Importance of PPC Minerals Energy
6. Questions and answers

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Presentation content

1. Introductory remarks
2. The Case LP Gas as a household fuel
3. The Initiative Three million households
4. The Future Challenges and action areas
5. Importance of PPC Minerals Energy
6. Questions and answers

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1. Introductory remarks

• The purpose of the presentation
• Update the PPC on the extensive developments
• Present legislative impacting aspects
• Ensure the LP Gas Industry has support
• Reference to the Ministers budget speech
• The history of LPG Industry DME relations
• Delivery to the poor a common objective
• Wide range of obstacles to delivery removed
• A private public partnership that can work!

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Presentation content

1. Introductory remarks
2. The Case LP Gas as a household fuel
3. The Initiative Three million households
4. The Future Challenges and action areas
5. Importance of PPC Minerals Energy
6. Questions and answers

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2. The Case Thermal fuel of choice

• Compared to other thermal fuels LP Gas is
• Safe
• Clean Healthy
• Value for money
• Multi purpose
• Portable
• LP Gas gives urban and rural customers access to
  a modern energy service!

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Safe

• Only stored in cylinders
• Stable cannot spill
• Cannot burn back into the cylinder
• Strict safety standards for cylinders
  appliances
• Cylinders are strong 30 Bar
• Safe Appliance Scheme

• Any leak smells
• One cannot drink it
• Less accidents
• Research shows it is the safest fuel
• Easy to use
• By anyone
• Children can be taught how to use it properly

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Safety Brochures
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Safety Comparison

• Markinor research results - June 2001
• gt 511 000 households use paraffin safety caps
• gt 143 000 children drank paraffin during 2000
• gt 55 000 children contracted pneumonia after
  drinking paraffin in the last year
• At least 4000 children died from paraffin induced
  chemical pneumonia in the last year
• gt 46 000 paraffin related fires and 50 000
  paraffin-related burns during 2000
• 31 000 of these burns (63 percent) were as a
  result of paraffin stoves exploding   
• The situation has worsened since then !!

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Clean and healthy

• No smell during use
• Room, Food, Clothes, Hair
• No smoke soot
• On surfaces
• Under pots
• No mess residual ash
• Easy to store
• Taste your food

• No fumes to breath in
• No burning eyes
• No coughing
• No sore throat
• No chest/lung diseases
• Dont always feel tired

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Many uses in the home

• Cooking
• Single plates
• Double plates
• Stoves with an oven
• Water heating
• Beverages
• Washing water
• Purifying (for drinking)
• Lighting
• Room heating
• Refrigeration

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Product samples later purchase
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Value for money affordability

• Independent tests Relative cooking efficiencies

Cost to Boil 2 litre water Paraffin 18
cents LPG 19 cents
Based on LPG Vat inclusive price R7.00/kg or
R3.85/litre versus R3.70 for Paraffin
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Portable

• Indoor
• Can use it in any room
• Cook, heat, light, or even a combination
• Outdoor
• Cooking/Braaing
• Lighting
• Next Door
• Visit friends
• Take to social functions
• Weddings, funerals, sport

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Presentation content

1. Introductory remarks
2. The Case LP Gas as a household fuel
3. The Initiative Three million households
4. The Future Challenges and action areas
5. Importance of PPC Minerals Energy
6. Questions and answers

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3. The Initiative Three million homes

• South African LP Gas Industry
• Overall programme vision
• What the customers are offered
• Need for a capital switching subsidy
• Free basic energy supply of LP Gas
• RDP households
• National Education and Promotional campaign

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South African LP Gas Industry

• This presentation is on behalf of the LPGSASA and
  the participating Industry members -currently
• Afrox
• BP Gas
• Easigas
• Tolalgaz

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Overall programme vision

• A private sector, commercial and competitive
  initiative fast, flexible and commited
• Increase the use of LP Gas in South Africa by 3
  million low income households
• Rural urban customers to have easy access
• Affordable and fairly priced relative to other
  fuels
• Poor households helped to switch - a grant of R
  120 per household for the appliance

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Overall programme vision cont.

• Resources provided by LP Gas industry and
  commercial funding bodies limited Government
  funds/subsidy
• BEE, SMME, livelihood creation and gender equity
  will play a major role in delivery
• High levels of safety ensured in the LIH market
• Phase One 250 000 households under way
• Phase Two 2 750 000 subject to a switching
  grant and a review of the pilot project

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What is the customer offer?

• Low income households offered
• A 3 to 6 kg LP Gas cylinder
• Funder subsidised single robust and stable cooker
  top compatable customer asset versus cheap
  paraffin stove
• Deposit of R50 (down from R150) - Industry
  subsidised
• First fill of around R35 Customer pays R85
• A paraffin competitive LP Gas price, R7 per kg
• Availability of refills through community stores
• Education on the safe and efficient use of LP Gas
• Available to Low Income households only, LSM 1- 4
  (Average income lt R 1750,00/month)

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Cylinders and cookers
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Optional extra
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Need for a capital subsidy

• Accessibility impacted by the costs of switching
  from other fuels to LP Gas R120
• A once off capital grant needed by the Low Income
  Householder to purchase the cooker top
• Progress
• Fund Raising by LPGSASA focused on Eskom
• Technical proposal submitted in September 2004
  for funding under Demand Side Management
  programme
• Eskom benefits reduced peak cooking load
  thereby reducing investment in new power stations
• Awaiting final decision due to DME/NER/Eskom
  policy alignment delays

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Free Basic LP Gas - Rationale

• Minister requested LPG industry to pioneer the
  concept
• For application in non electrified areas
• Policy paper written and circulated
• Existing Free Basic Electricity policy allows for
  Free Basic Energy provision
• Implementers are always local government and
  municipalities progress with
• Tshwane
• JHB
• Oliver Tambo
• Ongoing discussions with other municipalities

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Free Basic LP Gas - How it can work?

• Identify non electrified areas
• Create database of households in area
• LPG suppliers to provide a cylinder and cooking
  top to each household
• Issue monthly coupons equivalent to FB
  Electricity amount e.g. 50 kWh _at_ 45 cents
• Customers redeem coupons for a subsidised
  refilled cylinder
• Contracted LPG supplier in turn redeems coupon
  from Municipality

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RDP Houses

• All new households must be encouraged to switch
• Housing PPC has requested that paraffin be
  removed from RDP houses
• Identification of pilot areas
• Work with local authorities to get designs
  modified
• Can LP Gas equipment be paid for out of the RDP
  housing subsidy?

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Education and Promotional Campaign

• Champions needed to lead the switch to LP Gas
• Alignment between LP Gas paraffin campaigns
• Started with the parliamentary exhibition
• Billboards
• Packs provided to MPs for further
  promotion/education in their constituencies

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Presentation content

1. Introductory remarks
2. The Case LP Gas as a household fuel
3. The Initiative Three million households
4. The Future Challenges and action areas
5. Importance of PPC Minerals Energy
6. Questions and answers

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4. The Future Focus Areas

• Eskom grant funding for the households to switch
• Policy alignment needed (PPC oversight)
• Final decision needed to facilitate the roll out
• National Educational and Promotional campaign
• Money to be raised
• L I H to accept the need to switch
• Campaign to be sustained
• Competition commission
• Change in the agreements to comply
• Ensuring sufficient LP Gas is available

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4. The Future Focus areas cont.

• Programme results reporting system
• System accepted by all stakeholders
• Publication of success
• Stakeholder support
• Policy and legislative support
• Public sector creates enabling environment
• Common vision the key
• LP Gas Industry led delivery
• Private industry leads with delivery!
• Establish BEE SMME enterprises in supply chain

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Presentation content

1. Introductory remarks
2. The Case LP Gas as a household fuel
3. The Initiative Three million households
4. The Future Challenges and action areas
5. Importance of PPC Minerals Energy
6. Questions and answers

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5. Importance of PPC Energy

• Provided with cylinders asked to become
  champions
• Assist with alignment between all stakeholders
  Eskom, FB LPG, housing, health
• Oversight responsibility for this upliftment
  project
• Regular progress reports communication of
  results

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Presentation content

1. Introductory remarks
2. The Case LP Gas as a household fuel
3. The Initiative Three million households
4. The Future Challenges and action areas
5. Importance of PPC Minerals Energy
6. Questions and answers

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6. Questions and answers
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THANK YOU !