Eskom%20Distribution

1

• Eskom Distribution
• (An Integrated Development Approach)
  
• Presentation to the Portfolio Committee on
  Public Services and Administration
• 5 June 2006

2
Contents
Brief Introduction/Background
Eskoms Electrification programme
Alignment of Projects with IDP Process
Electricity Universal Access Approach 2012
National RED Conceptual Design
Progress on Billing Systems Revenue Enhancement
Electricity Power Challenges in the Western Cape



3
Eskom Holdings Divisional Mandates
To assure regulatory compliance, ensure
effective group wide governance, develop policies
for compliance assurance and to provide strategic
services.
Corporate
Generation
To optimally operate and maintain the plant
lifecycle of Eskoms South African generation
capacity assets.
To optimally operate and maintain the lifecycle
of the South African transmission network.
Transmission
Distribution
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 gt100GWh) and customers abroad
Enterprises Division
To design, build refurbish Eskoms assets, act
as a catalyst for globalisation for the group and
to be the custodian of Eskoms non-regulated
businesses. Eskom Enterprises will also offer
strategic and commercial lifecycle services to
the line divisions
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Distribution Division Business Model
Customer Categories
Wires Business
Retail Business (Customer Service)
(Engineering/Network)
Residential
Overall management of
Purchase electricity from the
network infrastructure in
wholesale market and sell to
Traction
delivery of electricity to end
end user/ Redistributors
user
Agriculture
Functional Areas
Functional Areas
Commercial
Construction of network
Sales Marketing


infrastructure

Energy Trading
Redistributors
Installation of meters


Customer Service

Inspection, testing, upgrade

Pricing Tariff Planning
maintenance of equipment
Prepaid

Call Centre

Technical customer connections
disconnections
Billing

Mining Industrial
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Contents
Brief Introduction/Background
Electrification programme
Alignment of Projects with IDP Process
Electricity Universal Access Approach 2012
National RED Conceptual Design
Progress on Billing Systems Revenue Enhancement
Electricity Power Challenges in the Western Cape



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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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Eskoms Electrification Programme

• 3,3m households have been electrified since 1994
• Approx. R9b capital expenditure average cost
• R3900 per connection
• National Government subsidised INEP since 2001
• R873m allocated for 2006/7 programme
• 120 000 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

8
Challenges

• Different challenges for current and proposed
• programme compared to the 1994 programme
• Limited Infrastructure mostly in rural areas
• Integration with Government prioritiess
• 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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CONTRIBUTION TO INTEGRATED SUSTAINABLE RURAL
DEVELOPMENT (ISRDP)

• MANDATE AND STRATEGY
• The programme was established in 2001 to support
  the Integrated Sustainable Rural Development
  Programme in the 15 identified rural nodes.
• Eskom will continue with other development
  initiatives as per their mandates.
• The programme will be reviewed in 2010. MANDATE
  AND STRATEGY

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Spread of Projects In Nodal Areas

• Region/Area Amount (R)
• Eastern Cape 8 Projects 17 145 282
• Northern Cape 5 Projects 8 278 350
• Central Karoo 2 Projects 2 400 000
• Free State 1 Project 1 200 000
• Limpopo 8 Projects 8 762 355
• KwaZulu Natal 11 Projects 21 690 000
• TOTAL CONTRIBUTION 59 475 987

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Type of Projects Funded

• Rural Development Projects include the following
• Upgrading of Classrooms
• Contributing towards infrastructure for water
  projects
• Food security programmes
• Multi-Purpose Centres Electricity Provision
• Agricultural Development

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Additional Eskoms Programmes For Social
Upliftment

• Eskom Development Foundation
• Training and Development
• Expo for Young Scientists
• Proudly South African
• Selected environmental initiatives
• Chairman and Chief Executive Funds
• HIV / AIDS / SAAVI, Health Care training / immune
  boosters
• Business Against Crime
• Scholarship Programme
• Assets donations / BUs donations

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Contents
Brief Introduction/Background
Electrification programme
Alignment of Projects with IDP Process
Electricity Universal Access Approach 2012
National RED Conceptual Design
Progress on Billing Systems Revenue Enhancement
Electricity Power Challenges in the Western Cape



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National Electrification Fund Allocation
Principles

• 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

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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 officials
• Provincial 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
Brief Introduction/Background
Electrification programme
Alignment of Projects with IDP Process
Electricity Universal Access Approach 2012
National RED Conceptual Design
Progress on Billing Systems Revenue Enhancement
Electricity Power Challenges in the Western Cape



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(No Transcript)
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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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Journey to Universal Access

• Eskom identified 3 phases for development of the
  Universal Access Planning approach
• Phase 1 - (Short term) High level planning
  proposal to achieve universal access in line with
  Government objectives
• Phase 2 - (Medium term) Detailed planning
  proposal per municipality for the current Medium
  Term Expenditure Framework 3 year cycle (with
  refined Phase 1 planning proposal) and
• Phase 3 - (Long term) Long Term approach on the
  development of the Universal Access Plan (UAP).

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Project Charter for Phase 3 (2 Stages)

• Project charter on how the plan might be
  prepared, based on 2 stages
• Stage 1 UAP Business Case
• Review the 3 year rolling electrification plan
  and related available data, for the 3 year MTEF
  cycle as per NT process and to be gazetted by
  February 2007 and
• Develop DME Business Plan (Case Study). Agree
  upfront on what the DME requirements are for a
  BP. The minimum requirements are
• Scope and definition of what is required.
• Resource requirements with a 2012 view broken
  down per year.
• Scenario sketching and sensitivity studies.
• Risk identification and mitigation The biggest
  risk is that Eskom must do more than 350 000
  connections within any year.

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Project Charter for Phase 3 (2 Stages)

• Stage 2 National requirement for Universal
  Access
• Compile the Connection Master Plan Network
  Development Plan, noting needs of low density
  areas small scale farming, constraints of the
  2012 target
• Assess impact on Eskom Generation Transmission,
  other operational issues, financial viability,
  recommended subsidies, tariffs, refurbishment
• Assess application of technologies (including
  non-grid), appropriate execution strategies,
  resource availability timeframes
• Align to Electricity Supply Industry
  Electricity Distribution Industry restructuring,
  development plans, other planning processes
  government initiatives and
• Compile next phase detailed projects
  timelines after Government decisions.

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Stage 2 Project Approach
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Stage 2 Work Streams
Steering Committee DME Stakeholders
Programme Journey Management
Programme and Journey Management
(includes managed involvement of Government,
metro REDs indepe
(includes managed involvement of Government,
Metro REDs independent)
Electrification
Electrification
Planning
Plan
Commercial
Commercial
Geo Based
Geo Based
Operational
Operations
Strategic
Strategic
Load
Load
impact on
Impact on
Sourcing
Sourcing
Forecasting
Forecast
-
Maintenance
-
Maintenance
-
Systems
-
Systems
Master
Master
Data Mgt
Data Mgt
-
Headcount
-
Headcount
Planners
Planning
-
Skills
-
Skills
-
Finance
-
Finance
Strategic Studies
Business Support to
Business Support to
Refurbishment
Refurbishment
Programme
Programme
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Contents
Brief Introduction/Background
Electrification programme
Alignment of Projects with IDP Process
Electricity Universal Access Approach 2012
National RED Conceptual Design
Progress on Billing Systems Revenue Enhamcement
Electricity Power Challenges in the Western Cape



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Background
?

• Meeting of the economic cluster ministers (DPE,
  DME, dplg, National Treasury) on 29 November
  2005
• 6 Metro REDs confined (for the 1st phase) to
  metro boundaries - to be confirmed by March 2006
• Business model for national RED in place by June
  2006, subject to realistic timeframes

Cabinet decision of 14 September 2005 six
metro REDs needed to be set up as soon as
possible after the local government elections,
and that other areas would be covered under
separate local REDs or a national distributor.
Eskom will continue to play a critical role
particularly in the national RED
?
?
?
January 2006 Minister of Public Enterprises
requested Eskom to conceptualise the national RED
with concrete proposals on management governance
February-May 2006 Financial Viability
analysis. Awaiting Cabinet approval.
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Key Features of the National RED
Credible consolidation vehicle for municipal
electricity undertakings - immediately address
weak rural distribution - leverage on Eskom
experience of TBVC and SGT take-overs - equalise
the financial impact of restructuring through
inclusion in the national rate base

• Use the Eskom national footprint as the basis of
  the National RED
• - enhanced economies of scale through proven
  technology, business processes scaleable IT
  solutions
• - improved service delivery through customer
  focused value chains
• - sustained industry skills in various centres of
  excellence
• - national planning and infrastructure
  development
• earlier progress - limited dependence on RED
  creation
• - a base for equitable national tariffs

• Support free basic electricity universal access
  to electricity by 2012
• - proven Eskom track record particularly in rural
  electrification
• - economies of scale with respect to planning,
  project management national infrastructure
  development
• - delivery of national electrification
  infrastructure
• - government interaction on electrification
  funding and reporting limited to a single service
  provider (national RED) as opposed to multiple
  municipalities

Staff Benefits - stability for industry employees
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Benefits to Municipalities
MUNICIPAL REQUIREMENT NATIONAL RED OFFERING
Financial Position not adversely affected Secure cash flow through asset compensation (sale or lease)
Effective and efficient electricity service provision Effective service provision based on regulatory standards Delivery on Electrification and FBE targets based on contractual agreements
Effective and Efficient non-electricity service provision Opportunity for focused attention to non-electricity services Eskom support for non-electricity municipal services e.g. billing, cash collection contact centres
Equitable electricity tariffs Low equitable tariffs in the long term due to enhanced business efficiencies through consolidation and economies of scale National RED a base for equitable national tariffs
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Non-Electricity Municipal Service Provision
Conceptual Design

Municipality
Dispatching
ESKOM
Finance
Water / Sewage Trouble Calls
Water / Sewage Operations
Electricity Dispatching
Shared Service
Electricity Wires
Electricity Trouble Calls
Single Customer Data Base
Information Cost for service
Finance
Refer to Electricity account
Contact Centre
Information
Refer to municipal account
Billing Account Ops
National Distributor
Copy Billing Account Ops
Copy Billing Account Ops
Electricity Account
Copy Billing Account Ops
KSACS
All trouble calls bill queries
Meter Reads
Rates Services Account
Municipal Services Revenue
Elect. Meter
Meter Reads
Electricity Revenue
3rd Party water credit Management
Customer
Water Meter
3rd Party cash collection
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Summary

• The proposed conceptual design of the national
  RED fully supports the national objectives
• The national RED will be an effective
  consolidation vehicle for non-metro
  municipalities
• Initially, minimal restructuring effort is
  required to immediately address the problems of
  rural distribution
• The national RED will significantly contribute to
  meeting the target of universal access to
  electricity by 2012
• Eskoms national footprint will provide the base
  for significant benefits through economies of
  scale and skill

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Summary

• Municipalities will benefit from the process
  through
• secure cash flows from asset compensation
• enhanced non-electricity service provision
  through a service provided by the National RED
• The financial implications of the national RED
  divesting of its business in the Metro boundaries
  as well as transferring in municipalities are
  manageable

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Contents
Brief Introduction/Background
Electrification programme
Alignment of Projects with IDP Process
Electricity Universal Access Approach 2012
National RED Conceptual Design
Progress on Billing Systems Revenue Enhancement
Electricity Power Challenges in the Western Cape



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Strategy

• Target 6 Munics from the list of 12 as a pilot
• Liaise with DPLG Service Delivery Facilitators
  locally
• Customised offering per Munic from
• Electricity provision
• Contact Centre
• Account Operations
• Water, rates, sewerage, refuse billing
• Systems

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List of 12 Munics with Service Delivery
Facilitators
  Proposed Municipalities Population of Households Other services 1st phase suggestion Eskom Region
1 Mafikeng Local Municipality (NW) 259,478 64,674 64,674 C
2 Makhuduthamaga Local Municipality (LP) 262,903 53,156 53,156 N
3 Matjhabeng Local Municipality (FS) 408,170 120,288 30,000 NW
4 City of Johannesburg (GP) 3,225,812 1,006,931
5 Tsantsabane Local Municipality (NC) 31,013 7,227  
6 Greater Kokstad Local Municipality (KZN) 56,528 19,625
7 UMngeni Local Municipality (KZN) 73,896 20,488 20,488 E
8 Dr. J S Moroka Local Municipality (MP) 243,313 53,582
9 Cederberg Local Municipality (WC) 39,326 10,366 10,366 W
10 Nelson Mandela Metropolitan Municipality (EC) 1,005,778 260,799
11 Buffalo City Local Municipality (EC) 701,890 191,046 50,000 S
12 Moretele Local Municipality (NW) 177,905 43,008
  TOTAL 6, 486, 012 1,851,190 228,684
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High Level Assessment and Recommendations

• There appears to be no major technical obstacles
• We can use Eskoms Billing and Contact Centre
  Systems
• Staff and systems are scalable
• Municipal customer impacts
• One municipal bill for all services separate from
  any Eskom bill
• No change to current municipal bill layout and
  logo
• New account id will be allocated to the customer
• Need to convert sufficient history to enable
  accurate estimates
• Time Frames
• At least 10 months to set up systems

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Contents
Brief Introduction/Background
Electrification programme
Alignment of Projects with IDP Process
Electricity Universal Access Approach 2012
National RED Conceptual Design
Progress on Billing Systems Revenue Enhamcement
Electricity Power Challenges in the Western Cape



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Western Cape Network
Eskom Peaking Generation 400 MW Palmiet
Note The above excludes The City of Cape
Towns generation
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What happened?
Date Incident Resulting Impact on Supply
11 November 2005 Switchgear failed Transmission lines and transformers tripped Loss of supply
16 November 2005 Fire under the line Koeberg Unit 2 shutdown Loss of supply
23 November 2005 Controlled shutdown of Koeberg Unit 2 Load shedding due to network limitations
25 December 2005 Controlled shutdown of Koeberg Unit 1, foreign object detected Loss of supply
18 to 19 February 2006 High pollution levels and misty conditions Kendal Unit 6 and Koeberg Unit 2 shutdown Loss of supply Full black-out Subsequent load shedding
28 February 2006 Multiple line faults Shutdown of Koeberg Unit 2 Subsequent load shedding
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What does this mean? Supply Capacity
Limited electricity supply
Sufficient electricity supply
Both Koeberg units operational
One Koeberg unit operational at a time
Complete repairs to Koeberg Unit 1 before end of
May
Key
Shutdown
Koeberg Unit 1
Koeberg Unit 1
Generating electricity
Shut down Koeberg Unit 2 for refuelling at end of
May
Koeberg Unit 2
Koeberg Unit 2
Transmission System Intact
Palmiet Pumped Storage
End July
28 Aug 2006
24 April 2006
19 June 2006
22 May 2006
25 Sept 2006
27 March 2006
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What does this mean? Supply Forecast
Sufficient electricity supply
Limited electricity supply
Koeberg Unit 900 MW
Koeberg Unit 480 to 900 MW
Palmiet Up to 400 MW
Key
Transmission System 2400 to 2800 MW (varies
according to Koeberg output)
Electricity supply forecast (Illustrative)
End July
28 Aug 2006
24 April 2006
19 June 2006
22 May 2006
25 Sept 2006
27 March 2006
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What does this mean? Supply Shortfall
We need more electricity than can be supplied
Enough electricity to meet needs
Gap Electricity Supply Shortfall of 300 to 400
MW during morning and evening peak times through
the winter
Key
Electricity supply forecast
Electricity need/demand forecast
End July
28 Aug 2006
24 April 2006
19 June 2006
22 May 2006
25 Sept 2006
27 March 2006
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What are our Action Plans?
We need more electricity than can be supplied
Enough electricity to meet needs

• No shortage of electricity supply after the end
  of July since supply will be provided by
• Koeberg Unit 1
• Koeberg Unit 2
• Palmiet (during peaks)
• Transmission System

• Koeberg Repairs and refueling
• Transmission Grid activities
• Load Shedding Plan
• Demand Side Management (DSM)

End July
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Koeberg - Update
Area Progress Update Risks
Unit 1 Synchronised on to the grid at 10h30 on 17th May Steadily increasing its power output Currently generating 99 (890 MW sent out) power Final adjustments to be made before increasing to full power At this stage there are no major known risks on the plant
Unit 2 Unit 2 shutdown during the early hours of the 22nd May for its routine refuelling shutdown Shutdown is planned for 59 days Should synchronise on to the grid on the 19th July As it is early days in the outage no new risks or threats have been identified
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Issues to note

• Electrification
• Progress to date and funding requirements
• Universal Access Approach/Strategy
• Co ordination of projects to meet IDP
  requirements
• Training, development and capacity building
  initiatives as part of Eskoms social
  responsibility programme
• Revenue Enhancement pilot project
• REDS and associated benefits
• Western Cape recovery Plan

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Thank You