Transcript THE EKURHULENI EXPERIENCE ON - Fred
THE EKURHULENI EXPERIENCE ON THE INCLINING BLOCK TARIFF
IMFO OCTOBER 2012 Presented by: Fred Fryer Director: Revenue Services (Energy)
DISCUSSION POINTS # Discussion
1 2 3 4 Ekurhuleni* Energy at a glance Influencing factors on the Ekurhuleni IBT The current levels of the EMM IBT Placing the EMM IBT levels in context 5 6 Is the City of Ekurhuleni doing the right thing?
Conclusion * Ekurhuleni = EMM
DISCUSSION POINTS #
5 6 1 2 3 4
Discussion
Ekurhuleni Energy at a glance Influencing factors on the Ekurhuleni IBT The current levels of the EMM IBT Placing the EMM IBT levels in context Is the City of Ekurhuleni doing the right thing?
Conclusion
EKURHULENI ENERGY AT A GLANCE
• • • • •
EMM has 48 bulk infeed points from Eskom The July 2012 account to Eskom was R1 billion (one thousand million) Bulk purchase account from Eskom in 2012/2013 will be R6,7 billion EMM predicted income from electricity sales is about R11 billion The City has the following numbers of electricity meters:
•
Credit meters = 183 000
•
Large meters = 6 000
•
Prepayment meters = 206 000
•
Total meters = +- 400 000
• •
Eskom supply areas inside EMM boundaries = +-144 000 meters Eskom larger customer meters = +-278
•
Previous year performance
Financial targets were: –
Income Budget
• • • Budget set at R9,414,228,343 Income achieved of R9,129,499,958 Which is 97% –
Bulk purchases of electricity
• Purchase budget set at R5,957,128,828 • • • Actual purchases of R5,984,093,496 Which is 100,5% The colder winter is the most likely reason for the deviation
• •
The graph shows that electricity sales have generally declined since 2007, with a slight increase in 2011 This indicates a struggling economy or rising electricity prices forcing efficiency
REVENUE VALUE CHAIN COMPONENTS
WEMMC 1 FUTURE SMART METERS BUSINESS PROCESS MANAGEMNT IMS (Tembisa) VENUS
ID2
SUPRIMA
THIRD PARTY VENDING CONTRACTOR(S) Cigicell, Easypay, Smartec
FUTURE METER MANAGEMENT SOFTWARE (currently at WEMMC’s) (Netgroup) WEMMC 2 (Tsekema) IMQS ELECTRICITY REVENUE MODULE
BCX Landis & Gyr
GIS REVENUE
NERSA
CRM IMQS PROJECT CONTROL
1 2 ENERGY REVENUE SERVICES 3 4 5 6 1 7 ELECTRICITY TARIFFS 2 3 4 8 5 9 6 ENERGY OPS & MAINTENANCE 7 8
FINANCE INCOME
9 10
COMMUNICATIONS NETWORK (ICT) SUPPLY CHAIN MANAGEMENT
Meter fault management software Pragma MATERIAL SUPPLY CONTRACTS (meters, protective structures, etc)
BUDGET MANAGEMENT OPEX + CAPEX
METER READ CONTRACTOR(S) Motla METERINGONLINE CONTRACTOR Utility Risk Management METER REPAIR CONTRACTOR(S) One per depot
REVENUE MANAGEMENT & ENHANCEMENT PROJECT
MAIN FACTORS SUPPORTING ELECTRICITY REVENUE, including a reduction in kWh losses
• • • • •
A good set of electricity tariffs
– EMM is fortunate to have leading talent in this regard
A very robust method of reading and managing demand meters
– meteringonline, meter management consultants, Finance, Energy meter maintenance
Reliable prepayment vending systems
– Suprima and IMS
Dealing with meter interference (tampering) sustainably Automation of processes such as new meter installations, meter exchanges, etc (business process management) and tracking of progress
MAIN REVENUE PROJECTS
• • • • •
ELECTRICITY TARIFFS
•
Reduced risk, adequate returns, refinement, manage Inclining Block Tariff DEMAND METERS (LARGER USERS)
•
AMR, tariff rules applied, refinement of supportive processes CREDIT METERS
•
Maintenance managed, focus on no-access meters
•
Smart meters to be tested in our environment (can we manage the technology, communications, effects of lightning, reliability, etc) PREPAYMENT METERS
•
Venus / Suprima integration project
•
Tembisa system upgrade (communications) OTHER
•
Business processes , contain costs, add customers, keep networks reliable, training to improve Energy skills
DISCUSSION POINTS #
5 6 1 2 3 4
Discussion
Ekurhuleni Energy at a glance Influencing factors on the Ekurhuleni IBT The current levels of the EMM IBT Placing the EMM IBT levels in context Is the City of Ekurhuleni doing the right thing?
Conclusion
INFLUENCING FACTORS ON EMM IBT
• • • • •
EMM has 144 000 residential customers, supplied by Eskom These customers are spread over vast areas throughout the EMM area In terms of previous electricity tariff charges, there was differentiation between the EMM specific IBT rates and the general Eskom IBT rates Previously, EMM had IBT rates suitable to EMM conditions, i.e.
•
Two sets of residential tariffs, one for higher consuming customers, and
•
One for lower consuming customers, and
•
Both being available to any residential customer (i.e. free choice)
•
A cross-over point, designed at a fairly low consumption level, ideally at 500
• •
units per month, was maintained A high consuming customer insisting on the IBT, could change to the IBT, but Would end up paying more for electricity The careful design created the minimum of customer administrative management and protected EMM income, whilst also taking care of vulnerable customers with 100 units FBE coupled to the IBT
GRAPH ILLUSTRATING A CROSS-OVER POINT DESIGNED INTO TWO RESIDENTIAL TARIFFS
R2 500,00 R2 000,00 R1 500,00
Tar B R0-00 Conv 100 FBE Tar A
R1 000,00 R500,00 R0,00 50 100 200 300 400 500 600 700 800 900 1 000 1 100 1 200 1 300 1 400 1 500 1 600
INFLUENCING FACTORS ON EMM IBT
• • • • • • • •
EMM customers and Eskom customers inside EMM boundaries questioned the tariff differentiation (One City, two tariffs?) EMM, from 1 July 2012, adopted the exact Eskom IBT rates Which will now form the status quo for the City One change was made to a final block, creating a financial barrier to deter higher consuming customers from migrating to the subsidized IBT This was done to maintain a second tariff for higher consuming customers, in order to deal with multiple households on one stand EMM also engaged with customers to explore a reduction of the FBE allocation (100 units per month), or to target the FBE allocation EMM customers were opposed to this and FBE of 100 units per month continues, coupled to the IBT in a broad-based manner Effectively, FBE subsidizes block 1 and part of block 2
DISCUSSION POINTS #
5 6 1 2 3 4
Discussion
Ekurhuleni Energy at a glance Influencing factors on the Ekurhuleni IBT The current levels of the EMM IBT Placing the EMM IBT levels in context Is the City of Ekurhuleni doing the right thing?
Conclusion
EKURHULENI AND ESKOM RATES
IBT EKURHULENI ESKOM Notes (c/kWh in (c/kWh in
VAT exclusive
12/13
)
12/13
) EMM PROVIDES AND PAY FOR 100 UNITS PER MONTH FREE BASIC ELECTRICITY IN BOTH EMM AND ESKOM AREAS
A.1 Block (1-50 kWh)
60,83c 60,83c
same A.2 Block (>50 to <=350 kWh)
75,09c
A.3 Block (>350 to <=600 kWh) A.4 Block (>600 kWh for Eskom) Block (>600 to <=700 kWh for EMM) * EMM modification A.5 Block (>700 kWh for EMM only) * Block 5 acts as a theoretical “barrier” to prevent higher end customers from receiving a windfall benefit
111,42c 122,21c 200,00c
SELECT TARIFF B AT
108,6c
75,09c 111,42c 122,21c
same same same
122,21c (> 700 kWh per month customers should select Tariff B, which is R108,60c)
DISCUSSION POINTS #
5 6 1 2 3 4
Discussion
Ekurhuleni Energy at a glance Influencing factors on the Ekurhuleni IBT The current levels of the EMM IBT Placing the EMM IBT levels in context Is the City of Ekurhuleni doing the right thing?
Conclusion
PLACING THE EMM IBT LEVELS IN CONTEXT
•
The next few slides are unique to EMM in that:
– – –
The IBT is at the same level as Eskom, for reasons provided The IBT tariff receives a broad-based allocation of 100 units of FBE The average bulk purchase rate from Eskom, will vary from City to City, as well as in the case of smaller municipal distributors. In this case, the EMM purchase rate was used to illustrate the principle
PLACING THE EMM IBT LEVELS IN CONTEXT
• • • • •
EMM will purchase from Eskom at 60c per kWh Technical and non-technical losses, conservatively, are 10% (see next slide) The City can, therefore, only sell 90% of units purchased from Eskom The value of 60c, now becomes 67c The first and second block of the IBT are:
A.1 Block (1-50 kWh) A.2 Block (>50 to <=350 kWh)
60,83c 75,09c
PLACING THE EMM IBT LEVELS IN CONTEXT
CCA
ALBERTON BENONI BOKSBURG BRAKPAN EDENVALE GERMISTON KEMPTON
Active Meters
17,883 11,833 16,956 Tariff A
Average Consumption
271 401 350 17,866 938 28,637 4,024 249 435 280 444
Active Meters September 2012
Tariff B
Average Consumption
5,314 4,187 4,460 867 962 927 1,979 1,862 1,423 6,282 878 789 871 870 Tariff A and B combined
Active Average Meters Consumption
23,197 16,020 21,416 407 548 470 19,845 2,800 30,060 10,306 312 671 308 704 NIGEL SPRINGS 6,671 28,899 389 292 616 1,958 937 868 7,287 30,857 435 328 TEMBISA 8,538 428 1,047 536 9,585 440 • • •
ALL CCAs 142,245
Average consumption for September is 315 kWh, for a low consumption customer base of 142 000
315
29,128 876 171,373 411
100 units are FBE, EMM sells 215 units per customer EMM income from this customer is R161. Eskom account is R211.*
* ignoring external subsidization AND ignoring theft of electricity.
VANDALISM AND THEFT
• • • •
The photo was taken in July 2012, in Villa Liza x2, Boksburg 6 prepayment meters in one pole top box, all bypassed, at least 4 meters destroyed A capital intervention is required involving protective structures and new meters The uncontrolled electricity consumption destroys transformer and cable insulation, even to the point that they catch fire
SUCCESS IS POSSIBLE
•
Our experience in Langaville (and other areas) shows that creating a commercially viable area (i.e. electrical network restored and protected) can result in excellent payment levels in EMM
•
Our experience indicate that a significant amount of work and other resources are required to reach the stage depicted in the next slide
LANGAVILLE IN EMM
700 000 600 000 500 000 400 000 300 000 200 000 100 000 • • • • • KWA-THEMA EXT 7 LANGAVILLE EXT 4 LANGAVILLE LANGAVILLE EXT 5 LANGAVILLE EXT 1 LANGAVILLE EXT 6 LANGAVILLE EXT 2 LANGAVILLE EXT 8 LANGAVILLE EXT 3
Langaville proper has 2 038 active meters EMM electricity income was at a low of R2 300 per month for Langaville Average account of R1,13c per month Post intervention – income is R280 000 (or an average account of R138 pm, ave 250 units pm) The R138 per month is payable after 100 units FBE were received, which = R67
DISCUSSION POINTS #
5 6 1 2 3 4
Discussion
Ekurhuleni Energy at a glance Influencing factors on the Ekurhuleni IBT The current levels of the EMM IBT Placing the EMM IBT levels in context Is the City of Ekurhuleni doing the right thing?
Conclusion
DISCUSSION POINTS
• Vulnerable electricity customers should be protected against high electricity costs.
• The assumption is underpinned by an acknowledgement that access to electricity is an important instrument in alleviating poverty. No access to electricity to a large extent denies access to safe cooking, lighting, knowledge acquisition and communication.
• Municipalities and Eskom should also be protected from over-extending their social responsibility related to the levels of the IBT. Block 1 of the IBT should be set at a level comprising at least the average annual bulk purchase cost of municipalities
plus 10%
, to practically compensate for technical losses and a small percentage of non-technical losses.
• The subsidy to the IBT customers will still be considerable, given that no maintenance and refurbishment costs, or administrative costs (such as vending costs, human resources, etc) are recovered, nor any surplus contribution.
DISCUSSION POINTS (2)
• Supplementing the IBT with a second tariff, i.e. by creating two tariffs, catering for two very different sectors of electricity users, several major problems are averted. • Two tariffs avoid negative factors such as: • • • • • income levels that must be protected; placing additional burden on business and industry to make up for shortfalls in income; the dilemma created by IBT and multiple households; the dilemma created by intermittent users, and a lack of choice in tariffs for residential users.
• The IBT is often relevant in areas where non-technical losses are very high. If these are not controlled, the IBT levels may become very critical in terms of the survival of the distributor.