1. www.salga.org.za 1 Presentation to Portfolio Committee on Energy Update on the implementation of the national indigent policy vis-à-vis electricity basic services and support tariff. Overview of the effectiveness of the national indigent policy Sufficiency of 50KWh 22 March 2012

2. www.salga.org.za INTRODUCTION This comes at a time when DoE just held an Electrification Indaba in Durban last week, focusing on progress made in the electrification in the country, articulating the Governments target of achieving 92% of all formal household by 2014. It must be noted that difficulties encountered in electrification has seen this target moved from Universal Access by 2012 to the qualified one in 2014. The beneficiaries of FBE are these covered in terms of this electrification programme. 2

3. www.salga.org.za FBAE POLICY: MINISTERIAL FOREWORD In 2000, Government announced its intent to provide free basic services to indigent households. In this regard various services including energy were identified as basic services to be supported by Government's programmes with respect to indigent households. Free Basic Electricity was launched by the Department in 2003, with the aim to support indigent households in meeting their basic energy needs. However the programme suffers in most areas because of limited grid availability. After seeing this, the Department realised the need to support indigent households that reside in un-electrified areas with free basic alternative energy. 3

4. www.salga.org.za FBAE: MINISTERIAL FOREWORD In this regard, the policy on Free Basic Alternative Energy is intended to provide indigent households with alternative energy where electricity is not available. Since it is the local sphere of government that is tasked with discharging such a service, there is a need to strike a balance between a number of factors including but not limited to: - availability of energy sources, allocated funding, etc.. I trust that the combination of our three current programmes namely: Integrated National ectrification Programme, Free Basic Electricity and Free Basic. Alternative Energy under the auspices of the Department will go a long way in improving the quality of life of the less fortunate South Africans. Ms Buyelwa Sonjica, MP Minister of Minerals and Energy 4

5. www.salga.org.za Update on the implementation of the national indigent policy irt FBE (Grid and Non-Grid The implementation of FBE is not without challenges. There are challenges both for the Municipal Distributors and Eskom who are the implementing agents on behalf of the Municipalities who are the Service Authorities mandated to provide this service funded from the Equitable share (Conditional Grant) 5

6. www.salga.org.za MUNICIPAL IMPLEMENTATION – GRID CONNECTIONS The challenge always experienced in terms of getting Municipal information is that there is no formal repository of information relating the implementation of FBE and the number of customers receiving Free Basic Electricity within the Municipality. The information presented is the one provided by those that responded to the AMEU call to members for information 6

7. www.salga.org.za MUNICIPAL IMPLEMENTATION – GRID CONNECTIONS Insert info from Municipalities including the amount dispensed per Munic. 7

8. www.salga.org.za ESKOM IMPLEMENTATION – GRID CONNECTIONS Local government is responsible for the provision of basic services in its area of jurisdiction. Eskom is providing a service on behalf of municipalities. Even in a case like this, municipalities will still be responsible for funding the provision of free basic services. Where government grants are paid to municipalities, these must be paid to Eskom to cover the cost of providing free basic electricity to the targeted households Information extracted from the Eskom performance kindly offered by Mr Isaac Sokopo indicates that of the 278 Municipalities in the country, 243 have signed a formal Free Basic Electricity provision Contract with Eskom 8

9. www.salga.org.za Total Munics on CC&B vs Approved Municipalities on Govt register ProvinceTarget Actual Munics signed as % of munics offering FBE – As @Jan 2012 Total no of munics on CC&B (A) No of Munics on Local Govt Directory (B) No of Munics – signed FBE contracts (C) Munics Not Signed Munics that are not on CC&B (B-A) Eastern Cape100%100.0%39453806 Free State100%100.0%19251906 Gauteng100%100.0%11141103 Kwa-Zulu Natal100%100.0%53614928 Limpopo100%100.0%24302506 Mpumalanga100%100.0%18211803 North West100%100.0%20252005 Northern Cape100%100.0%28322804 Western Cape100%100.0%26302604 Total100%100.00%238283234245 9

10. www.salga.org.za Consumption vs Configured Customers ProvinceTargetActual – January 2012 Eastern Cape75% Free State75%81% Gauteng75%59% Kwa-Zulu Natal75%57% Limpopo75%81% Mpumalanga75%78% North West75%72% Northern Cape75%72% Western Cape75%89% Total75%72% Total number of customers Configured as at 31 January 2012 1,125,022 Total number of customers – Consumption as at 30 January 2012 810,949 TotalAspirationActualVariance 100%72%28% 10

11. www.salga.org.za Consumption vs Configured Customers variance explanations Comments/ Variance ExplanationsAction being taken In North West Customers not collecting their tokens on monthly basis due to the fact that they buy from ghost CDU's that are very rife this nowadays. North West - OLV system being on and off most of the time that also pushed customers to ghost CDU's North West Region - experienced challenges of stationery issues for over 3 months in the NC that resulted in customers not buying nor collecting their FBE tokens North West Region is in the process of changing either SGC or Key revision to curb the problem. North West Region - National busy resolving the problem of data locks. North west Region - Easypay (Eason) resolved the problem later in December 2011 In Eastern region the de-configuration of customers had an impact on consumption Eastern region still waiting for the list of new customers form the municipality. Whereas in Central region City of Johannesburg has contributed to the drop as the manual de- configuration process has not been completed yet. Lastly Central region - City of Johannesburg data had lot of errors that needed to be cleaned 11

12. www.salga.org.za DoE IMPLEMENTATION – NON-GRID CONNECTIONS The Dept of Energy contracted a number of Service Providers deploying solar home systems with concessionaire areas. The two documents provides information on these areas and the challenges experienced with the provision of FBE Doc 1Doc Doc 2Doc 12

13. www.salga.org.za Some issues for consideration Without access to energy, poor households are unable to access basic necessities including cooking, heating, studying, lighting, communication etc Government has acknowledged the relationship between having energy and alleviating poverty, which led to the development of the Free Basic Electricity Policy. The data obtained was then analysed and used to illustrate that 50kWh per household per month is insufficient.

14. www.salga.org.za Overview of the effectiveness of the national indigent policy Need to focus on the approaches to providing FBE –Brad based targeting –Self Targeting Apply for FBE Automatic targeting by utility for hh using up to a predetermined level of consumption per month

15. www.salga.org.za Sufficiency of 50KWh UCT research finding before the implementation of FBE was that 50kWh is equivalent to energy necessary for basic lighting, small black and white TV, small radio, basic ironing and basic water boiling through an electric kettle for grid-connected consumers In an Earthlife Africa Paper by Ferrial Adam, titled, Free Basic Electric: A Better Life for All (February 2010) it is argued that the 50kWh per month FBE allocation is not sufficient and proposes that 200kWh per month would be appropriate So, what is the appropriate level of allocation of FBE is a big question. To answer this, we need too consider what the poor household can afford.

16. www.salga.org.za Implementation Challenges Inconsistency of application between Municipality and between the Municipality and Eskom in the same area of Municipal Jurisdiction. The lack of local government capacity is a big obstacle to the implementation of the policy. Within municipalities there seems to exist confusion as to whose responsibility it is to administer FBE. So for example, there is confusion as to whether FBS reside in the Chief Financial Operator’s (CFO) office or in the technical department. In some municipalities there are no structures to roll-out FBE.

17. www.salga.org.za Implementation Challenges Communities are often unaware of the availability of FBE. In addition, local authorities and Eskom do not provide sufficient information to the technologies being used. As such there is inadequate communication and education with regards to the technology and service options available for communities

18. www.salga.org.za THANK YOU