GENFLEX TARIFF AND INCOPORATION OF THE MEC INTO THE NMD RULES As approved by NERSA

Contents Executive summary Background What is the Genflex tariff Criteria for allocation of customers to the Genflex tariff Tariff charges NMD rule changes Contracting Implementation issues

Contents Executive summary Background What is the Genflex tariff Criteria for allocation of customers to the Genflex tariff Tariff charges NMD rule changes Contracting Implementation issues

Executive summary In December 2014, NERSA published its approval of the Genflex tariff on the NERSA website as follows: The introduction of a new tariff category (Genflex) for customers consuming (importing) and generating (exporting) energy at the same point of supply (or metering point) for urban and rural supplies connected to either the Distribution or Transmission networks be approved. This tariff category is based on Eskom’s existing tariff rates and deals specifically with the treatment of network-related charges where there is consumption and generation of energy at the same point of supply to avoid double-charging of network charges. All customers where there is consumption and generation of energy at the same point of supply are encouraged to convert to the Genflex tariff to avoid paying for network charges twice.

Executive summary It is proposed that the rules applicable to loads with regards to NMD are also applicable to generators with regards to MEC with the exception of the treatment of the excess MEC charges. It is proposed that the following is applicable to generators with respect to excess MEC charges: The excess MEC charge will be raised with respect to the excess MEC registered which is above the contractual MEC. Depending whether the generator is connected at Transmission or Distribution level, the charge will be based on network charges applicable for generators connected at Distribution or Transmission. With regards to medium voltage connected generators, the excess MEC charges will be based on the network charges applicable to Distribution high voltage connected generators. There will be no increasing penalties in accordance with the event number of the MEC exceedance.

Contents Executive summary Background What is the Genflex tariff Criteria for allocation of customers to the Genflex tariff Tariff charges NMD rule changes Contracting Implementation issues

Background In March 2012, NERSA published the “Regulatory rules on network charges for third party transportation of energy”. These rules are to be republished Provide guidance on the treatment of use of system charges for loads and generators In its MYPD3 determination, NERSA approved the introduction of use of system charges for generators. The above raised the question of how should customers be charged where there is consumption and generation at the same point of supply? There was no tariff category dealing with charges for customers that are both generators and consumers of energy from the same point of supply.

Where are we? Introduction of Genflex 04/2015 NERSA posted Genflex approval with comments 05/2013 12/2014 01-04/2015 Resubmission of Genflex to NERSA 09/2013 We are here 04/2012 Preparation for implementation NERSA Public Hearing scheduled Eskom governance approvals obtained

Contents Executive summary Background What is the Genflex tariff Criteria for allocation of customers to the Genflex tariff Tariff charges NMD rule changes Contracting Implementation issues

What is the Genflex tariff Genflex is a tariff category proposed for scenarios where there is both consumption and generation of energy at the same point of supply (metering point). Whether a generator requires energy for auxiliary usage when not generating, or a customer that is a co-generator produces more energy than is consumed (at times) and exports the excess energy onto the grid, there is a case for the Genflex tariff. The same network assets are used for the purposes of generating (delivering energy into the grid) and for consumption (importing energy from the grid). The proposed Genflex tariff is developed for the purpose of ensuring that customer are not disadvantaged in terms of payment of the use of system related charges. Es Eskom metering is capable of measuring import and export of energy from the same point of supply

What is the Genflex tariff (continued) There is currently no tariff category dealing with charges for customers that are both generators and consumers of energy from the same point of supply. There is also a need to review the NMD Rules to accommodate Maximum Export Capacity rules. A separate submission to be made to the Regulator This submission suggests some of the principles that could be incorporated into the Maximum Export Capacity rules. 16 April 2017

Comparison of use-of-system charges payable – loads and generators

Contents Executive summary Background What is the Genflex tariff Criteria for allocation of customers to the Genflex tariff Tariff charges NMD rule changes Contracting Implementation issues

Criteria for allocation of customers to the Genflex tariff There must be consumption and generation at same point of supply (metering point) The customer must be synchronised with the Eskom grid (and supplied MV or HV or Tx connected) Where there is synchronisation, CUOSA must be in place (applicable MEC) Generators/ consumers connected behind the Municipality network are not considered for this tariff as they use the Municipality network The customer must have the appropriate metering i.e. 4 quadrant metering Currently LPU customers have this metering Where this metering is not available the customer must convert to the tariff and pay the applicable fees for the metering installed

Contents Executive summary Background What is the Genflex tariff What are use-of-system charges Criteria for allocation of customers to the Genflex tariff Tariff charges NMD rule changes Contracting Implementation issues

Tariff charges Tariff All existing Customers consuming and generating energy at the same point of supply will be required to convert to Genflex tariff. The tariff will have an urban and rural version namely: Genflex (urban)- This tariff will have the same rates as Megaflex and will include the generator use of system charges. Genflex (rural)- This tariff will have the same rates as Ruraflex and will include the generator use of system charges. 16 April 2017

Service and administration charges Tariff charges Energy charges on electricity consumed The Customer will pay for all energy consumed at the relevant “Genflex” energy rates i.e Genflex urban or Genflex rural rates. Service and administration charges A service charge will be payable on the account level and an administration charge will be payable on each transaction loaded. The administration of the account will require that the measurements for both imports and exports are maintained and recorded for billing purposes. Hence two administration charges are payable. 16 April 2017

Contribution to subsidies Tariff charges Contribution to subsidies The ERS will be payable on all energy consumed Affordability subsidy payable on all Eskom energy sales for urban customers Urban Low voltage subsidy will be payable where applicable Network Charge The network charges payable will depend on whether the Customer is predominantly a load or a generator and where the customer is Distribution or Transmission connected In each month the customer shall pay the greater of: The sum of the Genflex network charges for loads (i.e. the Transmission network charge + Distribution network access and demand charge and the urban Low voltage subsidy, where applicable), or the sum of the Genflex network charges for generators Network charge applicable to generator ≥66kV Subject to NMD (MEC) rules application 16 April 2017

Reactive energy charge Tariff charges Reliability service charges (name changes to Ancillary service charge in 2015/16) The Genflex reliability charge will be raised on the sum of the consumed or generated energy. This principle is different from the proposal in the Regulatory rules and it is specific for this tariff. Eskom has no objection to raising the charges in terms of the principles of the Regulatory rules on network charges for third party transportation of energy. Reactive energy charge The Genflex reactive energy will be charged on all reactive energy supplied by Eskom at point of connection on energy consumed during the high season months. 16 April 2017

Proposed charges payable where consumption and generation of energy occurs at the same point of supply – Transmission connected and Distribution HV generators (>66kV) Consumption Generation + Energy charges- energy generated to be recorded for purpose of calculating reliability service charge and losses + Energy charges + Network charges + Network charges Greater of + Excess network charges (MEC excess charges) + Excess network charges (NMD penalties) Review in NMD rules + /- Losses + Losses Sum of + Reliability services + Reliability services Sum of + NERSA approved subsidy + Service and admin charges + admin charges

Proposed charges payable where consumption and generation of energy occurs at the same point of supply –MV generators (<66kV) Consumption Generation + Energy charges + Energy charges- energy generated to be recorded for purpose of calculating reliability service charge and losses + Network charges No Network charges applicable Review in NMD rules + Excess network charges (MEC excess charges) + Excess network charges (NMD penalties) + /- Losses + Losses Sum of + Reliability services + Reliability services Sum of + NERSA approved subsidy + Service and admin charges + admin charges

Calculation of rebate for Distribution connected generators Distribution Losses The benefit of losses is assumed as the inverse of the cost of losses. The standard tariff published loss factors are used as the basis. Generators will therefore receive network charge rebate. This rebate is calculated at the energy cost on a time-of-use basis at the loss factors as published and applied in the standard tariffs. Depending on how much is generated, then there may not be any charges raised for the generator. Take onto account impact on Distribution losses.

Example of rebate calculation

Calculation of losses charge for Transmission connected generators TUoS Losses Charge Location varying loss factor Losses charge = energy produced in peak, standard and off-peak periods x wholesale energy rate excluding losses in peak, standard and off-peak periods x (Transmission loss factor-1/Transmission loss factor)

Contents Executive summary Background What is the Genflex tariff Criteria for allocation of customers to the Genflex tariff Tariff charges NMD rule changes Contracting Implementation issues

NMD rule changes The NMD/MEC Rules shall apply to both the NMD and the MEC. An excess MEC charge will be raised when the MEC is exceeded. The excess MEC charge will be raised as follows: The excess MEC charge will be raised with respect to the excess MEC registered which is above the contractual MEC. Depending whether the generator is connected at Transmission or Distribution level, the charge will be based on network charges applicable for generators connected at Distribution or Transmission. With regards to medium voltage connected generators, the excess MEC charges will be based on the network charges applicable to Distribution High voltage connected generators. There will be no increasing penalties in accordance with the event number of the MEC exceedance. Exceedance of MEC constitutes a material breach and consequences of such exceedance are dealt with the Connection and use of system agreement. The excess NMD and MEC charges will be raised for both generation and consumption. 16 April 2017

Contents Executive summary Background What is the Genflex tariff Criteria for allocation of customers to the Genflex tariff Tariff charges NMD rule changes Contracting Implementation issues

Contracting A hybrid agreement which merges the current the Electricity Supply Agreement and Connection and use of system agreement has been developed for Genflex customers. Customers are to be converted to the tariff once agreement is signed. Once the customer no longer meets the criteria for the Genflex tariff i.e. is no longer a generator and consumer of energy, then the customer may revert to other standard tariff options. Customer scenario Agreement to be signed Existing electricity supply agreement and existing connection and use of system agreement Amendment agreement – tariff only Existing connection and use of system agreement, no electricity supply agreement Amendment agreement- incorporating the supply agreement Existing electricity supply agreement, no connection and use of system agreement New agreement to be signed (hybrid Genflex agreement) New electricity supply agreement, new connection and use of system agreement 16 April 2017

Contents Executive summary Background What is the Genflex tariff Criteria for allocation of customers to the Genflex tariff Tariff charges NMD rule changes Contracting Implementation issues

Other implementation issues All customers converted to the tariff must comply with the existing pricing policies. Depending on the outcome of the process to be followed in terms of the Regulatory rules on third party transportation of energy, the Genflex tariff structure may change.

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