1. ELECTRICITY DISTRIBUTION INDUSTRY DECISION
The Presidency
Department of Performance Monitoring and Evaluation
ELECTRICITY DISTRIBUTION INDUSTRY DECISION
Presentation to Energy Portfolio Committee
National Assembly
17 October 2012

2. Statement on Cabinet meeting of 8 December 2010 (GCIS, 9 December 2010)
“Cabinet decided to terminate the Electricity Distribution Industry (EDI) restructuring and to discontinue the process of creating the Regional Electricity Distribution (REDS) with immediate effect.
Although the Electricity Distribution Industry Holdings (EDIH) had made significant progress in establishing the REDs, Cabinet approved the recommendation that the Department of Energy takes over the programmes previously executed under the EDIH mandate.
The Department will review the whole electricity value chain with a view to developing a holistic approach to revitalize electricity infrastructure, energy security as well as the financial implications.
An administrator will be appointed to attend to the winding up of EDIH. The EDIH Board will remain accountable until the end of the 2010/11 financial year.”

3. Previously reported Progress on EDI restructuring related sub-output
within Outcome 6 Output 2:
Sub-output
Targets
Progress reported by DoE for 1st Quarter 2012/13
DPME comments
2.7 Restructuring of the electricity distribution industry
Decision on the end state of EDI Holdings by 2010/11
The decision on EDI Holdings has been finalised by Cabinet, and EDI restructuring process terminated. In the revised Delivery Agreement, the project will be excluded.
Distribution infrastructure maintenance backlog at municipal level still needs to be addressed
DPME

4. Progress reported by DoE for 1st Quarter 2012/13
Previously reported Progress on EDI restructuring related sub-output within Outcome 6 Output 2:
Sub-output
Targets
Progress reported by DoE for 1st Quarter 2012/13
DPME comments
2.2 Develop a funding and implementati on plan and reduce the electricity distribution infrastructure maintenance backlog of R27.4bn (baseline in 2009) to R15bn by 2014
Funding and implementation plan in place by March 2011
Report detailing a map of distribution asset status for 50% of all Municipalities by 2012/13
Initiate interventions, monitor rehabilitation projects and reduce backlog by R8bn in 2012/13
The Cabinet Memo on the Approach to Distribution Asset Management (or ADAM) has been approved at the cluster and will be submitted to Cabinet for consideration.
The options considered for funding ADAM at municipal level include (i) tariff based, or (ii) concessionary financing through development financial institutions, subject to regulatory conditions that municipalities will be required to accept. Consultations ongoing regarding the financing options
All Metros have been mapped in respect of the status of their electricity distribution infrastructure
On actual distribution network rehabilitation, pilot projects will be initiated once the ADAM concept has been approved by Cabinet
The planning work is behind schedule
Difficult to ascertain whether R8bn reduction in backlog in 2012/13 will be met or whether it is adequate, because DoE is not reporting on municipal rehabilitation expenditure using own funds. Municipalities are already receiving maintenance funding through Nersa approved tariffs.
DPME

5. Aggregate Municipal spending/budgeting on Electricity Distribution System (source NT)
Summary of All Municipalities - Table A9 Asset Management for 4th Quarter ended 30 June 2011 (Published Figures as at 2011/10/26)
Description
2007/08
2008/09
2009/10
2010/11
2011/12 Medium Term
R thousands
Audited Outcome
Full Year Forecast
Budget Year 2011/12
Budget Year 2012/13
Budget Year 2013/14
CAPITAL EXPENDITURE
Total New Assets
Infrastructure - Electricity
Total Renewal of Existing Assets
Total Capital Expenditure
EXPENDITURE OTHER ITEMS
Repairs and Maintenance by Asset Class  - -
48 850
62 580

6. Aggregate Municipal spending/budgeting on Electricity Distribution System (source NT)

7. Aggregate Municipal spending/budgeting on Electricity Distribution System (source NT)

8. Eskom Distribution spending/budgeting on Electricity Distribution System (source Eskom)
Eskom Distribution - 4th Quarter ended 31 March 2012
Description
2007/08
2008/09
2009/10
2010/11
2011/12 Medium Term
R thousands
Outcome
Budget Year 2011/12
Budget Year 2012/13
Budget Year 2013/14
CAPITAL EXPENDITURE (Eskom & DOE funded for electrification)
Total New Assets
Infrastructure – Electricity (Eskom funded)
  Infrastructure – Electricity (DOE funded)
Total Renewal of Existing Assets
Infrastructure - Electricity
Total Capital Expenditure
Infrastructure – Electricity (Eskom & DOE)
EXPENDITURE OTHER ITEMS
Repairs and Maintenance by Asset Class

9. Aggregate Eskom spending/budgeting on Electricity Distribution System (source Eskom)

10. Aggregate Eskom spending/budgeting on Electricity Distribution System (source Eskom)

11. Combined Distribution spending/budgeting on Electricity Distribution System (Source: NT, Eskom)
RENEWAL OF EXISTING ASSETS (R'000)
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
Eskom: Renewal of Existing Distribution Assets
Municipal Renewal of existing electricity assets
Total Distribution System Existing Asset Renewal
REPAIRS AND MAINTENANCE (R'000)
Eskom: Distribution Repairs and Maintenance
Municipal Repairs and Maintenance on electricity  - -
48 850
62 580
Total Distribution System Repairs and Maintenance
TOTAL SPEND/BUDGETING ON EXISTING DISTRIBUTION (R’000)

12. Combined Distribution spending/budgeting on Electricity Distribution System (Source: NT, Eskom)

13. CONCLUSION
Post the Cabinet decision to terminate EDI restructuring, there has been a marked improvement in the dedication of resources towards the renewal as well as the repair and maintenance of electricity distribution infrastructure by municipalities in aggregate as well as Eskom for the areas in which it acts as a distributor.
Assuming the budgeted figures are spent, then the R8 billion target for distribution expenditure in 2012/13 will be met and possibly exceeded.
Regarding coverage of the backlogs, if the inclining trajectory (reflected in the previous slide) of combined Eskom and aggregate municipal commitment of resources to the renewal, repair and maintenance of distribution infrastructure continues, we will have spent approximately;
R30 bn by 2014/15
R43 bn by 2015/16
R58 bn by 2016/17
It seems therefore possible to cover the R27bn – R35bn estimated aggregate backlog in a reasonable time, if the inclining trajectory continues.

14. and delivery agreement guide
Thank you
Go to for PME documents including narrative guide to outcomes approach, outcomes documents
and delivery agreement guide 14