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DEPARTMENT OF MINERALS AND ENERGY
Parliamentary Portfolio Committee
Briefing in respect of
ELECTRICITY BASIC SERVICES SUPPORT TARIFF (EBSST)
06 SEPTEMBER 2001
DAVID MAHUMA
ELECTRICITY BASIC SERVICES SUPPORT TARIFFS
• Government Policy on EBSST
• Energy Sources Considered• Cabinet Approval of
February 2001• EBSST Pilot Funding• Cost and Benefits of EBSST• Capacity of EBSST • Municipal Initiatives• Status of EBSST in Local
Authorities• DME pilot framework• Identified Pilot Sites
• Cost Implications of 8 Piloting
• Cost Implications of 2 Energy Efficiency Pilots
• Cost Implications of Full Implementation
• Time Frame for DME Process
• Inter-Departmental Committee on Pilot Funding
• Link between EDI and EBSST
• EDI Timetable
• Conclusion
GOVERNMENT POLICY ON FREE BASIC SERVICES
• Government announced policy of free basic services to all during the fourth quarter of 2000.
ENERGY SOURCES CONSIDERED AND APPROVED
• Paraffin VAT zero rated
• Electricity– grid 50 kWh free with
stepped tariffs– non-gird free access to the
capacity of system
CABINET APPROVAL OF FEBRUARY 2001
• Provision of free basic electricity to domestic sector (grid & non-grid);
• Pilot EBSST in 2001• Consolidated outcomes of pilot and final
recommendations to Cabinet early in 2002• Commence phased implementation from the
2002/2003 after Cabinet approval
EBSST PILOT FUNDING
• The following funding proposals were made: – Grid electricity pilots from cross
subsidisation
– non-grid electricity from Equitable Share allocation
COST AND BENEFITS OF THE EBSST
• Grid Electricity– Household connected to grid (50kWh @ R0.30
per kWh) saves R180.00/a– Excess consumption payable by consumer
Non-grid Electrification– Household connection to non-grid (R40/m
Operation &Maintenance) saves R480.00/a– excess O&M payable by consumer
CAPACITY OF EBSST ALLOCATIONS
• 50kWh can enable the following benefits:– access to lighting– basic access to media (TV and radio)– basic water heating with electric kettle– basic ironing
• 50Wp Non grid Solar Home Systems– access to basic lighting– basic access to media (TV (b&w) and radio)
MUNICIPAL INITIATIVES
• Cabinet directive interpreted as meaning immediate implementation of EBSST policy;
• Many municipalities outside the above target nodal areas announced EBSST implementation by 1 July 2001 in line with free basic water provision;
• Such municipalities are funding EBSST and free water from internal funding.
STATUS OF EBSST WITHIN LOCAL AUTHORITIES
• Some Metro’s started to implement EBSST;• Pressure on Eskom to provide the same to customers
within Metro boundaries; • Cape Town, Ekurhuleni, Pietersburg and Tshwane have
already implemented EBSST to their customers;• Eskom initiated discussions with Metros to investigate an
integrated approach regarding phased introduction of free basic electricity to Eskom customers within Metro boundaries;
• Special Task Team created between Eskom, DME and City Power to consider options for Johannesburg Metro;
• No breakthrough due to funding consideration.
DME PILOT FRAMEWORK
• Pilot projects intended to commence in July 2001. • Focus on 13 identified developmental nodes and
selected urban renewal areas• Lessons to be drawn from selection of
municipalities already commenced with some own free basic services .
• There is a need for balance and control of variables in pilot studies.
• Eskom and SALGA requested to assist the DME with the EBSST pilots during 2001.
IDENTIFIED PILOT SITES
• PILOT SITES AREA&PROVINCE
• Gesese Hothsazel, Northern Cape
• Antioch Ixopo, Eastern Cape
• Garagopola Pietersburg (Penge), Northern Province.
• Tambo Near Queenstown, Eastern Cape
• Makhutsu Northern Province
• Marapong Northern Province
• Makiepsvlei Groblersdal
• Mathopestad North West
•
• Energy Efficient Lighting Sites
• Zwelitsha E.Cape
• Dengwane E.Cape
IDENTIFIED PILOT SITES (CONT’D)
• All nodal areas fall within Eskom area of supply;
• Eskom has already commenced work in pilot sites to set up pilot projects since June 2001 (as requested by DME);
• First pilot launched in Northern Cape during September 2001;
• Other pilots announces when initiated;
• Interim report by December 2001 and Final report by end February 2002
• Pilot funding required
COST IMPLICATIONS OF 8 MONTHS PILOTING
• 8 pilot sites identified (DME Funding)– EDRC involvement (Social aspects of the EBSST)
• Issues– Change of Vending Systems– Link of Billing System to Financial system
• Cost: R24m – Implementation Costs R9,5m– Revenue Shortfall (Energy cost-Grid) R5m– Operation and Maintenance ( Non-grid) R2.1m– Communication Cost R5m– Project Management R2.5m
COST IMPLICATIONS OF 2 ENERGY EFFICIENCY PILOTs
• 2 Energy Efficiency pilot sites– Zwelitsha (Eastern Cape)– Dengane (Eastern Cape)
• Total Project Cost R1m Funding :Eskom and World Bank
COST IMPLICATIONS OF FULL SCALE FREE BASIC ELECTRICITY
• Annual energy cost R1.2 bn
• Meter replacement and vending system upgrades R0.6 bn
– (excluding cross subsidisation through tariff adjustments)
• Total cost R1.8 bn
TIME FRAME FOR DME PROCESS
• Preparatory work: June 2001• Implementation (dispensing): September 2001• Cabinet Recommendations: February 2002• Phased EBSST rollout: April 2001
• REDs and Local Government will be responsible for the EBSST Implementation
INTER-DEPARTMENTAL COMMITTEE ON EBSST ON PILOT FINDING
• Comprised National Treasury and DME officials
• Recommended
– Finance Minister’s support to
– R24m fiscus allocation
– usage of NEF as bridging finance
– Consideration by Treasury Committee
• No guarantees to date in terms of EBSST pilot funding;
• Awaiting Treasury Committee sitting towards end of September 2001;
• DME is looking at possible alternatives.
LINK BETWEEN EBSST AND EDI RESTRUCTURING
• Objectives of the EDI Restructuring– Address industry fragmentation– Address local government bulk debt– Enhance financial viability of industry– Enhance equity and quality of service
– Facilitate government priorities
• redress past imbalances I.t.o. service provision• Universal access to electricity• EBSST• Socio-economic development• poverty alleviation
EDI TIME TABLE
• Establishment of Holding July 2001- company Sept 2001
• Ring fencing of distribution Sept 2001- business Dec 2002
• REDs establishment Jan 2003-Dec 2004
CONCLUSION
• EBSST is quite an involved process;• Solutions to funding (pilots and phased
implementation in interim period) should be found soon;
• Cross-subsidisation will commence in 2003/2004 financial year;
• There is a need to clarify the the role of Equitable Share in provision of future free basic services.
THANK YOU
QUESTIONS AND ANSWERS
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