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COMPLIANCE MONITORING REPORT OF GOVAN MBEKI MUNICIPALITY Monitoring Date: 08 May 2013

COMPLIANCE MONITORING REPORT OF GOVAN MBEKI MUNICIPALITY · Page 6 of 18 4. GENERAL INFORMATION ON GOVAN MBEKI MUNICIPALITY Govan Mbeki Local Municipality is located in the north

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Page 1: COMPLIANCE MONITORING REPORT OF GOVAN MBEKI MUNICIPALITY · Page 6 of 18 4. GENERAL INFORMATION ON GOVAN MBEKI MUNICIPALITY Govan Mbeki Local Municipality is located in the north

COMPLIANCE MONITORING REPORT OF GOVAN MBEKI

MUNICIPALITY

Monitoring Date: 08 May 2013

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All enquiries and correspondence to be directed to the Head of

Department: Electricity Licensing and Compliance

Tel: 012 401 4794

National Energy Regulator of South Africa

Kulawula House

526 Madiba Street

Arcadia

Pretoria

PO Box 40434

Arcadia

0007

Tel: +27 (0)12 401 4600

Fax: +27 (0) 12 401 4700

www.nersa.org.za

DISCLAIMER

The content of this report is based on information and evidence obtained from

both the licensee and site verification of plant condition conducted during the

monitoring process. Should this report not be accurate as per the information

collected from the licensee, the licensee must in writing within fourteen (14) days

of receipt of this report advise NERSA about such inaccuracies.

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TABLE OF CONTENTS

EXECUTIVE SUMMARY................................................................... 4

1. INTRODUCTION ........................................................................... 4

2. METHODOLOGY .......................................................................... 5

3. NERSA DELEGATES & GOVAN MBEKI MUNICIPALITY DELEGATES .................................................................................... 5

4. GENERAL INFORMATION ON GOVAN MBEKI MUNICIPALITY 6

5. AUDIT FINDINGS ......................................................................... 6

6. PROGRESS IN IMPLEMENTATION OF CORRECTIVE ACTION PLAN ................................................................................................ 7

7. CONCLUSIONS .......................................................................... 15

8. RECOMMENDATIONS ............................................................... 15

9. NEXT STEP ................................................................................ 15

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EXECUTIVE SUMMARY On 08 May 2013, three NERSA employees conducted compliance monitoring on Govan Mbeki Local Municipality. The objective was to determine progress made by Govan Mbeki Municipality in the implementation of corrective action plans that were submitted by Govan Mbeki Local Municipality to NERSA. These corrective action plans were developed by Govan Mbeki Municipality and agreed to by NERSA after the findings of an audit conducted by NERSA from 11 October 2011 to 13 October 2011. The intent of the corrective action plans is to address the non-compliances identified during the audit in order to help Govan Mbeki Municipality be an efficient and complying licensee. Section 5 of this report depicts all the findings as per the audit, while section 6 displays in table format the non-compliances together with the corrective action plans and the progress made to date against the target dates as agreed with NERSA. It must be mentioned that at the time of the first monitoring exercise, Govan Mbeki Local Municipality had made progress in some areas, while in other areas very little progress has been made.

1. INTRODUCTION

1.1 Overview

The National Energy Regulator of South Africa (NERSA or ‘the Energy Regulator’) is required to monitor and assess whether the electricity suppliers comply with the conditions of their licences. The Energy Regulator approved a compliance monitoring framework for electricity distributors in 2011, which acts as a guide on how compliance audits and monitoring must be conducted. The framework is also supported by The Electricity Regulation, 2006 (Act No. 4 of 2006), Chapter 4 (a) (vii), which states that ‘The Regulator must enforce performance and compliance; and take appropriate steps in the case of non-performance’. NERSA conducts the compliance audits on licensed electricity distributors annually. NERSA regulates the energy industry in accordance with Government laws and policies, standards and international best practices in support of sustainable development. The organisation issues licences to electricity distributors and therefore requires audits to be conducted against key licence obligations. It is NERSA’s mandate to monitor and enforce compliance with the licence conditions as per the Act. This monitoring process is to enforce and ensure improvement and sustainability of the licensees for the betterment of the Electricity Supply Industry (ESI) which will lead to improved quality of supply and service to customers.

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1.2 Monitoring and Enforcement Objectives The key objectives of the compliance monitoring and enforcement of the corrective action plans are:

to enforce implementation of the corrective action plans;

to help the licensee not to lose sight of critical matters that need to be corrected;

to help the licensee to start to do self monitoring in terms of their performance against licence conditions;

to help licensee to ensure that the quality of service and supply does not decline; and

to inform the Energy Regulator of the progress made by the licensee in the implementation of the corrective action plans.

2. METHODOLOGY

A corrective action plan template was developed and sent to the licensee to populate with all the non-compliances highlighted during the audit, together with the intended corrective action plans (CAP) with implementation target dates. These were sent to NERSA after being signed by the relevant officials of the licensee. NERSA agreed on the CAP and instigated a monitoring process which robustly monitors progress against target dates. Progress is checked against target dates and remedial actions are implemented on an ongoing basis. Proof and supporting documents were requested and presented to the NERSA officials during the monitoring process. Some site verification was also done to compare the current plant condition versus the condition during the audit.

3. NERSA DELEGATES & GOVAN MBEKI MUNICIPALITY DELEGATES

NERSA was represented by the following officials:

Ms B Gobe Compliance Engineer

Ms V Poswa Dispute Resolution Officer

Mr V Malaza Senior Distribution Compliance Engineer

Govan Mbeki Municipality was represented by:

Mr D Miya Director Technical Services

Mr T Thangavhuelelo Acting Manager Electricity

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4. GENERAL INFORMATION ON GOVAN MBEKI MUNICIPALITY

Govan Mbeki Local Municipality is located in the north west of Gert Sibande District Municipality in Mpumalanga Province and supply electricity to Secunda, Trichardt, Kinross, Evander, Bethal, Emzinoni and eMbalenhle. It has 61,035 customers, which are categorised as follows: 46,707 prepaid Domestic; 11,925 Domestic credit meters; 2,151 Commercial and 252 Industrial customers. There is one main substation in Secunda town which is supplied by three 11kV Eskom incomers with 3X20MVA (33kV/11kV) transformers and one main substation in Evander which is supplied by two 22kV Eskom incomers with 5X3MVA (22/11kV) transformers. The network is in a fair condition not too old, with the majority of the equipment older than 30 years.

5. AUDIT FINDINGS

At the time of the audit, the following was highlighted to the licensee as areas that need attention and improvement:

The crucial vacancies on the organogram should be filled as soon as possible.

The Licensee must maintain separate electricity distribution business from the other Municipality businesses.

The outstanding D-forms must be completed and submitted as soon as possible. The Licensee must attend one of the workshops on the completion of D-forms that are organised country wide by NERSA.

The bulk account of Eskom must be settled as a matter of urgency.

An asset register for the electricity department should be compiled separate from the other assets of the Licensee to indicate the true replacement value of the assets. This register should be linked to the GIS system of the municipality.

It is recommended that the municipality adopt the NRS standards on maintenance of substations and conducting routine and preventative maintenance to improve public and employee health and safety, reliability of supply, quality of supply and service.

The municipality must be familiar and implement minimum requirements of the NRS 047 standard (Quality of Service) as well NRS 048 (Quality of Supply)

The implementation of the Occupational Health and Safety Act is critical and should be adhered to at all time.

A master plan that includes not only the current analysis of the electricity network but also sub-projects with indicative budgets that address the capacity constraints in the future planning must be compiled, to complement the full analysis of demand forecasting.

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6. PROGRESS IN IMPLEMENTATION OF CORRECTIVE ACTION PLAN

Non-compliance

Corrective Action Start Date End Date Progress

Condition on Monitoring Day

Critical positions not filled.

Request to advertise critical position was submitted to Human Resources. Two electrician positions and two installation inspector positions were advertised. The organisation is going through a restructuring. Price waterhouse Coopers (PwC) has been appointed to develop an organisational structure that will ensure better service delivery. This project is expected to run until end of December 2012.

January 2013.

June 2013.

The restructuring has not been finalised yet. PwC was appointed last year. The micro structure was finalised; the macro structure is pending, however, they could not wait for completion of restructuring, hence the filling in of critical posts is continuing. Three posts were advertised on 05/05/13 for electricians. New structure will have provisions for critical positions, especially protection maintenance and planning. Internal promotions have been done after people had acquired the skills required for the next level of post. At the time of the monitoring, six staff members were internally promoted after receiving their trade tests. No external recruitment so far.

Internal promotions done. A proof of a newspaper advertisement for the filling in of three electrician positions was submitted to the monitoring team.

An asset register for the electricity department separate from the other assets of the licensee should

The licensee discovered a copy of the asset register that had been prepared by GODOBA/SAHA in 2009. This

September 2012 June 2012

EDI Holdings appointed Goboda in 2009. PwC has been appointed to do the asset register on 01/05/2013. The scope of their appointment is to go out on the entire network to do the asset audit and compile the

Price Water House Coopers was appointed a week before the monitoring to conduct an

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be compiled to indicate the true replacement value of the assets and this register should be linked to the GIS system of the municipality.

service provider was appointed for the restructuring of electricity distribution industry. At the beginning of this financial year, PwC was appointed to address the issue of the asset register.

asset register since it has never been properly updated since Goboda 2009. The process is expected to run for three years. Proposed to move the target date to late next year. A report to AG will be done, hence it will be sent to NERSA in August 2013.

electrical asset audit in order to compile a proper electrical asset register. NERSA will receive a progress report in August 2013.

It is recommended that the municipality adopt the NRS standards on maintenance of substations and conducting routine and preventative maintenance to improve public and employee health and safety, reliability of supply, quality of supply and service.

A minimum maintenance was performed in some of the substations in order to comply with requirements as stipulated in the NRS guidelines. The following substations were maintained: Evander main substation, eMbalenhle main substation, eMbalehle ring sub4, Secunda main substation and Bethal main substation.

Ongoing.

Ongoing.

Maintenance on Plant equipment was done at eMbalenhle, Evander, Secunda, eMbalenhle Ring 4 and Bethal substations.

Vegetation management has still not been attended to especially at Secunda main and Evander substations.

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The municipality must be familiar with and implement minimum requirements of the NRS 047 standard (Quality of Service) as well NRS 048 (Quality of Supply)

All the applicable NRS guidelines are being discussed in weekly meetings. Soft copies and Hard copies of both guidelines were issued to the Senior Engineering Technicians. These guidelines will be empathised during the review of licensee’s by-laws, this will ensure that compliance is achieved and maintained.

Ongoing.

Ongoing.

The quality of service standard is being implemented on an ongoing basis a new call centre has been establish and recording of all customer complaints, fault and tracking of progress is made electronically.

The NRS 047 part has been addressed a new fully operational call and fault reporting centre and system is in place. The NRS 048 is not yet implemented due to funding challenges.

The implementation of the Occupational Health and Safety Act is critical and should be adhered to at all time.

Section 8 of the Act requires that safe working environment be achieved and achieved all the times. These safety rules are issued in the interest of employee’s safety, the safeguarding of electrical equipment and to ensure a safe working environment. These rules are the minimum requirements to comply with. It remains the responsibility of all supervisors to provide more specific details regarding safety

Ongoing.

Ongoing.

A number of working procedures on different plant equipment has been developed. This was submitted during the monitoring for perusal.

The procedures are on loose papers should be in the form of a booklet.

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and concerning operational and maintenance features of specific items of equipment to be worked on. It must be remembered that rules can never provide for each and every situation, consequently care should at all times be exercised in the work place. As safety forms an integral part of any job it should be included in the planning of each task.

The compilation of a master plan that includes not only the current analysis of the electricity network but also sub-projects with indicative budgets that address the capacity constraints in the future planning, to complement the full analysis of demand forecasting.

The development of the master plan is priority number one for the licensee in this financial year. An allocation was approved to realise the licensee’s objective. The Department of Cooperative Governance and Traditional Affairs (CoGTA) has taken initiative to assist municipalities in the development of master plans. The licensee is one of three that was identified to be

September 2012.

June 2013.

After discovering that the CoGTA process does not closely cover the unique needs of the licensee, a panel of consultants have been appointed to develop the master plan as and when they are required to provide service. In April 2013, a proposal was developed to request quotations to develop the master plan; the response was disturbing as there was a huge difference between the quotations (R40m vs. R10m). The exercise is to be redone because of the huge difference in quotes. It is expected to take a month to get a service provider. A budget is available for the task.

No progress. An appointment letter of the service provider with the scope of work must be sent to NERSA by the end of June 2013. The appointment letter to be sent to NERSA must stipulate the final product and the timelines for the scope of work.

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involved in this exercise. The reason behind this intervention by CoGTA is to develop an integrated master plan for both Eskom and the municipalities.

The licensee was not up to date with payments on the bulk account and the latest Eskom accounts proof that huge amount was in arrears.

Monthly meetings are held to address or solve the issues around the payment of bulk/Eskom account. These meetings are chaired by the Municipal Manager and all the commitments are handled in that platform.

September 2012.

30 June 2013.

The licensee is still behind with the payment of bulk account due to 40% revenue loss. Ongoing monthly meetings at Municipal Manager and CFO level are held to address the account issue. CFO/Finance department to provide payment schedules as no detailed information could be provided by the Technical team, as the financial department was not available to provide detailed feedback.

Still in arrears.

Safety Act, Operators’ operation certificates had expired and safety and warning signs not in place.

As part of maintaining the reasonably safe working environment for the personnel, High Voltage (HV) regulation training was requested to Cooperation department. Training of was suppose to start on 08 October 2012, but due to unforeseen reasons it could

01 July 2012

14 December 2012

The licensee indicated that operators/electricians were sent in November 2012 for training on the safe operation of medium Voltage (MV)/HV network, however no proof of training done by operators was available.

No change/no certificates were available at the time of monitoring.

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not take place. All the warning missing signs will be replaced as required.

20 MVA transformers At Secunda main substation required serious maintenance.

The two 20 MVA transformers at Secunda were maintained on 08/07/12.

08 July 2012

08 July 2012

Maintenance done on the transformers.

Transformers in acceptable condition.

Transformer no. 2 at Evander main substation not maintained.

All 5 X 3MVA transformers were maintained on 11/03/12.

11 March 2012.

16 March 2012.

Maintenance done.

Transformer maintained but old; it needs to be put on a replacement plan. Grass was cut in the yard.

Ext 4 substation 5MVA 22/11kV transformer was leaking oil.

Transformer to be maintained and the leakage to be stopped.

23 April 2012

30 June 2012

Transformer was maintained and the leakage was stopped.

No more leaks.

Damaged distribution boxes/ stubby/meter box and mini substation.

The main challenge is illegal connections that happening around the network. Most boxes are broken by licensee’s customers when they restore the service illegally. We have committed part of maintenance

01 July 2012

30 June 2013

A new specification for metering and distribution boxes has been developed which is more robust to prevent unauthorised entry.

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to repair and replace the most critical boxes.

Maintenance of fire extinguishers.

All fire extinguishers to be serviced. The appointed service provider has already started maintaining in Bethal/eMzinoni area.

01 July 2012

14 December 2012

Fire extinguishers replaced with new ones in all substations.

All fire extinguishers renewed and placed in designated areas. Flametec Fire Equipment Services was appointed in January 2013.

No maintenance plan on substations. Evander Main, Mbalenhle Main s/s, eMbalenhle ring 4, Secunda Main and Bethal main.

Maintenance to be done.

Maintenance on plant equipment is now done, however the budget that is given to the electricity department is far below the requirement. (R20m cut about R8m). Always the department do not get the requested budget on approval. Also the licensee is running at big loss in terms of revenue collection both technical and non tech loses approx R40m monthly loss. Split metering is in rollout in Embalenhle and Emzinoni. A maintenance template will be developed in terms of routine maintenance planning, this will emanate from the asset register from PwC.

Maintenance was done to the highlighted substations. Proper maintenance plan on all other plant equipment will be done once the asset register is completed.

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7. CONCLUSIONS

Govan Mbeki Local Municipality attended to the non-compliances highlighted by the audit in terms of transformer maintenance and repairs; however vegetation management in substations is still a problem. In general, Govan Mbeki Local Municipality improved in their performance on the technical part of the business since although the development of the master plan was not done, an approved budget for the development of the master plan was in place. The monitoring team observed that should the technical department be allowed the budget as requested without it being cut, a lot of improvement can be seen on the physical appearance of the network condition. This will translate to efficiency and an increase in revenues for the licensee.

8. RECOMMENDATIONS It is recommended that the licensee provide the required support to the electricity business of the Govan Mbeki Local Municipality on the following critical matters: 8.1 the filling of the of the critical vacant positions in the department; 8.2 the implementation of the process of the development of an asset register

for the electricity department linked to the GIS system of the municipality; 8.3 a proper maintenance plan for all plant equipment must be developed and

be adhered to in terms of funding and implementation; 8.4 the compilation of a master plan that includes not only the current risk on

the electricity network, but also sub-projects with indicative budgets that address the risks and capacity constraints in the future planning, to complement the full analysis of demand forecasting;

8.5 technicians and electricians/operators must be sent to a competent trainer who is accredited to be able to issue training certificates;

8.6 Pre paid meter rollout must be expedited to cub the 40% revenue loss experienced by the licensee; and

8.7 the licensee must furnish NERSA with a proper payment plan for the payments of the bulk account that is still in arrears.

9. NEXT STEP

The Energy Regulator expects the Executive Management of Govan Mbeki Local Municipality to support the electricity department as it implements these corrective action plans in order to not only improve on compliance, but also to be one of the efficient and successful licensees in terms of good quality of supply and service to its customers. NERSA will continue to conduct the monitoring of the implementation of the corrective action plans on an ongoing basis until NERSA is satisfied with the progress made. Further engagements on the monitoring will be communicated to the licensees. It is expected that the licensee will now implement self-monitoring measures to ensure that the improved areas do not deteriorate back to a situation of non-compliance.

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All communication should be forwarded to: The Head of Department Licensing and Compliance: Electricity National Energy Regulator of South Africa PO Box 40343 Arcadia 0007 Fax: +27 (0)12 401 4700

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APPENDIX A: PLANT CONDITION DURING AUDIT VS. MONITORING TIME

Condition during the time of the audit Condition during the monitoring - breather leaks repaired

Condition during the time of the audit During the monitoring - oil leaks repaired and transformer maintained

Condition during the time of the audit Condition during monitoring - vegetation still not maintained

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Condition during the time of the audit Condition during monitoring