SALGA recommendations for Integrated National Electrification Programme; Roll out of INEP in partnership with municipalities & Solar Water Heaters programme: Eskom briefing

Meeting report

Chairperson’s Opening Remarks
The Chairperson said that this briefing was long overdue and had emanated from oversight that was done at King Sabata Municipality in the Eastern Cape, and an engagement with the Portfolio Committee of Energy. The Committee had been called upon to provide assistance about the blockages and the lack of service delivery.

SALGA recommendations for Integrated National Electrification Programme (INEP)
Mr Mthobeli Kolisa, SALGA Executive Director Municipal: Infrastructural Services, first provided a historical outline of the performance of the programme since 2006 (see document). There were 75% of backlogs in rural areas, which were largely areas in which Eskom was the licensed distributor. He identified the key problem as being the lack of support municipalities experienced in these areas with no capacity to review the appropriateness of proposed projects and the quality of work by private companies.

Urbanised areas formed only a small part of the 25% urban backlog with informal settlements forming the significant component of this backlog. SALGA said that an issue in urban areas was that the Department of Energy (DoE) did not allow the upgrading of existing infrastructure required for electrification projects. The DoE was currently providing for the electrification of informal settlements. The National target to upgrade informal settlements and provide proper services and land tenure was 400 000 households by 2014. The planning alignment of the Informal Settlement Upgrading Programme with the electrical reticulation programme of the DoE was needed to ensure that electrical grid was available when settlement upgrading projects commenced. It would require that provincial governments make their approved Multi Year Housing Development Plans and priority development objectives available to the DoE to enable the latter to align its electrification programme accordingly.

Agreement would be required on the removal and recovery of the installed pre-paid meters from informal dwellings and the re-installation thereof in the new dwelling units, constructed through the National Housing Programme.

There were concerns around inequitable funding from the DoE, the funding application process, bulk infrastructure needs and the procurement process (see document for details).

SALGA’s recommendations were:
• Need some shared capacity to provide technical support to under-capacitated municipalities; capacitate INEP regional offices to play this role
• INEP offices should be the points of coordination/ planning alignment between various electrification projects funding agencies
• Provincial Housing Departments must make their approved Multi Year Housing Development Plans and priority development objectives available to Department of Energy (DoE) to enable the latter to align its electrification programme accordingly

• DoE to allow upgrade of existing infrastructure required for electrification projects
• DoE to fund infill connections
• Requirement for 80% occupancy of housing developments be done away with

 

 
• Adjustment of the National Housing Programme to include funding for the removal of the existing meters and the re-installation thereof in the new dwellings
• DoE policy should provide the full cost of connections in areas provided by both Eskom and municipalities
• Eskom should enter into service delivery agreements (SDAs) with municipalities where Eskom was a distributor so as to ensure alignment of expectations.

Eskom Electrification Programme briefing
Mr Louis Maleka, Acting Executive Director: Distribution, Eskom, briefed the Committee on Eskom’s Electrification Programme. The INEP recommended the allocation of funding to the National Electrification Advisory Committee (NEAC) based on the following criteria: a focus on the backlog and the application of a rural bias; the prioritization on Integrated Sustainable Rural Development Strategy (ISRDS) Nodal Zones; the maximization on available infrastructure; municipal Integrated Development Plans (IDPs) and past performance; and government priorities and initiatives such as Integrated Infrastructure Development.

Eskom also planned a National Electrification Fund Process for allocation of funding to provinces using the same criteria as in the NEAC, with the programme adjusted as per DoE requirements and in line with the change process. Provincial consultations would be done through: Provincial IDP/Municipal Infrastructure Grant (MIG) Forums chaired by Provincial Local Government officials; and Provincial Energy Forums.

Mr Maleka outlined the medium term expenditure framework allocation, and said that the annual average of 100 000 connections had been realised in the past six years. The total investment to date from 1991 to 2011 had been R7.5 billion. More than 11 000 schools had been electrified since 1991; and close to 400 clinics had been electrified since 1991.

Electrification still had a significant backlog of 2.5 to 2.9 million households.

Eskom’s Solar Water Heating (SWH) Programme briefing
Mr Andrew Ebzinger, Senior General Manager, Eskom, briefed the Committee on Eskom’s SWH programme which was introduced in 2008 in support of government’s target of one million SWH by 2014.

The benefits of the programme were outlined as job creation through installation, skills acquisition, service delivery, a shift to a green society and economy and electricity saving. Eskom would allocate funding amongst projects so as to achieve the best benefit possible. Rebate levels had been adjusted to stimulate demand. Rebate levels were therefore doubled in 2010 with a cautionary note that they would be reduced in subsequent years. The level was reduced by 5% in June with the intention of introducing incentives for local manufacture.

The programme has enjoyed rapid growth recently with more than 100 000 systems installed on the programme. R5 billion was needed to roll out one million SWHs, but Eskom only had R1.1 billion for SWHs. Additional funding was sought to sustain the programme. Long-term certainty of funding was required to stimulate local production.

Department of Energy comments:
Mr Mohau Nketsi, Senior Manager Electricity Planning: DoE, expressed support for the presentation by SALGA. A risk mitigation strategy had to be substituted with something substantial with agreement from all stakeholders. The Department was in the process of finalising an electrification strategy for Informal Settlements. This strategy was an attempt to integrate housing plans with electrification plans. The National Treasury was busy with urban settlement development strategies where some funding could be leveraged with those strategies from Treasury. One needed to use whatever help was available and explore all avenues especially refurbishment. Electrification could not be done in certain areas without refurbishments. More money was needed to deal with the challenges of the INEP programmes. DoE supported the recommendations put forth by SALGA.

Mr Nketsi noted SALGA’s complaints about the top-up funding the Department gave to municipalities and not to Eskom. Eskom was seen as a service provider who needed to account for all its funds and could not be expected to contribute to electrification. When Eskom projects were implemented there was surety about the costs. However, with municipalities the situation was based on an estimated approach. DoE was in the process of reviewing the cost of connections, and had realized that the averages based on municipal levels did not do justice across the provinces. Poor municipalities were being engaged with about top-up funds and implementation strategies.

Ms Mokgadi Mathekgana, Chief Director: Clean Energy, DOE, emphasised the points made by SALGA and Eskom in their respective presentations on the funding challenges in rolling out the programme. She highlighted the fact that DoE was engaging with Treasury for assistance with meeting targets. There was a need to work with other municipalities and join hands to improve energy efficiency.

National Energy Regulator South Africa comments
A representative from the National Energy Regulator South Africa (NERSA) stated that he was addressing the HEADCOM of the Programme of Solar Water Heaters because those were the people that they regulated. It was true that NERSA had allocated R1 billion to the programme and it was pleased that it had continued to proceed. However the rate at which it was continuing was a cause for concern for the Regulator, because with projections it would mean that more money was needed than the already allocated R1 million. Ring fencing of water requirements was needed because if the money was expended before the three-year period was completed, there would not be funds for Eskom. The question was then how solar heaters could be funded going forward if the money was used up. There should be a way to top up the funds given by the Regulator because the R1 billion might have been insufficient.

Department Public Enterprises comments
Mr Thomas Mutshidza, Acting Chief Director: Energy, Department Public Enterprises, said that there was a need to join the DoE in the search for how to obtain additional funds. Eskom also needed to be supported. This issue was raised because the rollout of the programme could not be viewed as a finished product but should rather be seen as the impact it would have on society. The concern was that funding was not adequately quantified. There was a need to understand the backbone of the distribution network and see the programme in totality and if tangible changes were being made to people’s lives.

Discussion
Mr D Ross (DA) said that with regard to delivery for the INEP programme, municipalities had only delivered about 38% of their targets. He asked whether delivery could be outsourced through municipalities, allowing Eskom to take full responsibility.

Mr Kolisa replied that municipal managers operated in the context of not having an electricity department but having to meet the needs in rural areas. They would then seek resources from the private sector that would cut corners to maximize profits at the expense of the quality of service. Hence there was a need to build capacity for technical persons to assist municipalities.

Mr Kolisa replied that the reason municipalities did not have capacity, had to do with the skills crisis in the country. The DoE should work with the Department of Higher Education and Training to look at a strategy to ensure skills in this area.

Mr J Selau (ANC) said that all the presentations were of similar mind with regard to co-ordination around plans, and the ability to do maintenance work. He asked for clarity about the situation in the North West (NW) province, as the table stated 83% of the projects were completed with 17% having more than 50% progress made. However, there were many people without electricity in the NW.

Mr Kolisa said that there was a misinterpretation in the understanding related to the NW and the progress made. This did not mean that there was no longer a need for more projects, as these were just the statistics for the year 2011/12 and what was budgeted for. More projects would be implemented in the future.

Mr Selau commended SALGA on the good presentation. The problem was that the current situation showed a focus on informal settlements. He asked when serious consideration was going to be given to rural areas.

Mr Sandile Maphumulo, Head: Electricity Ethekwini Municipality, replied that the emphasis had been placed on informal settlements in urban areas where the density was acceptable and where there was electricity. The Department was being engaged with to look at increasing the allocation per connection.

Mr Maleka, Eskom, responded that Eskom had a national footprint in rural areas to ensure rural areas were getting the same treatment as urban areas. Out systems had been built to support all customers.

Mr Selau asked if there had not been any thoughts from stakeholders about coordinators coming together to form a coordinating structure to have an integrated approach. He asked if all stakeholders just did as they felt best without seeing the need for shared capacity.

Mr Maphumulo replied that a co-ordination structure for electrification was in existence. This structure was called the National Electrification Advisory Committee. It was comprised of the Department Energy, other national departments, SALGA, and Municipal Association electrical undertakings. This structure looked at all policy issues about electricity and also monitored electricity programmes. Each department had such a structure as these were being strengthened at regional level.

Mr Selau asked for clarity about who was involved in the regional INEP offices. Eskom had given its best in terms of attempting to electrify SA, but the demand was becoming very high. What was the status quo, are we able to supply electricity, and how are we coping with load shedding?

Mr Ebzinger stated that the country was not heading for load shedding. A lot had been learnt from Eskom’s role which was to ensure that one million solar water heaters were provided whether there were other players in the market or not; and whether Eskom was the only one licensed and legislated. Eskom’s approach was to do what shareholders wanted, One million solar water heaters was the given mandate. The private sector role had to provide innovate funding mechanisms, in production, to get the solar water heating sector established in country; this would involve a long-term audit for which Eskom was not as yet ready.

Mr Selau said that SALGA had stated in its presentation that solar heaters were essentially a welfare intervention aimed at improving the quality of lives rather than reducing existing demand. He asked if the focus should be on poor households or whether electricity could be saved from those who already had electricity.

Mr Kolisa replied that the programmes not implemented by municipalities were of a grant-in-kind nature implemented through Eskom. There were two aspects to this programme: the one aspect was improving the lives of poor households through access to warm water; and the other one was reducing the existing demand from the grid. Eskom was talking about rebates using the load from the grid. There was a need to spend more money on solar water heating.

Mr Isaac Sokopo, Corporate Specialist: Eskom, said that as far as electrification was concerned it was not a case of doom and gloom. When this process was started in 1994 the level of electrification was 36%. The latest figures from Statistics South Africa now reflected 83% in 2009.

Mr L Greyling (ID) expressed concerns about the solar water programme as it would fall short of the R1 billion allocated. The target of one million Solar Heaters for 2014 should be attained. The issue was about where to get the money. He asked why the Department had not asked Eskom for money upfront. Yet, this was not only Eskom’s responsibility. He asked further why the by-law for new buildings did not include solar heaters, and with regard to the insurance issue, if it could not be insisted that the R20 billion Green Fund that the Development Bank of Southern Africa (DBSA) had, could be used.

Mr Kolisa replied that what had happened to the by-law in respect of solar water heaters in new buildings, was that most municipalities exercised their own powers through national or provincial governments in setting frameworks. The situation had subsequently changed, as they had to go through asking the national government to implement building regulations for energy efficiency in buildings. This move was being spearheaded by the Department of Trade and Industry.

Mr P Dexter (COPE) asserted there were things that could be done that were not factored into the equation. The targets on emissions were well known, but people were complacent, especially when it was clear that there were radical measures in place to reduce reliance on carbon emissions.

Ms N Mathibela (ANC) asked about Eskom and load shedding. There were illegal connections especially in RDP housing where excess in usage had been detected. She expressed concern about removing and re-installing meters, and possible protest action being taken.

Mr Maleka replied that load shedding was not occurring. In some municipalities there were pockets of network related problems, some of which were as a result of the ageing of the networks, illegal connections and others related to the by-passing of meters. There were two issues about the theft of energy: prepaid machines were broken and stolen, and people were buying electricity at minimal prices and using more.

Mr Maleka said that the bridging of meters was happening in RDP houses. The government had to look at policy in this regard.

Mr Greyling said that Eskom had made major progress with the INEP programme, but there was a 75% backlog in rural areas. He asked if mini grids could be look at for rural areas to allow movement beyond the grid to provide efficient energy resources for the future.

Mr Maleka replied that Eskom was looking at how to approach rural areas to connect them in the grid.

Mr Maphumulo said that the backlog was not only with regard municipalities, but for all distributors in the country.

Mr Sokopo said that electrification of the rural areas was now at approximately 60%, an increase from the 12% in 1994. The backlog had been partially addressed. Four million customers had been electrified.

Mr K Moloto (ANC) agreed with the views expressed by Mr Selau that better co-ordination between the DoE, Eskom and the Regulator should exist. He asked why only 28 000 connections existed, as this figure was very low.

Mr Kolisa replied that this issue had to do with implementation and alignment as most of the projects were in the 75% backlog in rural areas. Municipalities handed over to Eskom, but the priority for government should be to improve rural areas service delivery. A way should be found to improve access to services in rural areas. Municipality managers did not have electricity departments because they did not distribute electricity, hence they outsourced the capacity to implement projects and then hand them over to Eskom.

Mr Ebzinger said that things were so slow when looked at mathematically. The current rate of installation of Solar Water heaters was 5000 systems per week and rising, and at that rate it would reach one million by 2014.

Mr S Radebe (ANC) expressed concern in terms of the synchronisation of reporting. He asked for clarity from Eskom as the Presidency had said that health and education were a priority, and the government was slow in electrifying schools and clinics mostly in rural areas.

Mr Sokopo replied that a school programme was in existence in co-operation with the Department of Education. All clinics had been electrified. All schools on the electrification programme earmarked for electricity had received electrification.

Ms E van Lingen (DA, Eastern Cape) said that SALGA had reported 363 projects in total. She asked how many more projects there should be to cover what should be covered.

Mr Kolisa, SALGA, said that the Department would be better positioned to answer this question on the number of projects planned for beyond the target of 363 projects for 2011/12.


Mr E Lucas (IFP) said that town planning allowed for the full involvement in every facet of the process as the quality of solar panels was very important. He asked if there were any plans for the future to deal with informal settlements.

Mr Kolisa replied that it was difficult to deal with informal settlements once they had been set up. It would be better to formalise them and upgrade them to address the problems.

The following questions were raised:
Mr D Ross (DA) said that a problem existed with distribution networks as the prerequisite for the INEP programme in terms of funding. It was therefore assumed that funding was conditional for distribution. Mr Ross asked Eskom about funding on a conditional basis.

Mr Selau asked who else was accredited to provide electricity with Eskom, and if there were other role players.

Mr Mologo asked what the role of district councils were, and if they could play a role in the project management for projects in rural areas.

Ms van Lingen asked if the solar geyser programme would not lighten the load in deep rural areas.

Mr Lucas said that with solar water heating, the longer one took for installation, the more expensive it became. The handicap was that R1 billion was insufficient. He asked what would happen to the people who had paid to install those heaters.

Mr D Gamede (ANC, KwaZulu-Natal) asked whether a rural bias to address electricity in poor areas could ensure their benefit.

Some important points that emerged were:
Mr Maphumulo said that an 80% occupancy rate was required before a subsidy could be allocated for a particular project. SALGA was at the brink of reaching an agreement to scrap the 80:20 principle.

Mr Maleka said that Eskom had a robust capital programme with regard to the backbone and strengthening their networks. In terms of strengthening and the refurbishment of networks for new customers, there were still challenges in some areas, especially where there were private areas on the land.

Mr Maleka said refurbishments had been built into funding. Eskom was working with municipalities to build firm support, particularly in rural areas with one very long line and many users. These lines were cut short to allow more access.

Mr Ebzinger said that the rebate had to be brought to a level where the demand could be stimulated, but was not too high because then fewer homes would have access. This approach would be spread to as many homes as possible.

Mr Ebzinger said that the insurance industry had committed themselves to pay the rebate on the first electric geyser for installation.

Mr Ross questioned the competencies of consultants on electrification in rural areas.

Mr Selau noted that the area of co-ordination had become a serious issue.

Mr Dexter said that government departments were failing as there was a lack of commitment.

Mr S Njikelana (ANC), Co-Chairperson, said that a strategic policy action plan was required to shape future work. It should be ensured that consultants conducted themselves appropriately. He requested a three-page paper with projections for solar water heating projects.

Mr F Adams (ANC, Western Cape), the Chairperson, said that a concerted effort had been made in the approach to live up to vision of Parliament. The mission of the Freedom Charter would be pursued, as the Committees were here to assist each other and work together.

The meeting was adjourned.