National Electricity Regulator, City Power and Eskom on Gauteng Electricity Outages: briefing

Meeting report

MINERALS AND ENERGY PORTFOLIO COMMITTEE
16 September 2005
NATIONAL ELECTRICITY REGULATOR, CITY POWER AND ESKOM ON GAUTENG ELECTRICITY OUTAGES: BRIEFING

Chairperson: Mr E Mthethwa (ANC)

Documents handed out:
National Electricity Regulator briefing
Joburg City Power PowerPoint presentation
Eskom PowerPoint presentation
Eskom Central Region (Gauteng) Technical Performance Management and Improvement Plans

SUMMARY
The National Electricity Regulator, City Power and Eskom presented on attempts to resolve the high level of power outages in the Central Gauteng region. Representatives elucidated on their roles in the electricity distribution system and explained plans to correct the breakdowns. Skills shortages and ageing networks were identified as key problem areas. Extensive property development had exacerbated the problem and raised power demand. Steps such as training and improved maintenance would be introduced to rectify the problems. An independent audit would help to identify crucial areas that required improvement. City Power had a five-year plan in place to refurbish existing infrastructure. Capital expenditure requirements to address the shortfalls were explained. Reasons for the level of outages were presented and information technology would be used to identify problem areas within the network.

Members asked numerous questions including:
- the projected impact on the Local Government elections;
- the consequences of continued power disruptions for socio-economic development and democratic entrenchment;
- the high level of illegal connections and poor standards within complaints call-centres;
- impact of crime on standards of supply and the advantages of underground cables over overhead systems;
- why backup systems were not in place;
- problems within the tender process that resulted in poor service and inferior products;
- the need to focus on economic strategic areas, and
- the level of animosity from the public towards utilities.

MINUTES

National Electricity Regulator briefing
Mr S Mokoena (NER CEO)provided detail on the maintenance and refurbishment backlog within the distribution infrastructure with specific reference to the recent spate of outages. The Regulator's traditional role was outlined and resolutions from a recent Maintenance Summit explained. The Regulator conducted 36 audits per annum on average and independent specialists were required to carry out the function. The condition of the power supply utilities should not be misrepresented to consumers. Ten distributors were targeted within the technical audit programme and the findings of the independent audit would be made public. Skills shortages and ageing networks were highlighted as common problems. The property development boom within the central region exacerbated the problem. The deterioration of performance amongst suppliers was undeniable. City Power experienced 121 interruptions during 2004 with an average duration of three hours. A three-year refurbishment plan had been drawn up within City Power to address the weaknesses. The removal of outages would take time to achieve. The Regulator informed Members of their proposals to rectify the problems including additional training, improved maintenance and a necessary fiscal injection. The independent audit report would be released in due course.

The Chairperson stated that the concerns expressed by the Regulator related to the Electricity Regulation Bill before the Committee and Members should note the issues raised to assist in the upcoming deliberation process. Presentations should provide new detail to Members on progress made in addressing long-identified problems. Members were interested in current strategic plans to correct the faults so as to present new information to constituencies in the short term.

City Power briefing
Mr M Mohlala (CEO: City Power) recounted the current network condition and explained current initiatives to reduce outages. A master plan was needed to reduce the number of faults and promote better performance of the networks. An internal audit had been completed and problems identified.

Mr S Zimu (Vice-President: City Power) provided detail on the substation transformers overview. A five-year plan existed to refurbish all transformers that suffered from population increases and concomitant power demand. Protection audits had revealed high levels of inner-city degeneration and pending infrastructure collapse. Additional capital expenditure refurbishment requirements for the next five years were explained. R680 million had been allocated to all electricity services in JHB. R116m had been allocated to addressing the backlog.

Eskom briefing
Mr N Hari (Eskom Regional Engineering Manager) provided detail on technical performance management and improvement plans for the Gauteng region. Performance improvement targets had been identified and holistic solutions would be sought to improve the reliability of the network as a whole. Any maintenance work should have a minimum impact upon consumers. He elucidated key technical focus areas and reasons for outages in the central region. Current challenges and future risks were highlighted. Information technology would be used to increase communication within the network to identify faults and isolate outages to reduce fall-out. Eskom suffered from four incidents of conductor theft per month and experienced pylon collapse in certain regions due to the theft of cross-members. Illegal connections presented an ongoing obstacle.

Ms N Magubane (Department of Minerals and Energy Deputy Director-General) stated that the Department supported the initiatives of the NER with regard to the independent audit. Many areas experienced outages and an enhanced information system was needed to track all incidents and support preventative maintenance. Proactive maintenance was necessary to avoid reactive actions that undermined the overall system. Legislation was needed to impose additional sanctions on power distributors in response to outages and enhance the ability of the Regulator to exercise oversight over the utilities.

The Chairperson stated that many incidents of outages were not reported in the media and the high level of outages was an abnormal phenomenon that required urgent attention. The Committee had to facilitate the reduction of outages.

Discussion
Mr C Kekana (ANC) referred to the upcoming local government elections and asserted that power distribution had to be improved to reduce levels of anger amongst the voters and counter rising levels of voter apathy. Energy remained an important component of development initiatives. He asked that Members be informed of the Department's recommendations to strengthen the Regulator to assist in the upcoming deliberations on the Electricity Regulation Bill. Worsening power cuts after ten years of democracy was unacceptable and suitable strategies had to be devised to address the problems. Housing backlogs contributed to growing informal settlements that, in turn, caused increased illegal connections that undermined the network. He asked what measures were in place to address the problems.

Professor I Mohamed (ANC) asked who was responsible for the maintenance of power supply within Johannesburg, Eskom or City Power? The current trend to blame the apartheid regime for the faults was no longer a reasonable excuse for the myriad of problems. Many polling stations were without electricity during the last national election that impacted adversely on the democratic process. Some polling stations had had to be connected to houses after some time. Phone-in complaints to the utilities did not provide adequate information on the scale of the outage and estimated duration. The Regulator should ensure that improved public relations occurred at the various utilities. The theft of traffic cables should be addressed to reduce disruption of traffic lights. The Regulator should levy higher fines on electricity suppliers that did not maintain their networks in a satisfactory manner. He recommended that overhead cables be replaced to improve stability within the networks. A larger budget could be requested from the Department if this was necessary to improve the overall standard of provision.

Mr E Ngcobo (ANC) stated that the presence of old equipment could not be used as an excuse to justify outages. Sound strategies were needed to address the issues. He asked whether fail-safe mechanisms were in place to protect the supply chain. Clarity was sought on the number of managers with relevant electrical engineering qualifications. He referred to past experiences in Bulgaria and the back-up systems that existed at the time with the old Soviet Union network to counter any outages. He expressed confusion as to why outages were occurring in South Africa at such a high frequency and stated that back-up systems should be in place. A master plan was vital to promote a proactive response to the challenges.

Step-up and step-down transformers could be used to adjust the power current and prevent surges and other destructive events. He stated that overhead cables were problematic and should be replaced by more underground cables. Strategic plans had to be accompanied by timeframes to assist Members in oversight responsibilities. The tender programme to acquire service providers to expand networks and refurbish existing systems was problematic as there tended to be poor service. Contractors tended to pocket a large portion of the payment and invested in poor quality items. The Regulator had to ensure that service providers maintained a high standard of service and used quality products. He referred to incidents of sabotage of incoming Black managers within utilities by existing or departing managers. For example, existing information would be destroyed to handicap affirmative action appointments and justify personal criticism of the equity process. Transfer of skills had to be monitored by the Department.

Current attempts to improve the reliability of the power supply in the Central region were not working and had an adverse impact on the national economy. A corrective strategy had to prioritise strategic economic areas in the national interest. Fail-safe systems were needed to address the problems. He referred to twelve mothballed stations within the Mpumalanga region and asked whether their reconnection to the grid would improve the standard of electricity provision for the Central region. He asked whether the NER had an intervention strategy for Johannesburg in the short term to improve the electricity distribution system. He referred to a previous interview with Eskom in the early 1990s at which his relevant qualifications were ignored and questioned whether all skills within the country were being utilised.

Adv H Schmidt (DA) asked whether the various presenters interacted with members of the public on a regular basis as Members did with their constituencies. Outages were perceived as a serious issue amongst the public and should be addressed as a matter of urgency. The recent public spate between City Power and NER was unacceptable and management should behave in a more responsible manner. He acknowledged that two local government transformation processes had contributed to supply problems but the high level of outages should not be accepted as the norm. Only two 1936 transformers existed and the majority had been installed since 1974.

The Chairperson concurred that the matter of outages had to be addressed urgently. The NER had to be effective in monitoring the system and imposing firm sanctions on deviant utilities. The new amendment legislation could create additional problems and he asked Members to carefully engage on the issues. Utilities had to be persuaded to operate at the optimum level. Clarity was sought on the extent of the problem of illegal connections and the overall impact on the network. Members required timelines on the implementation of corrective measures to assist in oversight responsibilities. He asked whether outages occurred throughout the country and whether mechanisms could be installed to detect cable faults before they occurred. He asked what reasons could be ascribed to the high incidence of faults if funding was not a problem as claimed by City Power. The installation of pre-paid meters could have an effect on the price of electricity thereby further undermining the position of consumers. Poor service contributed to deteriorating customer confidence. Skills shortages and management capacity remained a challenge that had to be addressed. He asked what impact the new redistribution system would have on the standard of delivery.

Mr Zimo responded that City Power supported the independent auditing process and would provide detail on implementation timeframes to Members. Efforts would be doubled to achieve the required results. Integrated Development Plans (IDPs) were involved in all development initiatives to improve electricity provision. An extensive education campaign was underway to minimise illegal connections. Eskom and City Power shared responsibility for electricity distribution to the greater Johannesburg region. Plans were being formulated to ensure adequate power supply for the pending Local Government elections. Solar panels would be installed in rural areas. City Power was part of the Joint Operating Committee established to ensure an efficient election process in Johannesburg.

Call centres would receive more information from the field to improve communication with the public and to promote public relations. Overhead conductor lines were a safe technology and problems could be identified more easily than underground systems. Underground wires consisting of copper were stolen at a greater rate than overhead cables due to the copper component within the underground variant. Members would be informed of the strategic plans and timelines to address the problems. Challenges existed in the tender process and the capacity of contractors and the quality of items used remained a problem. Co-ordinators had been appointed to monitor the work of contract workers.

Evidence was needed to support any claims of sabotage and the National Intelligence Agency was involved in investigations on certain cases. Customer satisfaction indexes had been compiled by independent consultants to gauge levels of service by utilities. City Power interacted with ward committees to provide and receive valuable information. Less than five percent of outages were caused by transformers. City Power was a participant in the Revenue Protection Forum that sought to tackle the high levels of cable theft and significant advances had been made. Three scrap dealers had been closed recently and City Power benefited from the Eskom anti-theft initiatives. City Power had adequate funding at the moment and had asked the Metro to allow long-lead time items to be ordered in advance and to be paid for in the next financial year.

Mr P Craig (Eskom Engineering Portfolio Manager) replied that Eskom served on a committee with the Independent Electoral Commission (IEC) to plan for the Local Government elections and sound attempts would be made to cover the deep rural areas in terms of electricity or power supply. Underground cables were more reliable but were seven times more expensive and would not create enough connections in rural areas. The intention of various initiatives was to ensure that power lines operated at the optimum level. Faults would be isolated and protection measures put in place to reduce outages. Urban areas had shorter feeders and rural areas longer feeders that impacted adversely on performance. Rural distribution would never be as effective as urban distribution.

A plethora of technology items within residences raised demand and placed additional burdens on the supply lines. Customers would be approached to determine weaknesses within the network. Performance measurements were in place to identify which feeders were not working. Members would be informed of time-scales in the implementation of strategies. The level of outages would not decrease by commissioning mothballed power stations. An attempt to quantify the number of illegal connections could be made. Contractors would be monitored to check performance and ensure acceptable standards of service delivery. An accreditation system was in place to assist in the recruitment of skilled contract workers. A training programme to train Eskom managers in the management of contracts was in place to promote efficacy.

Mr Mokoena stated that the NER would make an extensive submission on the Electricity Regulation Bill and regarded the Bill as an important development. Six viable distribution areas were needed as part of any long-term restructuring initiatives. The Regulator had to fulfil an advocacy role in the public interest and communicate pertinent issues. The recent spat between NER and City Power was minor compared to similar incidents in other countries. Pending legislation should benchmark the NER with other international regulators. Quality management was needed within utilities to improve distribution and hands-on management would be advantageous. Management issues should be included within the audit process. The government should provide leadership on what type of management should be installed within the utilities.

The NER CEO met with the CEOs of utilities on a regular basis to discuss practical issues and determine how maintenance plans would be monitored. The Department and the Minister should review the implementation of previous strategic plans and establish the extent of the maintenance backlog. Thirty-six regular audits were conducted on an annual basis and a R7billion backlog shortfall had been identified. A benchmark study had provided sound information and independent audits would be engaged in. The 2003 resolutions would be reassessed after the completion of the independent audits. The issues had to be resolved before a crisis situation developed.

Mr N Singh (NER Executive Manager: Regulations) stated that the Regulator was aware of the adverse impact of poor electricity provision on socio-economic conditions. Urgent action would be taken to rectify the situation. CEO-to-CEO interactions would help to alleviate the level of outages. City Power provided the regulator with maintenance and capital refurbishment plans that would be monitored on a regular basis. Independent audits would identify priorities to improve the overall level of service delivery. For example, the turn-around of sub-stations was an important step to take. Performance measures would indicate the level of success of the strategic plans.

The Chairperson declared that the independent audit should continue and would serve a useful purpose. Members would perceive the situation as business as usual if the level of outages remained. Industry restructuring would have to be speeded up in a co-ordinated manner with regular interactions between the stakeholders. Outages had to be reduced in the public interest and the Committee would strive to ensure that the standard of distribution was dramatically improved. Disruptions in electricity provision impacted negatively on people's lives and utilities had to enhance communication with consumers to alleviate rising levels of anger. Members would ensure that all strategic plans bore fruit.

The meeting was adjourned.