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COMPLIANCE MONITORING
REPORT OF NKOMAZI LOCAL
MUNICIPALITY
Monitoring Date: 12 August 2015
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All enquiries and correspondence to be directed to the Head of Department,
unless indicated otherwise, by means of a formal letter signed by the Head
of Department: Electricity Licensing, Compliance and Dispute Resolution.
Tel: 012 401 4794
National Energy Regulator
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, the licensee must, in writing and 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 ........................................................................... 5
2. METHODOLOGY .......................................................................... 6
3. NERSA AND NKOMAZI LOCAL MUNICIPALITY DELEGATES.. 6
4. GENERAL INFORMATION ON NKOMAZI LOCAL
MUNICIPALITY ............................................................................. 7
5. AUDIT FINDINGS ......................................................................... 7
6. NKOMAZI’S PERFORMANCE ON NERSA COMMUNICATION .. 8
7. PROGRESS ON THE IMPLEMENTATION OF THE CORRECTIVE
ACTION PLAN .............................................................................. 9
8. PLANT CONDITION DURING AUDIT VS. MONITORING
TIME……………………………………………………... .................. 14
9. CONCLUSIONS .......................................................................... 17
10. RECOMMENDATIONS ............................................................. 18
11. NEXT STEP .............................................................................. 18
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EXECUTIVE SUMMARY
The National Energy Regulator (NERSA) conducted a compliance audit on
Nkomazi Local Municipality (‘the Licensee’) from 21 to 22 October 2013 to
determine its level of compliance with the licence conditions. The objective was to
determine the compliance of Nkomazi Local Municipality with the legal, financial
and technical conditions of the electricity distribution licence. After the audit,
findings were recorded in a draft report and forwarded to the Licensee for
management comments with regard to the correctness of the findings in order to
make the report final.
On 15 January 2014, Nkomazi Local Municipality sent the management comments
to NERSA. These were received well within the prescribed timeframe. The report
was then considered final by NERSA and Nkomazi Local Municipality was then
requested to send NERSA a signed, time-bound corrective action plan (CAP) to
address the highlighted instances of non-compliance.
On 23 May 2014, Nkomazi Local Municipality sent a CAP for NERSA’s perusal
and this was found to be acceptable as it addressed the issues highlighted by the
audit. The National Energy Regulator instituted a monitoring regime to ensure and
enforce the implementation of the CAP. On 12 August 2015, the National Energy
Regulator conducted a monitoring exercise on the implementation of the CAP at
Nkomazi Local Municipality. The monitoring exercise was conducted in order to
determine progress made in the implementation of the CAP. The National Energy
Regulator is of the view that addressing issues raised during an audit will help
Nkomazi Local Municipality to be a more efficient and effective licensee.
This is a report on all the findings as per the audit and presents the status quo in
terms of the progress made to address the instances of non-compliance
highlighted during the audit. During the monitoring exercise, NERSA conducted
site inspections to verify progress made in the implementation of the CAP. The
level of improvement is presented in detail in section seven of the report.
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1. INTRODUCTION
1.1 Overview
The National Energy Regulator (NERSA) 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 Act, 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’. The National
Energy Regulator conducts the compliance audits on licensed electricity
distributors annually.
The National Energy Regulator 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 the National Energy
Regulator’s mandate to monitor and enforce compliance with the licence
conditions as per the Electricity Regulation Act No 4 of 2006 (Act No 4 of
2006). This monitoring process enforces and ensures 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.
1.2 Monitoring and Enforcement Objectives
The key objectives of the compliance monitoring and enforcement of the
corrective action plans are to:
a) enforce implementation of the corrective action plans;
b) help the licensee not to lose sight of critical matters that need to be
corrected;
c) help the licensee to start doing self-monitoring in terms of their
performance against licence conditions;
d) help the licensee to ensure that the quality of service and supply does
not decline; and
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e) 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 Nkomazi Local
Municipality (‘the Licensee) to populate all the instances of non-compliance
highlighted during the audit, together with the intended corrective action plan
(CAP) with target dates of implementation. This is to be used by the National
Energy Regulator to monitor the progress made and to establish whether the
timelines on the CAP were realistic and addressed the issues highlighted
during the audit.
The CAP was sent to the National Energy Regulator after being signed by
the relevant officials of the Licensee. The National Energy Regulator agreed
on the CAP and initiated a monitoring process, which robustly monitors
progress. Progress is checked against target dates and remedial actions are
implemented on an ongoing basis. Proof and supporting documents are
requested and presented to the National Energy Regulator’s officials during
the monitoring process. Site verification was also done to compare the
current plant condition against the plant condition during the audit.
3. NERSA AND NKOMAZI LOCAL MUNICIPALITY DELEGATES
NERSA was represented by the following officials:
Mr B Nhlabathi Compliance Monitoring Technician
Ms B Malatji Compliance Monitoring Technician
Ms B Gobe Compliance Engineer
Ms V Poswa Dispute Resolution Officer
Mr V Malaza Senior Distribution Compliance Engineer
Nkomazi Local Municipality was represented by the following official:
Mr Pieter Theron Manager Electrical
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4. GENERAL INFORMATION ON NKOMAZI LOCAL
MUNICIPALITY
Nkomazi Local Municipality is the electricity distribution licence holder for the
supply area with licence number NER/D/MP324 and supplies electricity to
Malelane, Hectorspruit, Marloth Park and Komatipoort. It has five bulk supply
points with an installed capacity of 18.5MVA and a maximum demand of
16.5MVA. At the time of the audit, the Licensee had 3,735 customers, which
are categorised as follows: 2,213 prepaid domestic; 1,207 domestic credit
meters; 313 commercial and 2 industrial customers.
The total geographical area of Nkomazi Local Municipality is approximately
3,240 km². It was also mentioned during the audit that 60% of the electricity
equipment is older than 30 years and 10% is less than 10 years old.
At the time of the monitoring, it was highlighted that the Licensee managed
to refurbish certain parts of the network, which even though they were not
inspected during the NERSA compliance audit, needed urgent attention to
ensure continuous supply of power to dedicated customers.
5. AUDIT FINDINGS
At the time of the audit, the following was highlighted to the Licensee as areas
that need attention and improvement:
a) There were 42 vacancies out of 72 approved positions.
b) There was a shortage of vehicles to accommodate the 31 employees.
c) There was no Competent/Responsible Person appointed in terms of the
requirements of the Occupational Health and Safety Act (Act No 85 of
1993).
d) The areas of electricity supply do not correspond with the supply areas
in schedule 1 of the Distribution Licence.
e) Nkomazi did not budget sufficient funds (6% of total budget) for the
maintenance of the electricity network as required by the NERSA tariff
guideline – only 3% was budgeted.
f) The new, approved tariffs were implemented on 01 July 2013 and
customers were charged at the new tariffs for the full period. The
customer’s accounts should have been based on 50% of old and 50%
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of new tariffs as the consumption was measured from 15 June to 15 July
2013.
g) Nkomazi does not have any bulk stores to keep critical stock.
h) Although Nkomazi is doing scheduled maintenance, there is no official
maintenance plan available.
i) There was an outdated (2008) master plan that made provision for
upgrades and replacement of equipment, which was constrained by lack
of funds and personnel.
j) There was no formal power quality management system in place.
k) The service date of some fire extinguishers had expired.
l) There were missing cable trench covers at the back of the switchgear in
Malelane substation and no single line diagram was visible at the
substation.
m) Some mini-substations were old and need to be replaced (Hectic 1).
n) The safety signs were faded on the outside of the mini-substations.
o) The open switchgear at Erf mini-substation was not locked.
p) Some wooden poles were old and leaning and should be put on a
replacement programme.
q) There was a high level of technical and non-technical loses.
6. NKOMAZI LOCAL MUNICIPALITY’S PERFORMANCE ON
NERSA COMMUNICATION
In October 2013, the National Energy Regulator conducted a compliance
audit on Nkomazi Local Municipality to determine its level of compliance with
its licence conditions. This audit was followed by a number of emails from the
National Energy Regulator to Nkomazi Local Municipality. This
communication was sent directly to Nkomazi Local Municipality’s Electricity
Manager. During this communication, Nkomazi Local Municipality’s
Electricity Manager cooperated and responded in a satisfactory manner as
indicated in table 1 below.
Table 1: Nkomazi’s response record
NERSA REQUEST DATE OF REQUEST LICENSEE
RESPONSE
DATE OF
RESPONSE
Request of Management
comments on draft report
22/11/2013 Management
comments sent
15/01/2014
Request for Corrective Action
Plan
03/02/2014 CAP sent 23/05/2014
Monitoring notification 28/07/2015 Positive response 28/07/2015
Monitoring exercise 12/08/2015 Positive response 12/08/2015
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7. PROGRESS ON THE IMPLEMENTATION OF THE
CORRECTIVE ACTION PLAN
Nkomazi Local Municipality displayed a lack of commitment during the
monitoring exercise as most instances of non-compliance highlighted during
the audit were not addressed. At the time of the monitoring exercise it was
observed that certain parts of the Licensee’ infrastructure was in worse
condition now compared to the time during which the audit was conducted.
However, the Licensee indicated that certain mini-substations that had not
been inspected during the audit had been in a critical condition and had
needed immediate intervention. Table 2 below depicts the progress made at
the time of the monitoring of the implementation of the CAP that was
submitted to NERSA to address the instances of non-compliance.
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Table 2: CAP implementation progress
Non-compliance Corrective action Target date Target date for
completion
Progress Condition during monitoring
day
Shortage of personnel:
Critical vacancies must be
filled according to the
immediate demand.
All current vacancies for the
2013/2014 financial year will
be filled. Additional posts will
be added on the 2014/2015
personnel budget. A total of
11 posts will be advertised
and filled.
01 July 2014 01 September
2014
Fifteen (15) posts were
advertised and filled from
November 2014 to March
2015. These posts include:
7x Electricians;
7x Electrical Labourers; and
1x Electrical driver
At the time of the
monitoring, 15 vacant
positions had been filled.
The 64% of positions that
were vacant during the
audit were still not filled.
Shortage of vehicles:
Sufficient work vehicles
must be purchased.
One LDV was purchased in
May 2014. The purchase of
a cherry picker truck was
approved by Council, but
procurement has not started.
Additional vehicles will be
considered on a lease
agreement that must still be
finalised .
01 May 2014 30 June 2015 Only the one LDV was
purchased – procurement of
the Cherry Picker failed.
Leasing of vehicles also
failed. Planned for 2015/16
FY are the following:
• Purchase of 1xCherry
Picker
• Replacement of 5xLDVs
The shortage of vehicles was
also not yet finalised during the
monitoring exercise.
No responsible person:
A Competent Person must
be appointed according to
the OHS act.
Pieter Fourie from lntegra
Electrical Technologies was
appointed as a
Competent/Responsible
Person on 27 March 2014
for a 12- month period. This
appointment was done
according to the scope of
work for a responsible
person as per OHS Act
requirement.
Completed . Integra Electrical was
appointed as from March
2014 for twelve months. The
appointment was extended
with an additional 12 months
until March 2016.
Proof was provided.
Confusion of supply
areas: Areas of supply
should be clarified -
Marloth Park
NERSA must intervene to
resolve this matter, because
this is a dispute between
two Licensed Authorities.
Nkomazi Municipality and
Eskom have the same
licences for the same area,
as issued by NERSA.
To be
confirmed.
As requested, the dispute
was forwarded to NERSA in
September 2014 as it
became a serious safety
risk.
No response from NERSA to
date.
Still unresolved. NERSA is
awaiting application to correct
schedule 1 of the Electricity
distribution licence.
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Insufficient Budget:
Operations & Maintenance
budget should be increased
to 6% of the total revenue
generated
6% of the R 48m (revenue
generated) was allocated to
operations and maintenance
for the new financial year of
2014/2015.
01 July 2014 Continuous For 2015/16 FY, 6% (approx.
R4 million) was allocated to
operations and maintenance
from the estimated R65
million revenue.
The budget figure of 6% was
implemented. No proof was
provided.
No Bulk Stores: Bulk stores
should be put in place to carry
critical stock .
Due to the shortage of
capital funding, the issue of
bulk stores will only be
addressed in the next
financial year. However the
small individual stores will
equipped with most critical and
essential stock/material.
2014/2015 2015/2016 A 3-year supply and delivery
contract (for all electrical
material, cables and
transforming equipment) will
be awarded before 30
August 2015.
The stores finance at
Finance Offices will also be
made active for keeping
essential material.
A tender evaluation committee
was in progress on the day of the
monitoring. It was reported that
this will be finalised by 30 August
2015.
No maintenance plan:
Compile a comprehensive
maintenance plan to address
network backlogs.
The Maintenance Plan was
originally part of the MISA
programme, but due to
financial constraints the
focus moved to compiling a
conclusive asset register. The
register will form part of the
maintenance plan. Additional
funding required to compile the
maintenance plan.
Source funding . Source funding The Maintenance and the Master
plans’ non-compliances were still
not addressed. The Licensee
indicated that they have a
template at present that was
developed in-house which they
use for maintenance. No
supporting documents were
submitted.
Wrong
application of
tariffs:
Approved tariffs should be
correctly implemented .
From 2014 onwards billing for
new tariffs will be in August
instead of July .
August 2014 Continuous According to Finance
Department this was
corrected.
No supporting documents were
submitted to the monitoring team.
Outdated Master Plan:
Electrical master plan must
be reviewed and updated to
accommodate the current
status quo.
The Electrical Master Plan
also formed part of the MISA
programme, but was later
excluded. Tough the master
plan is old it is still up to date
with the current challenges .
However funding is required to
include ESKOM projects and
development to the master
plan.
Source funding Source funding The Maintenance and the Master
plans’ non-compliances were still
not addressed.
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No Supply monitoring:
Quality of supply
management should be
implemented according to
NRS 047.
R1,200,000.00 is allocated
for smart metering for the
2014/2015 financial year.
Smart metering will include
quality of supply metering .
Suppliers were invited to
present their products and do
proposals for the
municipality. The next
presentation will be on 03 June
2014.
01 July 2014 30 June 2016 Seventeen (17) smart meters
were installed for the largest
municipal consumers.
Immediate revenue increase
were noticed.
This project will be continued
in the 2015/16 FY since there
are still thirty seven (37) large
consumers outstanding.
No analysis of the quality of
supply information from the
installed meters was available.
No evidence was shown to the
monitoring team.
Expired fire extinguishers:
Fire extinguishers must be
inspected and serviced within
the recommended periods.
Fire extinguishers will be
inspected quarterly and will be
serviced within recommended
time frames.
01 July 2014 31 December
2014
Service provider was
appointed in July 2015 to
perform these duties.
Although they have to be
inspected quarterly, only 1 of the
substation’s fire extinguisher was
serviced.
Hazardous e nv i ronm e nt :
Open cable trenches must be
covered.
All open cable trenches were
covered properly.
Completed Completed 100% Completed
Unavailability of drawings:
Install single line diagrams in
all the main substations , and
update all drawings
Drawings and single line
diagrams were installed in all
the main substations . Some
drawings must still be
updated. (responsibility of the
appointed Competent Person).
01 April 2014 31 December
2014
All drawings will be updated
and placed in newly
upgraded substations in
Komatipoort and Malelane.
Non-compliant
Replacement/
refurbishment of old
substations:
Old mini-substations must be
replaced or refurbished
according to their condition.
2 x Mini-substations and 1 x
floor standing transformer were
already replaced. The
redundant units were sent for
refurbishment.
The only reason for replacing
mini-substations,
transformers and switchgear is
due to failure or very bad test
reports. It is very costly exercise
to replace units just because of
their age.
06 January
2014
• 2x new mini-substations
were installed;
• 3x mini-substations were
replaced;
• 2x mini-substations were
refurbished;
• 2x Ring main units were
replaced; and
• 2x New ring main units were
installed
Only the Mini-substation in
Hectorspruit, the RMU was
replaced. Other relevant
information were not part of the
monitoring.
Faded safety and
warning signs :
All safety and warning signs
to be inspected and replaced
where necessary.
All missing, damaged and
faded safety and warning
signs were listed. New signs
will be purchased and installed.
01 July 2014 31 December
2014
All damaged and faded signs
will be replaced in the newly
upgraded substations in
Komatipoort and Malelane.
The service provider was
appointed in July 2015 for
this function.
Non-compliant
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Inadequate lock out
facilities:
All transforming and
switching equipment
must be locked.
New padlocks were purchased
and installed on all
transforming, switching and
distribution equipment.
Completed Completed 100% completed
Lack of maintenance on
OH lines:
OH lines - redundant
wooden poles must be
replaced. Lines must be re-
tensioned.
3 x Overhead lines were
already refurbished by
replacing redundant poles,
pole boxes and re-tensioning
the lines. R1,267,200 .00 is
available on the new
financial budget for
refurbishments. OH lines will
be restored according to
priority (worst condition first).
14 April 2014 Continuous • 4x Overhead lines were
refurbished (LV);
• 2x Overhead lines were
refurbished (MV); and
• 1x New Overhead line was
build (MV)
Only a section of the line in
Hectorspruit was re-stringed.
More work still need to be done
and some of the poles were still
supported by stumps of poles.
Line losses:
Investigate high line losses.
Line losses will also be
addressed by the
implementation of smart
metering.
01 July 2014 30 June 2016 Seventeen (17) smart meters
were installed for the largest
municipal consumers.
Immediate revenue increase
were noticed.
This project will be continued
in the 2015/16 FY since 37
large consumers are still
outstanding.
Figures to be provided.
This project is still to be continued
and accurate figures are still to be
provided.
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The table above indicates that Nkomazi Local Municipality did not implement
the majority of the activities outlined in the CAP as highlighted during the
audit. Implementation of the CAP will improve the Licensee’s level of
compliance with the distribution licence conditions. At the time of the
monitoring, about 26% of the CAP had been implemented by the Licensee.
During the office session of the monitoring, some supporting documentation
to substantiate the above feedback was provided to NERSA officials.
8. PLANT CONDITION DURING AUDIT VS. MONITORING TIME
The photos below depict the condition of the network equipment during the
audit compared to the condition during the monitoring process.
Corrosion on terminals of the backup batteries Terminals of the backup batteries corrosion free
No safety signs on the fence at the time of audit No safety signs on the fence at the time of monitoring
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Open cable trench in the substation during the audit Cable trench in the substation closed during the monitoring
Very low battery solution during the audit Battery solution at acceptable level during the monitoring
Old Hectic 1 mini-substation with broken door Old Hectic 1 mini-substation with broken door during monitoring
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Unlocked 4 way switch behind Erf mini-substation Locked 4 way switch behind Erf mini-sub
Uncovered switch at Komatipoort Central in 2013 Worse and uncovered switch at Komatipoort Central in 2015
Expired fire extinguishers at Komatipoort in 2013 Expired fire extinguishers at Komatipoort in 2015
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Bad pole-mounted transformer during monitoring Transformer replaced with a mini-substation in Eerste Street
The photos indicate that the condition of Nkomazi Local Municipality’s
network has not improved since the audit. The old (type A) mini substations
with magnefix switches, which are obsolete and unsafe to operate, has not
yet been replaced. During the monitoring, the audit team discovered a lack
of commitment to implement the CAP, especially in Komatipoort.
9. CONCLUSIONS
Nkomazi Local Municipality, has managed to close only five out of 19
instances of non-compliance that were identified during the audit. However
the Licensee has made noticeable progress on four instances of non-
compliance that were identified during the initial audit. These are shortage
of personnel, vehicles, bulk stores and Quality of Supply monitoring. It was
observed during the monitoring exercise that the service providers or
responsible personnel appointed to rectify the non-compliances relating to
expired fire extinguishers did not apply due diligence in executing these
tasks.
The unavailability of the maintenance and master plans are making it difficult
if not impossible for the Licensee to conduct proper maintenance and
planning on the network equipment. The installation of the smart meters by
the Licensee indicated willingness and commitment to reduce the line losses
as these are closely related to revenue collection improvement.
Page 18 of 18
10. RECOMMENDATIONS
It is recommended that Nkomazi Local Municipality should prioritise the
implementation of the CAP to improve the level of compliance with licence
conditions and impose a self-monitoring regime to ensure that it does not
deteriorate back to non-compliance. The Licensee was advised to submit an
application for the correction of the areas of supply, as well as to indicate the
challenge faced at Marloth Park based on the NERSA resolution made in
2004 that was not implemented.
11. NEXT STEP
There are still instances of non-compliance that need to be addressed by the
Licensee. As a result, the Energy Regulator expects the Licensee to
implement the corrective action plan until all the instances of non-compliance
have been fully addressed in order to improve the Licensee’s level of
compliance. The National Energy Regulator will continue to monitor the
Licensee’s implementation of the corrective action plan on an ongoing basis
to ensure that all the findings are addressed. Once the remaining projects in
the CAP have been concluded, the Licensee must send a closeout report to
the National Energy Regulator. It is expected that the Licensee will then
implement a self-monitoring regime to ensure that the improved areas do not
deteriorate back to a situation of non-compliance. On the self-monitoring
report, the Licensee will be able to indicate any additional projects
implemented to improve its level of compliance with the licence conditions.
Further monitoring exercises to be conducted by the Energy Regulator on the
Licensee will be communicated to the Licensee in due course.
All communication should be forwarded to the Head of Department, unless
indicated otherwise, by means of a formal letter signed by the Head of
Department:
The Head of Department
Electricity Licensing, Compliance and Dispute Resolution
National Energy Regulator
PO Box 40343
Arcadia
0007
Fax: +27 (0)12 401 4700
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