City of Cape TownElectricity Services

Presentation to NERSA24 May 2013

Presented by: Dr. Leslie Rencontre

Capital Budget

0

100 000 000

200 000 000

300 000 000

400 000 000

500 000 000

600 000 000

700 000 000

800 000 000

900 000 000

2007/8 2008/9 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18

Ra

nd

External Financing Fund (EFF)

Capital Replacement Reserve (CRR)

Categories of projects

Staff complement requires augmentation in the long term, mitigated by efficiency gains – no requirements for the 2013/14 programme

There are no additional operating costs emanating from any of the categories of projects in that no additional equipment or facilities are required

Category of Expenditure 2012/13 Budget

2013/14 Budget

2014/15 Budget

2015/16 Budget

2016/17 Budget

2017/18 Budget

Infrastructure: Growth (Strenthening / Expansion) 294 069 887 488 447 562 445 953 522 561 437 830 610 775 670 459 587 250Infrastructure: Refurbishment 343 854 868 274 371 201 308 057 148 201 352 840 152 190 000 305 703 420Electrification (including backyarders) 194 728 033 164 947 360 204 444 000 295 500 000 277 500 000 290 500 000Facilities, Vehicles, Equipment 400 565 635 463 480 300 224 700 000 198 675 300 201 628 500 191 875 000Public Lighting 53 375 796 55 705 000 52 275 000 61 000 000 62 300 000 64 300 000Total 1 286 594 219 1 446 951 423 1 235 429 670 1 317 965 970 1 304 394 170 1 311 965 670

Source of Funding

CRR funding utilised for non income generating projects such as Facilities, Vehicles, Mechanical Plant & Equipment (non-network), Public lighting, Electrification

Funding Source 2012/13 Budget

2013/14 Budget

2014/15 Budget

2015/16 Budget

2016/17 Budget

2017/18 Budget

External Financing Fund (EFF) 668 222 891 829 589 063 706 840 670 706 840 670 706 840 670 706 840 670Capital Replacement Reserve (CRR) 359 538 184 327 175 800 262 789 000 269 525 300 273 653 500 265 325 000Capital Replacement Reserve (CRR: WardAllocation) 2 962 204 0 0 0 0 0Grants (DME-INEP) 0 25 000 800 18 000 000 50 000 000 20 000 000 20 000 000Developers Contributions 51 200 000 43 700 000 45 300 000 47 000 000 48 800 000 52 000 000Private Sector 27 864 622 33 100 000 35 500 000 37 600 000 38 100 000 40 800 000Grants 175 806 318 185 185 760 166 000 000 206 000 000 216 000 000 246 000 000Revenue 1 000 000 1 000 000 1 000 000 1 000 000 1 000 000 1 000 000Electricity Demand Side Management 0 2 200 000 0 0 0 0Total 1 286 594 219 1 446 951 423 1 235 429 670 1 317 965 970 1 304 394 170 1 311 965 670

Main Substation Loads 2012

Risk Assessment

35 5

LI 12 3 28 1 7 26 13 K 4 24 21 29 32 36 EL 33 19 37 2 25 15 27 18 20 16 I Moderate 3 22 14 6 4 H 5 9 8 O 31 30 17 O Unlikely 2 11 34 D

23 10 Rare 1

1 2 3 4 5

5 YEAR TRANSMISSION SYSTEM IMPLEMENTATION PLANNOTE: Projects should be implemented before the risk profile exceeds a moderate risk as indicated by the solid line

Key to Risk Assessment:

Extreme risk High risk Moderate risk Low risk

Major Catastrophic

IMPACT

Almost certain

Likely

Insignificant Minor Moderate

35 Mitchells Plain Intake Integration 27 SANS Main Substation1 Athlone - Philippi: OHL Line Undergrounding 14 Koeberg Road Switching Station Phase 27 Dassenberg 33kV Switchgear Replacement 6 Broad Road Phase 3

26 Roggebaai 33kV Switchgear Replacement 4 Bisschop Road13 HV Switchgear Replacement 5 Bofors Upgrade 32 Vanguard Transformer Replacement 9 Eversdal - Durbanville OH Line Upgrade36 Grassy Park HV Rearrangement 8 Durbanville Phase 218 MV Circuit Breaker Replacement 19 Newfields Transformer Replacement20 Oakdale - Boston: Replace 33 kV Cables 37 Langverwacht Upgrade16 Main Substation MV Switchgear Replacement 2 Atlantis Industrial Main Substation12 Gugulethu Upgrade 22 Observatory Upgrade3 Atlantis Substation 5 Transformer Replacement 31 Tygerberg Hospital Reinforcement

28 Steenberg Upgrade 30 Tamboerskloof Transformer Replacement24 Piers Road Upgrade 17 Muizenberg Ph321 Oakdale Upgrade Phase 2 11 Grassy Park Upgrade29 Stikland Main Substation 34 Stikland Hospital Switching Station25 Plattekloof - N1 Reinforcement 33 Philippi Farms Ph 115 Kraaifontein Upgrade 23 Pelican Park Upgrade

10 Firlands Main Substation Phase 1

Operating Budget

MTREF Assumptions:

CPI (as per CF): 2013/14 = 5,6%2014/15 = 5,6%2015/16 = 5,8%

Collection Ratio: 98% (all 3 years)

Contribution to Rates: 10% of Sales (all 3 years)

Effective Eskom increase: 2013/14 = 6% 2014/15 = 8,5% 2015/16 = 8,5%

Growth Parameter: 2013/14 = 0% (3% growth FBE customers all 3 years)2014/15 = 0%2015/16 = 0%

Required City increase: 2013/14 = 7,86%2014/15 = 9,92%2015/16 = 9,26%

Energy Growth = 0%

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023Old Forecast 3.3% 9072 9371 9681 10000 10330 10671 11023 11387 11763 12151 12552 12966 13394 13836 14292New Forecast 10 61 10 54 10 46 10 39 10 36 10 36 10 46 10 67 10 88 11 10 11 43 11 78 12 13 12 50 12 87Actual 9 134 9 490 9 768 9 982 10 27 10 56 10 61 10 52 10 52 10 40Actual growth 3.91% 2.93% 2.19% 2.96% 2.79% 0.48%-0.81%-0.06%-1.15%

9000

10000

11000

12000

13000

14000

15000

GWh

Growth trends per sector

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14

GW

h So

ld

Financial Year

Residential

Small Power

Large Power

Municipal

Losses

7.9%

8.9%

8.3% 8.4%

7.7%

8.9%

10.8%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

13.0%

14.0%

15.0%

-

2 000 000 000

4 000 000 000

6 000 000 000

8 000 000 000

10 000 000 000

12 000 000 000

2005_2006 2006_2007 2007_2008 2008_2009 2009_2010 2010_2011 2011_2012

Energy Losses

Energy Purchased Energy Sold Percentage Losses

Required 7,86% increase

Breakdown of 7.86% tariff increase

2012/13 2013/14Subjective Category Budget Budget Breakdown

Rm Rm

EXPENDITURE

Employee Related Costs 754 900 821 546 0.61%General Expenses 116 822 122 327 0.09%Contracted Services 36 746 39 660 0.03%Fuel 19 877 24 703 0.02%Repairs & Maintenance 484 580 474 148 0.35%Collection Costs (Vendors Commission) 74 945 78 733 0.06%Connection Fees 0 35 000 0.03%Capital Charges 503 611 580 891 0.43%Contribution to CRR 308 961 326 123 0.24%Support Services 166 264 166 427 0.12%Other 143 865 221 376 0.16%Bulk Purchases 6 106 600 6 545 300 4.86%Contribution to Rates 936 774 1 010 732 0.75%Bad Debts Provision 190 954 138 747 0.10%Total 9 844 899 10 585 713 7.86%

Outside parameter requirements

(included in MTREF & draft budget)

• Capital charges (due to 2011/12 CRR reduction and concomitant EFF increase).1.2 (c) Investment in Infrastructure

2013/14 = R580,9m2014/15 = R727,5m 2015/16 = R838,9m

• Contribution from Rates in lieu of Street Lighting reduced to nil from 3 A Caring City

R60.6m in 2012/13.

• Fuel – Additional requirement for Gas Turbines due to SHPS availability2013/14 = R4m once off

• Additional Revenue Protection teams - would support increase in collection ratio.2013/14 = R5,5m once off

Outside parameter requirements

(included in MTREF & draft budget)

• Artisan and learner technician posts to accommodate apprenticeship graduates into operations where a critical shortage of skills exists. 1.6(a) SETA

2013/14 = R15,0m2014/15 = R19,1m 2015/16 = R30,8m

• Eskom – Notified Maximum Demand Upgrades 1.2(c) Investment in Infrastructure2013/14 = R35m2014/15 = R63m 2015/16 = R77m

• EAM R8.5m once off 1.2(c) Investment in InfrastructureSupports savings in breakdown maintenance

Apprenticeships and EAM

7.86% Requirement

Operating Budget – Cost drivers

860 903 1 072 1 133 1 189 1 352 1 407 1 525 1 663 1 803 1 9660 128 165 192 214 262 296 335 379 428 483327 394 815 736 886 937 1 011 1 111 1 214 1 321 1 442

461 581892 860 1 006 996 1 153 1 293 1 424 1 529

1 639

1 947 2 740

3 5124 420

5 6176 298

6 7197 319

7 9508 637

9 425

0

2 000

4 000

6 000

8 000

10 000

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14 000

16 000

2007/2008 2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018

Rm

Bulk Purchases/Trading costs

Cost of capital

Contribution to Rates

Street lighting

Operating costs

Bulk purchases 23.6%

Cost of capital 17.6%

Contribution to Rates 25.4%

Operating costs 8.7%

CPI 6.1%

Average increase over period 2007/2008 to 2012/2013

2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18Eskom Increase 8.5% 35.9% 31.3% 29.0% 26.7% 13.5% 6.0% 8.5% 8.5% 8.5% 8.5%City Increase 5.6% 34.6% 33.4% 24.6% 19.9% 11.0% 7.86% 9.9% 9.3% 8.8% 9.2%Contribution to Rates as % of operating costs27.6% 30.4% 43.2% 39.4% 42.7% 40.9% 41.8% 42.2% 42.2% 42.3% 42.3%CPI 9.2% 10.2% 5.7% 3.9% 5.9% 5.4% 5.6% 5.6% 5.8% 6.0% 6.0%

Guideline Increase

NERSA expected increase based on City Benchmarks 2013_2014Bulk Purchases 7.30%Salaries 6.75%R&M 5.50%Capital Charges 5.50%Other Costs 5.50%

NERSA weighted average expected increaseBulk Purchases 5.0%Salaries 0.6%R&M 0.3%Capital Charges 0.6%Other Costs 0.3%Sub Total 6.8%90% of TariffContri to Rates 10% of Tariff 0.7%Expected Tariff Increase in Following Year 7.5%

2013_2014

Nersa Expenditure Guideline (City Benchmarks)Bulk Purchases 68.3%

Salaries 9.0%

R&M 5.0%

Capital Charges 11.4%

Other Costs 6.3%

Sub Total 100.0%

Contribution to ratesTotal

CoCT expected IncreaseBulk Purchases 6.00%Salaries 8.80%R&M -2.20%Capital Charges 15.30%Other Costs 9.80%

CoCT weighted average expected increaseBulk Purchases 4.1%Salaries 0.8%R&M -0.1%Capital Charges 1.8%Other Costs 0.6%Sub Total 7.1%90% of TariffContri to Rates 10% of Tariff 0.7%Expected Tariff Increase in Following Year 7.9%

Tariffs

Restructuring Residential TariffsTariff Policy changesLifeLine Tariff

Atlantis TOU tariff

Residential Embedded Generation tariff

Tariff Policy Changes13.4.6-9 Applicability of LifeLine tariff (target poor)

Consumers > 450 kWh/m average over 12 m = DOMESTIC tariff

Prospective LifeLine consumers must:Have maximum 40A connectionHave a pre-paid meterHave a property valuation of less than R300 000

OrBe registered Indigent ito City’s CCDC PolicyBe eligible for rebate ito 5.7 City’s Rates Policy

Existing LifeLine consumers unaffected if < 450 kWh/m average

Current Subsidy FrameworkAverage Monthly AccountsImpact of loss of subsidies (Current Year)

Changes to IBT structures

2012/13

LIFELINE

DOMESTIC

2013/14

LIFELINE

DOMESTIC

Similar Structure to Eskom HomeLight

0 - 150 kWh150 - 300 kWh300 - 600 kWh

> 600 kWh

0 - 50 kWh 50 - 600 kWh > 600 kWh

0 - 350 kWh > 350 kWh

0 - 600 kWh > 600 kWh

ConsolidateIncrease revenue by 4.6%

LIFELINE 0-350 block

90c

80c

65c

50 150 350

Changes to the FBE Framework

2012/13Eskom 50FBE 0-250kWh on 4BLK IBTCoCT 50FBE 0-450kWh on 4BLK LIFELINE IBT

2013/14Eskom 50FBE 0-250kWh on 2BLK HOMELIGHT20A IBT CoCT 60FBE 0-250kWh and 25FBE 250-450kWh on 2BLK LIFELINE IBT

FutureEskom 50FBE 0-250kWh on 2BLK HOMELIGHT20A IBT CoCT 60FBE 0-250kWh on 2BLK LIFELINE IBT

Impact on LIFELINE

Monthly Accounts

Impact of phase-in on % subsidy

Comparison with Eskom

R 0.00

R 200.00

R 400.00

R 600.00

R 800.00

R 1 000.00

R 1 200.00

R 0.00

R 200.00

R 400.00

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R 1 200.00

0 150 300 450 600 750 900

Mon

thly

Acc

ount

(Ran

d)

Monthly Consumption (kWh)

13/14 City of Cape Town 13/14 Eskom

450 kWhR109.16

33%

451 kWhR213.03

61%

LifeLine Homelight 20 Domestic Homelight 600 - 350 79.70 73.22 0 - 600 125.00 77.66> 350 185.00 78.60 > 600 152.00 131.99

NEW ALTANTIS TOU TARIFF

Specifically for large MV Customers in AtlantisIntention is to promote Atlantis as a major economic hub and to provide employment in the areaAllowable ito EPPInitially proposed unchanged MV TOU Tariff (essentially a 7.86% discount to those customers)Estimated R15m revenue loss re-covered from Commercial base (not residential)Anomalies created, pricing signal.Limited increase recommended. Megaflex compared to our TOU. (not be lower) adjusted to at least match Megaflex. Overall 4.3% increase to accounts.

Data Tariff Revenue Tariff RevenueTime of use Demand Charge - kVA 337 880 81.03 27 378 416.40R 81.03 27 378 416.40R Service Charge 365.00 5210.00 1 901 650.00R 5210.00 1 901 650.00R Commercial TOU off peak high demand 17 163 200 0.3677 6 310 908.64R 0.3925 6 736 556.00R Commercial TOU off peak low demand 49 420 400 0.3191 15 770 049.64R 0.3471 17 153 820.84R Commercial TOU peak High demand 5 930 000 2.5546 15 148 778.00R 2.5546 15 148 778.00R Commercial TOU peak low demand 17 668 000 0.7253 12 814 600.40R 0.7253 12 814 600.40R Commercial TOU standard high demand 13 978 000 0.6755 9 442 139.00R 0.6772 9 465 901.60R Commercial TOU standard low demand 39 171 600 0.4500 17 627 220.00R 0.5159 20 208 628.44R

106 393 762.08R 110 808 351.68R 1 4.15%

2013/14 Original 2013/14 Alternate

“NEW” ALTANTIS TOU TARIFF

• Council Budget Approval – May 2013

Net Metered Domestic

Changes name to “Residential Embedded Generation Tariff

No longer net-metering, hence name changeSystemically significantly easier to implement – no issues with carry-overs, or any such thingIncentivises matching consumption to generationNo customers on existing tariff “Non-residential Small Scale Embedded Generation” energy charge-generation of 46,04c/kWh (excl vat.) introduced to facilitate such systems in a non-residential environment. This would not be applicable on the SPU2 Tariff.

Service Charge R10.60 per dayEnergy Charge 88.82 c/kWhGeneration Recharge 46.04 c/kWh

THANK YOU