City Power Business Plan (2013 - 2016)
City Power Johannesburg (SOC) Ltd
Business Plan
2013 - 2016
Board Approved Page 1
City Power Business Plan (2013 - 2016)
Sign Off:
CEO/MD Name: ……………………………………………………………………
Signature Sector ED: ………..………………..…………………………………
Signature of Sector MMC: ……………………..……………………………….
Date: ………………………………………………………………………………..
Receipt & Review: Signature of Group Governance Representative: …………………………………………….
Signature of EISD Representative: ……………………………………………
Company Details
Company Name: City Power Johannesburg (SOC) Ltd Company Registration Number: Reg 2000/030051/30 Physical Address: 40 Heronmere Road, Reuven Postal Address: PO Box 38766, Booysens, 2016 Phone Number: (+27) 011 490 7000 Fax Number: (+27) 011 490 7590 E-mail: [email protected] Website: www.citypower.co.za Customer Contact Centre: (+27) 011 375 5555
Board Approved Page 2
City Power Business Plan (2013 - 2016)
TABLE OF CONTENTS: SECTION 1: STRATEGIC CONTEXT ...... 4
INTRODUCTION ...... 4 PROBLEM STATEMENT ...... 5 GROWTH AND DEVELOPMENT STRATEGY 2040 (GDS 2040)...... 5 MAYORAL PRIORIES AND CITY POWER ALIGNMENT ...... 6 GDS – IDP 5 YEAR PLAN ...... 13 SECTION 2: STRATEGIC ANALYSIS AND FOCUS ...... 16
PESTLE ENVIRONMENTAL SCAN ...... 16 SWOT ANALYSIS – PRIORITISED ...... 17 KEY DRIVING FORCES IMPACTING CITY POWER’S STRATEGY ...... 18 SECTION 3: STRATEGY AND SCORECARD ...... 19
STRATEGY MAP ...... 19 SCORECARD ...... 20 SECTION 4: DAY–TO–DAY OPERATIONS ...... 24
PROVIDE NETWORK INFRASTRUCTURE ...... 24 DISTRIBUTE ELECTRICITY ...... 25 NETWORK EXPANSION ...... 25 ELECTRIFICATION...... 29 PUBLIC LIGHTING ...... 33 ASSET MAINTENANCE MANAGEMENT ...... 35 REVENUE WAR PLAN ...... 37 SECTION 5: HUMAN CAPITAL PLAN ...... 45
MANAGEMENT AND ORGANISATIONAL STRUCTURES ...... 45 STAFF ESTABLISHMENT ...... 49 HUMAN CAPITAL EXPENDITURE ...... 49 EMPLOYMENT EQUITY ...... 50 STAFF TURNOVER / MOVEMENT DURING PREVIOUS FINANCIAL YEAR ...... 50 SECTION 6: FINANCIAL PLAN ...... 51
TARIFF PLAN ...... 51 FINANCIAL PLAN ...... 56 CAPITAL EXPENDITURE: INFRASTRUCTURE & SERVICE DELIVERY CAPITAL PLAN ...... 61 THE TABLE BELOW SHOWS THE APPROVED LONG TERM CAPITAL BUDGET: ...... 63 SECTION 7: RISK ASSESSMENT ...... 70
BACKGROUND ...... 70 RISK IDENTIFICATION...... 70 STRATEGIC RISKS REPORT ...... 73 SECTION 8: CONCLUSION ...... 76 SECTION 9: BUSINESS ACRONYMS AND APPENDICES ...... 77
BUSINESS ACRONYMS ...... 77
Board Approved Page 3
City Power Business Plan (2013 - 2016)
SECTION 1: STRATEGIC CONTEXT
Introduction
Following the first democratic elections that took place in 1994, and the local government election that followed in 1995, eleven local authorities were amalgamated to form the Greater Johannesburg Metropolitan Council. By mid-1997 it became apparent that the new structures were not optimally effective and the Councils of Greater Johannesburg were facing a severe financial crisis. It was then agreed that a unified, metropolitan-wide initiative was necessary to focus specifically on the critical problems facing the City. This led to the inception of the i-Goli 2002 plan. i-Goli 2002 was essentially a three-year strategic plan. It involved the structural transformation of Metro functions with the view to ensuring enhanced and more cost effective service delivery. It achieved this by reducing fragmentation, eliminating duplication, improving accountability, focusing on human resource development and improving performance incentives. From an organisational perspective, the i-Goli 2002 Plan put in place “sensible” structures that delivered at greater levels of efficiency.
The i-Goli 2002 Plan envisaged that the City would work through a combination of new political governance structures, agencies and corporatised entities. A key element of the i-Goli 2002 strategy for service delivery was the establishment of utilities, agencies and corporatised entities now called the municipal owned entities (MOEs). One of the entities established was City Power Johannesburg (SOC) Ltd, 100% owned by the City of Johannesburg, and established in terms of the Companies Act, on 30 November 2000.
In line with the establishment of City Power Johannesburg (SOC) Ltd, the Council utilises an Environment and Infrastructure and Services Department (EISD) to oversee the performance and Group Governance to oversee the governance of the company, as well as to regulate it. In this regard various agreements in principle were concluded during the establishment of the companies. These included the Sale of Business Agreement (SBA) and the Service Delivery Agreement (SDA).
The relationship maintained with the Greater Johannesburg Metropolitan Council is one of Service Authority and Service Provider. City Power Johannesburg (SOC) Ltd is the preferred Service Provider for the Service Authority, the Council.
The Mandate of City Power Johannesburg (SOC) Ltd from its only shareholder, which is the City of Johannesburg, is to buy and sell electricity to the citizens of Johannesburg. The 2 main suppliers of electricity are Eskom at 80% and Kelvin Power at 20%. The company is regulated by the National Energy Regulator of South Africa. The chart below is a representation of the organisation‟s business:
Board Approved Page 4
City Power Business Plan (2013 - 2016)
What business are we in? Problem Statement
National Energy Regulator of South Africa (NERSA) Kelvin
Generation Transmission Distribution
We are in the business of buying electricity and selling it to customers.
The problem statement for the City Power business plan is to assist the City of Johannesburg to address the South African challenge of security and quality of electricity supply i.e. enabling consumers who reside in the City of Johannesburg jurisdiction to obtain electricity at a defined quality and reliability at affordable rates and transparent prices.
In parallel to this objective City Power will also be required to ensure the sustainability of the business through the achievement of certain agreed to financial, social and environmental goals.
Growth and Development Strategy 2040 (GDS 2040)
City Power was established in 2000 according to the principles of the i-Goli 2002 Plan and it is wholly owned by the City of Johannesburg. The review of the Growth and Development Strategy 2030 was brought about by a shift in the light of climate change and natural resource scarcity. Natural resource scarcity affects both human and economic development. Without securing natural resources, cities cannot sustain human and economic development. “Cities are seeking new ways of overcoming critical natural resource constraints, „decoupling‟ as a concept has emerged to assist national governments and cities to „decouple‟ economic production and consumption from resource use. The emphasis has shifted in an important way, reframing economic and human development within the context of sustainability” 2040 GDS.
Board Approved Page 5
City Power Business Plan (2013 - 2016)
GDS Outcomes
There are four GDS outcomes in the GDS2040 these are outlined below: Outcome 1: Improved quality of life and development driven resilience for all Outcome 2: Provide a resilient, liveable, sustainable urban environment- underpinned by infrastructure supportive of a low-carbon economy Outcome 3: An inclusive, job-intensive, resilient and competitive economy Outcome 4: A leading metropolitan government that pro-actively contributes to and builds a sustainable, socially inclusive, locally integrated and globally competitive Global Credit Rating.
GDS Principles
There are six GDS principles in the GDS2040 these are outlined below: Eradicating poverty Building and growing an inclusive economy Building sustainable human settlements Ensuring resource security and environmental sustainability Achieving social inclusion Promoting good governance
Mayoral Priories and City Power Alignment
In this business plan the organisation ensures alignment with the City‟s strategic direction and aligns to the GDS 2040. City Power is part of sustainable infrastructure cluster and the cluster has identified seven flagships sub-programs which driven by different departments and MOE‟s. City Power is directly involved with some of the programmes while it has direct and indirect input on others. The table below shows the flagship programmes and City Power‟s involvement and input to these programmes:
Lead and Influence Indirect Input To Indirect Input To Financial Sustainability Agriculture and Food Security Human Capital Development and and Resilience Management Resource Sustainability Safer Cities Strategic Communication and Marketing Sustainable Human Investment attraction, retention Urban Water Management Settlement and expansion Active Citizenry City where none goes hungry Smart City
Green Economy SMME and
Entrepreneurial Support
Board Approved Page 6
City Power Business Plan (2013 - 2016)
The above priorities have been further broken done to a 10 STEP Programme that has ten interventions and targets for the next three to five years. City Power has a STEP programme to ensure alignment to the mayoral priorities. STEP is an acronym that stands for: S – Service Delivery, T – Transformation, E – Excellence, P – Performance
The 10 STEP Programme Decade 1 Priorities City Power Response
Term of Financial resilience and S – Service Delivery, T – Transformation, E – Office sustainability Excellence, P – Performance Priorities (2012- Sustainable Human 1. Attaining an Unqualified audit in a sustainable 2017) Settlements manner 2. Reduce losses to 10% by December 2015 Active engaged citizenry 3. Achieving 98% meter reading by June 2013 (100% SMME and entrepreneur Compliance to the by-law) development and support 4. Achieving 100% payment level for key and LPU customer by June 2013 Food Security 5. Achieving 90% data accuracy by 2015 6. Installing 110 000 SWH by December 2016 Decade Smart City 7. Achieving full compliance to NRS 047 and 048 One Resource Sustainability immediately Priorities 8. Achieving 90:10 Planned: Unplanned by December (2017- Investment attraction, retention 2015 2022) and expansion 9. Accelerated Visible Service Delivery (eg.100% compliance to the SLA, electrification, PL) Green Economy 10. Innovative Product Pricing (Introduction of Domestic Time of Use and Green Tariffs) by 2015
City Power’s alignment projects to the SDBIP
The 5 year IDP is translated into one year plans which are called the Service Delivery Budget Implementation Plan (SDBIP). City Power‟s has four main programmes that ensure attainment of the SDBIP which are: • City Power‟s Infrastructure Plan on COJ‟s Transit Oriented Development (TOD) – New substation for the Park Station precinct at an estimated cost of R 100 M – New substation for the Westgate precinct at an estimated cost of R 110 M – “Sebenza” will be situated in the North-East of Johannesburg adjacent to Kelvin Power Station and – “Quattro” in the South West of Johannesburg in the vicinity of the old Orlando Power station site. – Eskom‟s transmission networks will also need to be extended to supply our planned 275/88kV intake points at both Quattro and Sebenza. – Public lighting and electrification programme • Smart Grid • Energy Plan • Asset Management Plan
Board Approved Page 7
City Power Business Plan (2013 - 2016)
Below is a map that illustrates the TOD
Revenue War Plan
Key Priorities City Power Initiatives Status Expected Outcomes Financial Improve metering data In progress Achieve 90% data Resilience and accuracy and completeness accuracy by 2015 Sustainability, Attaining an unqualified Deployment of statistical In planning stage Smart City, audit in a sustainable and check metering Resource manner Deployment of smart In planning stage Sustainability Achieving 100% meters payment level for key Deployment of prepaid In progress and LPU customer by meters, Remote Access June 2013 Terminal system (RATS) Reduce losses to 10% and protective structures by 2015 Conversion of LPU to AMR In progress Achieving 98% meter reading by June 2013 (100% Compliance to the by-law)
Board Approved Page 8
City Power Business Plan (2013 - 2016)
Accelerated Visible Service Delivery
Key Priorities City Power Initiatives Outcomes Programmes
Sustainable Electrification Bulk supply programmes in Human Fleurhof , Lufhereng, Elias Settlements Motsoaledi and Lehae Resource Accelerated Visible 4500 households in Lehae Sustainability Service Delivery Phase 2, Klipspruit Ext11 (eg.100% and Golden triangle compliance to the SLA, electrification, Public 10000 public light PL) Lighting cumulatively in Soweto, Attaining an Orange Farms and Ivory Unqualified audit in Park in the next two financial a sustainable years (2013/14 and 2014/15) manner 2 days turnaround time on Achieving full public lighting maintenance compliance to NRS 047 and 048 Customer Operationalisation of immediately Services Customer Services Charter Charter and the Service Level Agreement
Energy Plan
Key Priorities City Power Energy What we are doing? Programme Resource Energy efficient Deployment of energy efficient technologies Sustainability street lighting eg: induction lighting, CFLs, and piloting LEDs Green program Economy Building retrofit Retrofitting of Municipal owned buildings, program Tender/Bid process currently underway. Building Assessment of privately owned buildings, at performance rating inception stage system Waste to energy Landfill Gas Electricity Generation at programmes Robinson Deep and Goudkoppies, PPA negotiations underway to bring 12MW into the grid Low pressure solar Roll out underway focusing on customers water geyser consuming less the 1000kWh/ month. program update
Board Approved Page 9
City Power Business Plan (2013 - 2016)
Key Priorities City Power Energy What we are doing? Programme Virtual Power Up market solar water geysers program at Station conceptual stage Innovative Product Introduction of Domestic Time of Use and Pricing Green Tariffs by 2015, application has been made to NERSA to consider green and TOU tariff Tariff support for Use of distribution system costs, application distributed has been made to NERSA to consider green generation sources tariff Tariff support for Enhancement of PV System efficiencies, photovoltaic application has been made to NERSA to systems consider green tariff Promotion of gas Displacement of electric stove, at conceptual cooking to replace stage electric stoves Natural gas Conversion of City Power open cycle gas electricity turbines and Establishment of Co-gen generation precincts, at conceptual stage
City Power’s Smart Grid Initiative
Key Priorities Initiative What we are doing?
Smart City, Customer The advanced transmission and distribution Green Centric: operations inherent in a smart grid will shorten Economy power outages and improve quality of power. Resource Customers will also benefit by having real time Sustainability billing information from smart meters – better planning and no surprises. Condition The smart grid infrastructure, such as the Monitoring communication medium interconnecting network nodes, allows proactive diagnostic of potential asset failures before they result in costly outages / catastrophic system failures. Asset life-cycle will be prolonged Energy Ripple control and smart meters allow City Power to Demand Side better manage peak loads. This in turn has a huge Management: benefit to City Power‟s bottom line – less stressed plant and reduced maximum demand penalties.
Board Approved Page 10
City Power Business Plan (2013 - 2016)
Key Priorities Initiative What we are doing?
Outage Self-healing characteristics of a smart grid system Management: will result in less costly power outages. Faulted circuits will be identified quicker, hence improved response times and NRS compliance.
Revenue Smart grid system (communication, smart meters Protection etc.) enables real-time and remote disconnection and reconnection of supply for non-payment of services. Accurate Data Smart and Power Quality meters enable the on Network determination of technical and non-technical losses Losses: in the entire network (comparative metering).
Advanced The AMI allows for real-time billing information Metering availability to both the customer and City Power. Infrastructure Huge reduction in cost associated with meter (AMI): reading, disconnection and reconnection of non- paying customers.
Co-Production
Key Priorities City Power Initiatives Outcomes Programmes
Active Coproduction Develop Coproduction Plan Engaged Plan Citizenry Energy Plan Develop 30 sustainable SMME and SMMEs over next three years Entrepreneur Improved Development Infrastructure Create 8 000 job over next community And Support plan three year engagement, Smart Grid Develop 10 sustainable Improve SMMEs over next three years, Customer through installation and Centricity and maintenance process people development Education and Create 500 jobs over next awareness three year through Community Liason Officer (CLO) programmes, community ambassadors and public education
Board Approved Page 11
City Power Business Plan (2013 - 2016)
Key Priorities City Power Initiatives Outcomes Programmes
Learning Partner with universities to academy have 100 learnerships, apprenticeship and Bursars over the next three years
Asset Management Plan
Key Priorities City Power Initiatives Outcomes Programmes
Sustainable Improve network data accuracy and Human Achieve 90% data completeness Settlements accuracy by 2015 Resource Achieving 90:10 Improve Implementation of Sustainability Planned: Unplanned by Network Condition Monitoring December 2015 performance system Achieving full compliance and quality of Implementation of Shift to NRS 047 and 048 supply System immediately Accelerated Visible Review and implement Service Delivery core and support value chains
Board Approved Page 12
City Power Business Plan (2013 - 2016)
GDS – IDP 5 Year Plan
CP IDP Impact on Actuals Plan Budget Plan Budget Plan Budget Budget KPI Unit Plan 2015/16 PIP Programme Community 2011/12 2012/13 2012/13 2013/14 2013/14 2014/15 2014/15 2015/16 SAIDI Minutes 11.37 11.7 1137 1037 937 SAIFI Number 3.08 3.08 4.78 4.68 4.58 CAIDI Minutes 368.67 368 237.87 221.58 204.59 CAIFI Number 0.08 1.12 5.65 Opex: 4.65 Opex: 3.65 Opex: Planned: Opex: R810m R849m R873m Improve Network Improved Unplanned % 62:38 65:35 R1129m 70:30 Capex: 75:25 Capex: 80:20 Capex: performance and restoration Maintenance 293m 318m 289m quality of supply times, reduction : in unplanned HV Outages: NPR Number 68 70 78 76 74
Sustainable Outages, NRS 047 % 90 90 90 90 90 Human improved Compliance Settlements network health NRS 048 % 97 97 97 97 97 Smart City Compliance Resource Opex: Opex: Opex: Opex: Refurbishment of Sustainability Average age of R175m R169m R185m R200m ageing Years 50 39 39 38 38 Investment infrastructure (HV) Capex: Capex: Capex: Capex: infrastructure attraction, R160m R90m R203m R208m retention and More people Additional Capacity MW New 90 Opex: 90 120 120 Opex: Opex: Opex: expansion Expansion and with access to R295m Electrification Number 5610 3200 3400 R184 m 3600 R238m 3800 255m Green Strengthening of electricity, Capex: Capex: Capex: Capex Economy Network Economic Provision of public R45m Number 5126 4200 4400 R712m 4600 R1468m 4800 R1131m growth Lights
After Diversity Maximum Demand KvA New 0.12 0.3 0.46 0.6 Climate (ADMD) Opex: Opex: Opex: Opex: Demand Side Change & R50m 114m 118m 150m Energy Mix % New NEW 0 0.01 0.02 Management Energy Capex: Capex: Capex: Capex: Diversification Solar Water R127m R18m R15m R5m Number New 20000 30000 30000 40000 Heaters Reduction in GHG % New 5% 10% 15% Board Approved Page 13
City Power Business Plan (2013 - 2016)
CP IDP Impact on Actuals Plan Budget Plan Budget Plan Budget Budget KPI Unit Plan 2015/16 PIP Programme Community 2011/12 2012/13 2012/13 2013/14 2013/14 2014/15 2014/15 2015/16 Payment Levels (Current % 92.4 93 96 98 98 Sustainable consumption) Human Relief in Tariffs, Meter Reading Settlements % 98 96 96 Opex: 96 Opex: 98 Opex: Smart City, performance Active engaged Revenue step 250m 247m 264m reduction in Meter Roll Out Number New 30000 100000 150000 200000 citizenry change programme Capex: Capex: Capex: accounted for Losses (Technical/ Resource % 19.31 15 13.5 R505m 12 R580m 10 R535m electricity & Non-Technical) Sustainability % of ESP customers with FBE % New 97 97 97 provided EPWP Number 2333 3000 5000 5000 5000 50% black owned % New 5 8 10 12 companies 30% black woman % New 2 5 8 10 owned company Improve Customer Improved Customer Centricity and people % 65 65 65 65 70 Financial services Satisfaction resilience and development Affirmative Action Opex: Opex: Opex: sustainability % 79.2 85 85 85 85 (all) R290m R229m R357m Smart City Gender Equity (all) % 20.91 23 24 Capex: 25 Capex: 26 Capex: Resource People with R108m R40m R60m Sustainability % 2.9 2 2 2 2 Disability
DIFR Ratio 0.51 1 1 1 1 Unqualified Continuous ISO accreditation Audit report Improved Audit report Opex: Improvement of the Unqualified Unqualified Unqualified Unqualified Audit services Attainment of an Qualified 403m business Audit report Audit report Audit report report unqualified audit Audit report Audit Capex: report Report R234m
Board Approved Page 14
City Power Business Plan (2013 - 2016)
City Power shifting the Strategic Focus (Changing the Course)
Board and management of the company recently reviewed the strategic direction of the organization and it became clear that the entity is at a strategic inflection point. Ten years on, an assessment must be made as to whether the current business model is still relevant and is aligned to stakeholder expectations and to the GDS 2040. In addition, the current business model needs to be reviewed in light of the creation of the R&CRM unit at COJ. In light of the changing energy landscape City Power must consider becoming a provider of alternative sources of energy. This strategic direction will impact on how the company conducts its business going forward, requiring the need to review the business model. This will help redefine the company strategy and ensure alignment to the Growth and Development Strategy and IDP.
City Power History
We are at a strategic inflection point?
2012– 2017 2007 – 2012 • GDS 2040 • GDS 2030 • Improving condition monitoring maintenance 2002 – 2007 • Improving network performance • Making sure we get paid for our • Perfecting time based maintenance services & improve revenue • Egoli 2002 • Introducing condition monitoring management maintenance • Bringing the different municipalities • Improve stakeholder together • Implementation and improving Capex communication, engagement • Moving from fire fighting to planned program to reduce backlog and management including maintenance R&CRM • Consolidation and centralisation of • Developing and initiating Capex customers services • Shift to low carbon infrastructure program to reduce backlog and introduction of SSM & DSM • Improving prepaid & smart meter • Introduction of customer segmentation technologies • Introduction on TOU and green tariffs • Introduction of prepaid meters • Piloting of DSM projects
Board Approved Page 15
City Power Business Plan (2013 - 2016)
SECTION 2: STRATEGIC ANALYSIS AND FOCUS
PESTLE Environmental Scan
PESTLE ANALYSIS IMPACT EXTERNAL FACTORS EFFECTS ON THE ORGANIZATION SEVERITY
Re-alignment of projects and re-allocation of funding Mayoral and CoJ Priorities Not always based on business case and may de-focus CP plan
Political Lack of Business Alignment to Political and Service Delivery High Competing Needs requirements. Pressure from politicians prior to elections Service delivery pressures
Inadequate Funding Unable to meet expectations, limited expansion programmes Investment ratings and policy
Impact of new Toll roads Increase operational costs, decrease customer disposable income
Pass through electricity costs; Customer dissatisfaction; Businesses going Increasing cost of Electricity Supply out of business; Decreasing consumption Economic High Economic downturn due to Global recession:
Affordability of inputs – loans, people costs, fleet and bulk Impacts on Service delivery; Causes increases in costs if theft is high and
costs insurance does not recover all the losses; Impacts on ability to deliver
Green energy Decreased consumption and revenue
Tariff regulation Ability to be cost reflective Theft and Vandalism Increase Outages and non-funded expenditure
Increased cost of sales with no corresponding income Illegal connections and theft of energy Increase public fatalities
Social Non-payment of services Insufficient income High
Impact of HIV/AIDS and chronic diseases on the workforce Increased pressure on resources to provide case management and support
Community/customer activism/protests Non-payment, destruction of property, pressure to deliver Change of technology Additional training and safety requirements Cost of new technology Limited available funding Technologically Reliable and safer designs Important impact on City Power although there has been many initiatives Alternative energy solutions regarding demand supply management and SCADA enhancements Technological Smart Grid Alternative source of energy Medium
Increase in Demand Additional funding required meeting the demand. Quality of service: Improve company image Social media – Facebook, Twitter Customer satisfaction Qualified audit reports High focus as City Power is the provider of electricity to the greater Corporate Governance/ MFMA/ King III/ NERSA/ Companies Johannesburg and covers many legal requirements. ACT/ OSH Act/ ISO/ By –laws. Court cases not legalizing electricity Legal Penalties and fines High Inadequate legislation to deal with cable thieves Increased theft and vandalism/illegal connection; Increase repair & Legislative framework for smart meters maintenance costs; Loss of revenue
EIA implementation Delay in the implementation of major projects Medium ISO Accreditation Reduction in DIFR, improve quality of service Medium Pollution Due to the impact of the business activities on the environmental this is an ISO 14001:2004 High important focus area. Green and Renewable Energy Environmental Disposal of waste/obsolete equipment Potential pollution due to obsolete equipment (e.g. Vulnerable to prosecution plus poor public image Medium transformers)
Shift to low carbon, monitoring and reporting Energy purchases high High
Board Approved Page 16
City Power Business Plan (2013 - 2016)
SWOT Analysis – Prioritised
Strengths Weaknesses
·ISO accreditation ·Communications ·Good knowledge and understand of the ·Accountability business ·Poor change management ·Well documented value chains ·Poor contracts management ·Supportive stakeholder ·When things go wrong we blame each ·New structures based on sound business other/team work at executive level
Internal approach ·Perceived low employee morale ·World class systems ·Operationally inefficient ·Inability to execute projects and follow through on benefit realisation ·Process leading up to decision-making is slow
Opportunities Threats
·Green energy/alternative energy sources ·Lack of sufficient funding to fund key ·Community upliftment company initiatives ·Smart Grid ·Loss of revenue – Due to illegal ·Improve company image connections, theft and vandalism ·Expand Jhb footprint ·Household ability to pay/reduced ·Carbon Funding/ CEF consumption
External ·Provide technical training externally and ·Loss of NERSA licence increase income ·Generation capacity in SA • Raise funds through the network ·Customer activism/revolution •Industrial action
Board Approved Page 17
City Power Business Plan (2013 - 2016)
Key Driving Forces Impacting City Power’s Strategy
Priorities Internal External
Leverage for competitive advantage Higher 2 3 4 1 Data Non Metering Losses management compliance Clean audit Smart grid readings low inaccuracies issues
Low Change Operationally Energy Blame Quality of performance management & inefficient balancing culture supply acceptance comms reactive 5 Project Revenue Aging Unions & Labour Aging ICT Quality of execution collection infrastructure Issues network service weak low
4 Alternative Eskom 3 CoJ Strategy / Cost of sources of energy Smart city strategy GDS 2040 supply Predictability / green energy
Expand NERSA 2 Theft and ISMO Bill footprint NRS 47/8 vandalism
1 Service Legal ISO External Non payment delivery compliance accreditation image poor protests
Plan Scenario’s Impact on Strategic Agenda
Board Approved Page 18
City Power Business Plan (2013 - 2016)
SECTION 3: STRATEGY AND SCORECARD
Strategy Map Mission Business Operating Principles CP Strategy Map The mission of City Power Johannesburg SOC is • Customer-centric organisation Previous to meet the expectations of our customers and • Seamless value chain driven Aspired stakeholders by: Getting the organisation Values • Providing a sustainable, affordable, safe and Basics Right •Zero tolerance for poor performance • Resourceful reliable electricity supply •Doing business in an ethical manner, City of • Resilient • Providing prompt and efficient customer Johannesburg zero tolerance for fraud and corruption • Reliable services •Business case driven investment Business of • Respectful • Being the preferred equal opportunity employer decisions Tomorrow Always with by developing and incentivising our employees •Maximum technology enablement Integrity • Undertaking our business in an environmentally •Doing it right the first time acceptable manner Strategic Priorities Strategic People Service Infrastructure Perspectives High Performing teams , Social transformation , quality of Network refurb & development, asset customer centric, SHEQ service , SHEQ maintenance, DSM, alternative energy sources, infrastruc security, SHEQ Value Optimise Surplus 1. Financial Propositions Sustainable Revenue Low (30%) Increase financial Growth Operating resilience and Costs Improve Sustainable sustainability of the Capex Revenue Cash Flow Reduce business Promote Losses Spend Energy Collection Expand Efficiency Footprint 2. Customer / Improve customer Improved
Stakeholders Influence Key Customer Quality Socio
What Business Are We In? Are We Business What electricity. We are in the business ofin are distributing the business We centricity and ensure (30%) Stakeholders Experience Supply and Economic active citizenry CoJ, NERSA, DoE Availability Development
3. Internal Efficient and Manage core Process effective processes value chains (20%) and enabling
Asset Data class - information systems Management Management ICT Governance, Risk, Compliance
Maximum employee High Performing 4. Learning Teams & Growth productivity whilst Performance conducting business Talent Talent Talent Knowledge (20%) Planning Management
To be aworld be To Development Acquisition Management Vision electricity utility electricity in an ethical manner
The 10 STEP Programme The above priorities have been further broken done to a 10 STEP Programme that has ten interventions and targets for the next three to five years. STEP is an acronym that stands for: S – Service Delivery, T – Transformation, E – Excellence, P – Performance
1. Attaining an unqualified audit in a sustainable manner 2. Reduce losses to 10% by December 2015 3. Achieving 98% meter reading by June 2013 (100% Compliance to the by-law) − 99% Meter Reading AMR LPU customers − 95% Manual Meter Reading for Domestic customers − 98% Meter Reading for Domestic AMR 4. Achieving 100% payment level for key and LPU customer by June 2013 5. Achieving 90% data accuracy by 2015 6. Installing 110 000 SWH by December 2016 7. Achieving full compliance to NRS 047 and 048 immediately 8. Achieving 90:10 Planned: Unplanned by December 2015 9. Accelerated Visible Service Delivery (eg.100% compliance to the SLA, electrification, PL) 10. Innovative Product Pricing (Introduction of Domestic Time of Use and Green Tariffs) by 2015
The company scorecard is aligned to the company strategy, which is illustrated below:
Board Approved Page 19
City Power Business Plan (2013 - 2016)
Scorecard
Segment Financial = 30% Overall Intent Increase financial resilience and sustainability of the business Value Base FY Targets Objectives Measure Units Acc Freq Proj Proposition 2011/12 2012/13 2013/14 2014/15 2015/16 Optimise Improve surplus Surplus Rand value Rbn MD 1.4 0.9 0.8 0.9 1.3 M 2,3,4 surplus Sustain revenue Increase sales revenue Sales revenue Rbn RS 12.1 12.4 13.3 14.6 15.9 A 2,3,4 growth Sustain cash Increase cash levels Net cash position Rbn Fin 2.3 2 2.1 1.5 1.5 M 2,10 flow Reduce outstanding Payment levels % RS 92.4 93 96 98 98 M 4 debtors 99% meter reading AMR Improve LPU customer revenue Meter reading 95% manual meter reading collection % RS 98 96 96 96 98 M N/a performance domestic 98% meter reading domestic AMR Reduce Reduce non-technical Non-technical loss % MD 8.2 6 4.5 3 1 M 2 losses losses Low operating Optimise bulk purchase Cost per kWh (n1) c/KWh RS 58.5 67 72 74 78.2 M N/a costs cost Optimise maintenance Maintenance as % of opex % EO New 3 4 5 7 M 8 expenditure Maximise return on Return on assets % ES 11.5 10.7 10.7 8.9 8.9 M N/a capital spend Capex spend Manage total capex Total capital spend % ES 100 100 100 100 100 M N/a spend to business plan
Board Approved Page 20
City Power Business Plan (2013 - 2016)
Segment Customer / Stakeholders = 30% Overall Improve customer centricity and ensure active citizenry Intent Value FY Targets Objective Measure Units Acc Base Freq Proj Proposition 2012/13 2013/14 2014/15 2015/16 Solar water heating GWH ES New New 13 21 24 M SWH installations Promote Reduce energy After Diversity Maximum energy KvA ES New 0.12 0.3 0.46 0.6 M consumption Demand (ADMD) efficiency Energy Energy Mix % RS New New Proj 0.01 0.02 Q Plan Improved Customer / stakeholder % RS 65 65 65 65 70 M RS customer / Improve customer / satisfaction index stakeholder stakeholder satisfaction Positive company image % MD 44 45 55 65 70 M N/A experience Meter roll out Number ES New 30000 100000 150000 200000 M
Maintain high quality of NRS047 index % RS 90 90 90 90 90 M 3,7,9 supply levels NRS048 index % ES 97 97 97 97 97 M 7 Quality CAIDI mins EO 368.67 368 237.87 221.58 204.59 M 7 supply and Improve overall system CAIFI # EO 0.08 1.12 5.65 4.65 3.65 M 7 availability reliability SAIDI mins EO 11.37 11.7 1137 1037 937 M 7 SAIFI # EO 3.08 3.08 4.78 4.68 4.58 M 7 Co- Number in EPWP # ES 2333 3000 5000 5000 5000 M Production Plan Increase employment 50% black owned opportunities % Fin New 5 8 10 12 M Socio companies economic 30% black woman owned % Fin New 2 5 8 10 M development company Additional Capacity MW ES New 90 90 120 120 A Increase basic service delivery Number of public lights # EO 5126 4200 4400 4600 4800 M N/a Electrification # ES 5610 3200 3400 3600 3800 M N/a
Board Approved Page 21
City Power Business Plan (2013 - 2016)
Segment Internal Processes = 20% Overall Intent Efficient and effective processes and enabling information systems Value Targets Objective Measure Units Acc Base Freq Proj Proposition 2012/13 2013/14 2014/15 2015/16 Manage core value Manage core chain processes to ISO accreditation UA with Index RAC UA with 1 major findings A N/a value chains maximise business (maintained) minor value Asset Improve maintenance Planned maintenance % EO 62 65 70 75 80 M 8 management planning and execution ratio Improve network and IS network availability ICT applications % IMS 94 97 97 97 97 M N/a (uptime) performance Data Achievement of data Data Accuracy % RS Proj Proj Proj Proj 90 Proj 5 management accuracy (index) AG Governance, Attain an „unqualified Qualified / unqualified / report War risk, audit‟ in a sustainable All QA Unqualified Audit A matter of emphasis out- plan compliance manner come
Board Approved Page 22
City Power Business Plan (2013 - 2016)
Learning & Growth = 20% Overall Intent Maximum employee productivity whilst conducting business in an ethical manner Value Targets Objectives Measure Units Acc Base Freq Proj Proposition 2012/13 2013/14 2014/15 2015/16 Filled critical positions as Continuity of service Talent Planning per approved and aligned % HR 30 30 50 80 100 Q N/a delivery workforce planning % of individuals who have Consistent Performance been through the PM performance % HR 80 30 80 100 100 BA N/a Management process, and have management submitted scores Aligned PDP achievement % HR 80 60 70 90 100 BA Talent Targeted talent Availability of targeted KM Development development skills pool – actual vs. % HR 50 40 60 80 100 Q number of people trained Achievement of turnaround Days HR 90 90 90 90 90 Q N/a time for new recruits Filling of vacancies aligned to agreed Affirmative Action (AA) targets - % HR 79.2 83 83 83 83 Q N/a supervisory levels and Talent Effective talent above Acquisition acquisition Filling of vacancies aligned to agreed Gender % HR 20.9 23 24 25 26 Q N/a Equity (GE) targets Filling of vacancies aligned to agreed People % HR 2.9 2 2 2 2 Q N/a with Disabilities (PWD) targets High Performing Satisfaction Survey Employee satisfaction Mean HR 3 2 3 4 4 A Prod Teams Results
Board Approved Page 23
City Power Business Plan (2013 - 2016)
SECTION 4: DAY–TO–DAY OPERATIONS
City Power Johannesburg (SOC) Ltd is the Electricity Distribution Service Provider to the Service Authority, Johannesburg Council. The core competency of the business is to purchase, distribute and sell electricity within its geographical footprint of business. The City of Johannesburg is the sole Shareowner. The Council, by means of a Service Delivery Agreement, regulates the service in respect of the following: financial issues (such as tariffs and capital expenditure), human resource issues (such as skills development), delivery targets (maintenance of assets and addressing assets), and standards of customer care. City Power Johannesburg (SOC) Ltd is accountable to provide network services to all its customers. Network services include: the purchasing and distribution and sale of electricity constructing networks connecting customers repair and maintenance of networks installation and maintenance of public lighting The City of Johannesburg provides retail customer services for all customers, i.e. processing of applications, customer queries, customer complaints, customer accounts and revenue management.
Provide Network Infrastructure
City Power Johannesburg (SOC) Ltd projected network infrastructure status is given in the table below: Network Infrastructure
Measure Indicator Unit 2011 2010 2009 2008 Eskom Supply Points No. 42 42 39 39 High Voltage Substations (Bulk Intake Points) No. 5 5 5 5 Medium Voltage Substations (Major Substations) No. 87 87 82 82 excl. Bulk Intake Substations Low Voltage Substations (Devices) No. 18,366 17,964 14, 252 14,252 High Voltage Overhead Transmission Lines > km 811.37 811.17 811 811.00 44kV High Voltage Transmission Cables > 44kV km 101.10 101.10 93.68 93.68 Medium Voltage Overhead Lines >20.5kV and < km 9.6 9.6 11.2 11.20 44kV Medium Voltage Cables >20.5kV and <44kV km 118.8 118.8 123.3 123.30 Ripple Relays Installed No. 192,000 181,711 177,771 171,860 Ripple Relays In-service No. 124,800 119,435 113,141 103,700
Draft 6 Page 24
City Power Business Plan (2013 - 2016)
Distribute Electricity
City Power Johannesburg (SOC) Ltd comprises of six independent networks. The figure below gives the schematic representation of City Power Johannesburg (SOC) Ltd.‟s Johannesburg transmission network and indicates the bulk power intakes from Eskom and Kelvin Power Station.
DELTA 3*250MVA 88kV Transmission Circuits
Westfield KELVIN PS ESKOM 275kV 300 MW Firm capacity Rosebank , Ridge, 500 MVA Fort, Parkhurst and MD 200 MVA MD 404 MVA Roosevelt Park Marlboro Cydna , Gresswold, Eskom Observatory, Bellevue, Orchards, and Alexandra P roposed Sebenza 275 kV ESKOM 275kV Alexandra 88kV Transmission Circuits Firm capacity township Intake from Eskom 750 MVA MD 676 MVA
Braamfontein, John Ware, 88kV Transmission Circuits Bree, Mayfair, Selby, and Central (20kV).
Eldorado , Nancefield, Pritchard, Siemert , Central, Nirvana, Hursthill, Robertsham, Mondeor, Industria , Eikenhof, Mulbarton , Moffat, Cleveland, FORDSBURG and Soweto. Kazerne , Wemmer and Van 4*250MVA PROSPECT Beek. 4*250MVA 88kV Transmission Circuits
ORLANDO 88kV SWITCHYARD ESKOM 275kV P roposed Firm capacity P roposed Mondeor 88 kV 750 MVA Q uattro 275kV ESKOM Bus MD 827 MVA Intake Lenasiafrom Eskom
Power is received from Eskom at three major bulk intake points (Prospect, Fordsburg and Delta Substations) at a voltage of 275kV.
At these major Bulk intake stations the voltage is transformed down to 88kV, it is then transmitted on City Power‟s transmission network to over 30 step-down substations. At these step down stations the voltage is transformed down to 11kV and from here it is distributed. In addition, the 88kV transmission network is supplemented by a power input from the independently operated Kelvin Power Station.
Network Expansion
The electricity demand in City Power areas reached 3GW in 2010. It is predicted that the future demand, which excludes potential power-saving strategies and efficiency improvements, will reach 5.4GW in 2030.
During the past few years a detailed analysis was conducted on the network infrastructure in order to ascertain the capacity to meet current and future demand. This entailed the conduct of detailed audits in order to ascertain the condition of the network infrastructure and the development of network and electrification master plans to ascertain short and medium-term capacity requirements.
Board Approved Page 25
City Power Business Plan (2013 - 2016)
The result of the analysis indicated that extensive refurbishment, upgrades and expansion of the network were needed in order to meet the current and future demand. The average transmission infrastructure has reached 63 % of accepted useful life, the average installed infrastructure (lines / cables) is currently utilized at 31.6 % during normal operations, and substations (transformers) are utilising installed capacity at 54.6 % and firm capacity at 103.1%.
In an effort to proactively plan for the energy needs of the City Power Distribution Area, a study has been done on how to develop a master plan for energy supply in the areas from Midrand in the east to Roodepoort in the west and from Randburg in the north to Lenasia in the south.
The study provided City Power with a clear view and long-term plan on how to develop the electrical infrastructure required, supporting the envisaged growth in demand. The study further clearly identified where new infrastructure should be located and what components, either existing or new, will be required. This has identified and documented expansion and strengthening projects to ensure the adequate performance of the network within the short- and longer-term period. The Network Master Plan has been evaluated against a set of sustainability criteria to ensure that it is a sustainable development.
Focus was placed on the following tasks: Sufficient information was gathered and reviewed to provide a solid platform on which the Network Master Plan was to be based. Geographical load forecast was developed based on regional demographic and historical load growth patterns, taking into account futuristic economic information, demographic trends, available land use data and future development initiatives. The aim of load forecast was to determine the present and future electricity requirements of electrical end-users and to develop an economic and demographic model which forecasts the expected population and economic growth in the study area. These results were then converted into a spatial load forecast applications to produce the expected electricity needs of the study area. The anticipated long-term load forecast was directly used as input to the long-term expansion plan. Review generation-, transmission- and distribution expansion plans with the Network Master Plan for the region. Define the network problems by assessing the existing network capability and analysing the shortcomings in a coordinated manner. In this way all the existing network problems were identified, along with any potential future problems, within the study area. Different networks to supply the expected load were identified and analysed and evaluated properly to ensure that each alternative network complies with required standards and guidelines. A review on the adequacy of City Power Sub-transmission network through load flow and contingency analysis was done and possible new transmission supply stations was also evaluated.
The overall Strategic Environmental Assessment (SEA) approach including the use of a multi-disciplinary team of experts and specialists that assessed the environmental consequences of the proposed Network Master Plan on the environment was required. Alternative plans and strategies were formulated. Emphasis was placed on understanding the biophysical, social and economic environment and the values there-of. Opportunities, constraints and values of the study area, including the needs and wants of the relevant stakeholders, were assessed. This was formulated into a desired state of the environment that recognises appropriate development options. The Participation Process allowed for all
Board Approved Page 26
City Power Business Plan (2013 - 2016) relevant stakeholders i.e. local authorities, service providers and the property and business sectors to contribute meaningfully during the development of the Network Master Plan. The illustration below demonstrates the predicted longer-term demand growth based on density and location:
Density Density Load, Load,
To meet current and future demand, City Power has developed a detailed asset management plan which covers network expansion and the continued maintenance and refurbishment of network assets over the medium and long term.
The 20 year capital expenditure plan required to ensure the sustainability of the network is estimated at R26.8bn. in respect of the following infrastructure projects: In order to support anticipated demand growth, the strengthening and expansion of the transmission and distribution networks are required. In order to reduce the failure rate and the average age of network infrastructure, refurbishment of the transmission and distribution networks are required.
Board Approved Page 27
City Power Business Plan (2013 - 2016)
The graph below is a graphic representation of the expected capital distribution between the projects.
Carbon Emissions
A number of renewable energy and DSM initiatives have been developed to align the city with the international requirement to reduce carbon emissions. In 2013/14 financial year City Power will develop a comprehensive Energy Plan to reduce carbon emissions, which will incorporate all the Supply and Demand Side Management projects and how the organisation will measure the impact.
Supply Side Management
City Power takes the majority of its power from Eskom and a very small contribution from Kelvin Power Station. Almost 98% of this power is produced from coal which is one of the major contributors of CO2 emissions. The country has committed itself to reduce certain amount of emissions and through participation in Integrated Resource Plan 2010 (IRP2010), City Power has to come up with meaningful contribution to the goals of IRP2010. These initiatives will be confined within the useful renewable resources within the City of Johannesburg.
The city has embarked on a number of solar projects i.e. solar water heaters, photovoltaic and waste to energy to reduce dependency on coal produced electricity. City Power is also investigating affordable off grid solutions for informal settlements where there are no services installed.
Demand Side Management
The city has also embarked on a number of energy efficiency initiatives like the replacement of incandescent lights with compact fluorescent lights. This has seen massive savings in residential dwellings and city buildings. City Power is also busy with the replacement of current induction lamps with the energy efficient and LED lights. These technologies are helping tremendously in reducing technical losses and improving the life time of those components.
City Power has heavily invested in electrification projects and Demand Side Management initiatives which has seen massive job creation and visible economic activities in those targeted areas.
Board Approved Page 28
City Power Business Plan (2013 - 2016)
Electrification
City Power has electrified over 5610 previously-disadvantaged dwellings during the 2011/12 financial year.
Electrification
10,000 9,000 8,000 7,000
6,000 5,000
Rm 4,000 3,000 2,000 1,000 - 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 Actual 9,057 5,029 6,901 4,369 5,610 Plan 5,800 3,000 3,000 4,000 4,000 4,000
The table below shows the areas that have been electrified during 2010/11:
Number of Political Ward Project Name Stands Region Number Electrification of Pennyville (Zamimpilo) 251 D 68 Electrification of Alexandra ext. 9 Phase1 & 2 2,101 E 32,81 Electrification of Hospital Hills 1,483 G 7 Normalisation of Rabie Ridge 81 A 80 Electrification of Tsepisong West (Ebumnandini 192 C 53 Electrification of Alexandra ext. 10(32,81) 261 E 32 TOTALS 4369
These programmes have positively contributed towards poverty alleviation, as the following have emerged in the townships: Establishment of “Spaza” shops Back yard mechanics Informal restaurants Employment of local community during project execution (EPWP) Community Phones (Cell C, Vodacom and MTN); and Improved living standards
Board Approved Page 29
City Power Business Plan (2013 - 2016)
Future Electrification Plans
Table below shows the projects that have been identified as part the electrification master plan, which is derived from the housing plan. It is envisaged that the following townships will be proclaimed and developed in the near future.
Projects included in the master plan:
Financial Project Name Number of Amount (R) Political Ward Year Stands Region Numbers 2013/14 Electrification of Lehae ext 1 Phase 2 941 26,754,875.00 Region G 8 2013/14 Rand Leases x 5 1000 10,701,950.00 Region C 70 2013/14 Kliptown: Klipspruit Ext. 11 995 10,648,440.25 Region D 37 2013/14 Golden Triangle ext 35 1000 10,701,950.00 Region G 8 2013/14 Electrification of Fleurhof ext 5&7 930 9,952,813.50 Region C 70 TOTALS 4866 68,760,029.00 2014/15 Electrification of Motswaledi 1289 15,794,813.55 Region D 26 2014/15 Electrification of Lehae ext 1 Phase 3 1000 30,754,875.00 Region G 8 2014/15 Klipspruit ext 7 1000 10,701,950.00 Region D 2014/15 Transfer of service connection to an RDP TBA 15,000,000.00 All All House 2014/15 Alexandra Normalisation 5000 50,000,000.00 Region E 2014/15 South Hills 3880 105,023,594.00 Region F 2014/15 Hospital View 1132 28,017,000.00 TBA TOTALS 13301 255,292,232.60 2015/16 K60 2119 22,677,432.05 Region A TBA 2015/16 Dunusa(Matholesville Squater) 2164 23,159,019.80 Region C TBA 2015/16 Meriting 281 2,587,843.97 Region G 6 2015/16 Chris Hani 420 5,571,716.96 TBA TBA 2015/16 Transfer of service connection to an RDP TBA 5,000,000.00 All All House 2015/16 Electrification of Slovo 2989 10,000,000.00 Region G TBA 2015/16 Alexandra Normalisation 5000 50,000,000.00 Region E 2015/16 Hospital View 1140 29,907,900.00 2015/16 Electrification of Freedom chater Square 2691 28,798,947.45 Region D TBA TOTALS 16804 177,702,860.00 2016/17 Electrification of Kya Sands/Lions Park 2989 8,000,000.00 Region C 100 2016/17 Slovo Park (Nancefield) 1052 17,000,000.00 Region D 7 2016/17 Patsing /Vegiland 129/301-IQ TBA Region G 122 TOTALS 2016/17 Unaville 13/313 -IQ TBA Region G 120 2016/17 Stand TBA Region D 18 Eldorado Park 4624 2016/17 Alexandra Normalisation 5000 15,000,000.00 Region E 32 2016/17 Fun Valley Olifantsvlei TBA Region G 119 2016/17 Hospital View 1120 311,461,932.00 2016/17 Electrification of Princess Plot 2536 34,140,145.20 Region C TBA 2016/17 Electrification of Lindelani Boundary 1996 28,361,092.20 Region A TBA TOTALS 2017/18 Ennerdale Ext 6,9 Stand TBA Region G 121
Board Approved Page 30
City Power Business Plan (2013 - 2016)
Financial Project Name Number of Amount (R) Political Ward Year Stands Region Numbers 4553-5550 2017/18 Klipriviersoog 31/299 TBA Region D 119 2017/18 Kapok & Hopefield Ennerdale TBA Region G 7 2017/18 Lawley Station TBA Region G 8 2017/18 Eldorado Park Ext 5 TBA Region D 18 TOTALS
Electrification specification City Power has improved its electrification specification in order to cater for proper revenue collection, make provision for public lighting infrastructure, network protection and future upgrades by providing the following:
Split Prepaid metering Street Lighting Concrete Poles Auto Recloses Path Finders 60Amp breakers Underground MV bulk infrastructure
Due to the above specification, the cost per connection has increased to an average of R12500 per stand.
Typical electrification layout
Bulk Electrification Infrastructure The majority of the above mentioned townships are located on the outskirts of Johannesburg, far from serviced areas. Their locality has posed a large challenge in terms of bulk infrastructure availability. Bulk infrastructure is becoming increasingly critical in the roll out of the electrification programme. The total funding requirements to allow bulk to address the electrification are in table below.
Board Approved Page 31
City Power Business Plan (2013 - 2016)
Total funding requirements for bulk supply
BULK SUPPLY PROJECTS Financial Description Project Benefits Cost Ward Year Numbers (started) 2013/14 Lufhereng Bulk Supply Provide electricity to approximately 130,000,000.00 53 25 000 household in Lufhereng 2013/14 Bulk Supply to Fleurhof Provide electricity supply to 100,000,000.00 70 Development approximately 6000 household in Fleurhof Development 2013/14 Bulk Supply to Elias Provide electricity supply to 40,000,000.00 26 Motsoaledi Development approximately 1400 household in Elis Motsoaledi 2014/15 Bulk Supply to Lehae Provide electricity to approximately 133,000,000.00 7 Township 25 000 household in Lehae Township Total 403,000,000.00
Challenges The following are the challenges currently faced by City Power in rolling out the electrification projects: Lack of funding, for both internal reticulation and bulk infrastructure requirements Slow allocation of beneficiaries by housing to their respective RDP houses Slow pegging and re-location of beneficiaries to their demarcated stands Lack of coordination between departments and spheres of government e.g. Local and provincial housing Unavailability of Housing Master Plan to guide the electrification future project plans
Board Approved Page 32
City Power Business Plan (2013 - 2016)
Public Lighting
Analysis of current backlog for new streetlights has been done. Table below is the backlog of streetlights per administrative region.
The streetlights backlog per administrative region:
Current No of No of Streetlights Streetlights per outstanding per Budget Required (Present Region area area % Backlog day cost
A 15,957 25,773 62% R 322,162 500.00
B 37,430 341 1% R 4,262,500.00
C 62,358 11,633 16% R 145,412,500.00
D 33,228 20,609 38% R 257 612 500.00
E 26,056 27,795 52% R 347,437,500.00
F 70,816 1,749 2% R 21,862,500.00
G 4,631 22,184 83% R 277,300,000.00 Eskom Areas 40,748 80,075 66% R 1,000,937,500.00 Total 291,224 190,159 40% R 2,376,987,500.00
Public lighting is one of the mayor‟s strategic priorities. The figure below shows the expenditure spent on implement Public Lighting Program.
Expenditure 60,000,000.00
50,000,000.00
40,000,000.00
30,000,000.00
20,000,000.00
10,000,000.00
- 2003/4 2004/5 2005/6 2006/7 2007/8 2008/9 2009/10 2010/11 2011/12
Current Public Lighting Projects Table below illustrates the areas, where the Public Lighting Projects have been approved by USDG for 2012/13 financial year and the projects are currently underway. Majority of these projects are at the design stage, others are already at construction stage
Board Approved Page 33
City Power Business Plan (2013 - 2016)
Period Area Region Number of New Lights Project Cost
2012/13 Soweto D 3086 41,108,185.76 2012/13 Orange Farms G 3851 35,325,874.42 2012/13 Diepsloot A 282 2,419,892.76 7219 78 853 952.94
Future Public Lighting Projects
These are the projections as per public lighting master plan. Total of 23471 lights will be installed in the future years.
Period Area Region Number of New Lights Project Cost
2013/14 Orlando Ekhaya D 400 5,000,000.00 2013/14 Jabulani D 400 5,000,000.00 2013/14 Nancefield/Klipspruit D 400 5,000,000.00 2013/14 Orange Farms ext 1 G 160 2,000,000.00 2013/14 Diepsloot A 400 5,715,000.00 1760 22,715,000.00
Period Area Region Number of New Lights Project Cost
2014/15 Soweto D 815 10,183,153.00 2014/15 Orange Farms G 410 2,500,000.00 2014/15 Ivory Park A 161 2,024,446.00 1386 17,307,599.00
Period Area Region Number of New Lights Project Cost
2015/16 Soweto D 415 5,183,153.00 2015/16 Orange Farms G 170 2,100,000.00 2015/16 Ivory Park A 82 1,024,446.00 667 8,307,599.00
Period Area Region Number of New Lights Project Cost
2016/17 Soweto D 156 1,953,153.00 2016/17 Orange Farms G 88 1,100,000.00 2016/17 Ivory Park A 81 1,024,446.00 325 4,077,599.00
Board Approved Page 34
City Power Business Plan (2013 - 2016)
Asset Maintenance Management
In the medium term a five year infrastructure rolling plan to address the load growth and electrification and refurbishment needs was developed and put in place. This has been incorporated into the key focus areas of City Power. As part of the drive towards achieving a ratio of 80:20 planned vs. unplanned maintenance, City Power has developed a maintenance strategy based on condition monitoring in consultation with Singapore Power. The object of this maintenance strategy is to ensure that the organisation moves towards proactive maintenance, thereby improving the reliability of supply to the end customer. Reduction in maintenance and post failure repair costs. Extended equipment life and extension of intrusive maintenance intervals
The graph below illustrates the asset maintenance management - planned vs. unplanned journey map:
Restoration times
In 2009 City Power engaged in a process to improve the network connectivity. This project has yielded results that now the organization has more accurate information on the connectivity of its customers, and thus can provide more accurate figures on restoration times. The targets for network restoration are as per NRS 047.
Over the last couple of years, a new system to report network performance has been under development. This system will ensure that there is direct linkage between interruptions and the number of customers affected, thus enabling City Power to report supply reliability more accurately. Reporting on this new system is based on internationally recognised indices. The following indices are used: System Average Interruption Duration Index (SAIDI). This KPI measures, on average, how long a system was out System Average Interruption Frequency Index (SAIFI). This KPI measures, on average, how often a system was out.
Board Approved Page 35
City Power Business Plan (2013 - 2016)
Customer Average Interruption Duration Index (CAIDI). This KPI measures, on average, how long a customer was out Customer Average Interruption Frequency Index (CAIFI). This KPI measures, on average, how often a customer was out.
CURRENT YEAR RESULTS
Description of Measuring Actual Actual Actual Actual Measure Target Indicator measure unit 2011/12 2010/11 2010/11 2009/10 Availability of Minutes per 582 min 682.2 min 699 min 699 min 583.8 min SAIDI supply index annum (9.70hrs) (11.37hrs) (11.65hrs) (11.65hrs) (9.73hrs) Number of Reliability of supply SAIFI interruptions 0.034 3.08 0.04 0.04 0.04 index per annum Availability of Minutes per CAIDI 256 368.67 366.44 366.44 258.58 supply index annum Number of interruptions Reliability of supply CAIFI per 1.07 0.08 1.12 1.12 1.09 index customer per annum
Going forward these are the KPIs that City Power will use to measure its network performance as illustrated in table below
Measure Description Measuring 2011/12 2012/13 2013/14 2014/15 20015/16 Indicator of measure unit Actual Plan Plan Plan Plan
Availability of Minutes per 682.2min 702 min 1137 min 1037 937 SAIDI supply index annum (11.37hrs) (11.7hrs) (18.95 hrs) (17.28 hrs) (15.62 hrs)
Number of Reliability of SAIFI interruptions 3.08 3.08 4.78 4.68 4.58 supply index per annum Availability of Minutes per CAIDI 368.67 368 279.7 221.58 204.59 supply index annum Number of Reliability of interruptions CAIFI 0.08 1.12 5.65 4.65 3.65 supply index per customer per annum
City Power has entered into a partnership with Singapore Power which resulted in the purchase of innovative test equipment that is designed to assess the condition of the CoJ‟s electrical network. This will enable City Power to detect a fault on the equipment and rectify the fault before it results in an electrical failure. This will in turn improve the reliability and quality of electricity supply and limit the number of forced outages and downtime due to the occurrence of faults.
Board Approved Page 36
City Power Business Plan (2013 - 2016)
Revenue War Plan
REVENUE COLLECTION PLAN
BACKGROUND
The primary responsibility of the City is to deliver services through infrastructure development and efficient and effective management of resources and operations. To execute this responsibility the City must be financially sustainable and have adequate financial resources to fund infrastructure development and operations.
It is to be noted that the strategy encompasses short term interventions over the next 12 months. The focus will be to collect the target cash in order to meet the budget requirements of City Power and the City of Joburg.
ACTUAL PERFOMANCE
Budget figures will be adjusted monthly with the actual billing figures
Month Revenue Budget 95% Budget Target July 1 271 447.81 1 207 875.02 August 914 660.89 868 927.00 September 1 513 714.45 1 438 028.73 October 1 111 317.57 1 055 751.69 November 1 030 298.06 978 783.16 December 1 012 743.83 962 106.64 January 997 890.26 947 995.75 February 972 234.08 923 622.38 March 1 001 941.23 951 844.17 April 1 050 552.94 998 025.29 May 1 070 807.81 1 017 267.42 June 1 205 840.33 1 145 548.31 13 153 449.26 12 495 775.56 Table 2.1 Budget Collection vs. Actual Collection
Challenges effecting collection:
• City Power LPU AMR readings at an average read rate of 65% for June 2013, the customers are complaining of under billing due to a lack of meter down loads. • Affordability of arrangements The current economic situation has led to customers being unable to afford the 50% down payment required when making arrangements. This affects the lower recovery from disconnection values used in the target Incorrect customer data impacts on the disconnection process
Board Approved Page 37
City Power Business Plan (2013 - 2016)
RISKS
• The credit control process intervention is done manually and thus there may be an error rate in the process despite all efforts to validate for queries and unusually long estimations. • The interventions are going to cause a very high number of disconnections. Historically the pre-termination process when followed by a disconnection indicated a 95% reduction from the number of accounts starting the process. The result is out of 100 accounts, only 5 were disconnected. The current intervention will see that increase to over 50%. There will therefore be a lot of customer dissatisfaction reaction to this drive. • The interventions will require a lot of emphasis on the arrears debt, and the success will depend on how quickly any resultant queries are then resolved. • Inability to validate if cut offs were executed
MITIGATIONS
• The time from issue of the pre-termination to the date of disconnection is 14 days, and this will allow customers to come forth to deal with any query which may be raised. • Communication to customers • An increased overtime effort will be made on queries which result from this process. • Roll out of smart meters to effect cut offs remotely
PLAN TO REDUCE UNACCOUNTABLE ELECTRICITY LOSSES
Electricity Distribution Losses
Technical losses Technical losses describe energy losses in the network encountered through the transmission cables and transformer, due to network design and materials of construction. In essence, technical losses result from differences in voltages and longer feeder lines from substation or transformer, to the consumption end-point at the customer‟s premises.
Non-technical Losses Non-Technical losses define lost or uncollected revenues relating to the inadequate customer billing and poor management of metering operations in the distribution network. As a result, non-technical losses may be considered to be revenue losses due to the theft of electricity and inability to measure customer energy consumption accurately for billing. The following are common factors that contribute to non-technical losses:
Illegal Connections: Energy theft such as in non-proclaimed/ informal settlement, own-connections before the meter or tampering with the meter to bypass readings dials. Illegal connections are compounded by the inherited challenge from Eskom of poor customer addresses and meter locations managed. This challenge also created a scenario where “ghost” prepaid vending became possible.
Board Approved Page 38
City Power Business Plan (2013 - 2016)
Bypassed Meters: Emergency calls out after hours, often result in power restorations where a customer‟s meter is bypassed and the necessary meter change- out does not happen. This is caused by lack of job card data which electricians do not close, in order to enable metering operation to replace the bypassed meter. Meter Tampering: Meter tampering is often a problem with prepaid customers that do not have split meters. Customers on AMR meters are also known to tamper with the communications modules by stealing sim cards, or removing fuses on meters. The result is an online meter that can be detected, but does not transmit customers‟ consumption data, due to communication failure. Poor management of meter installations and maintenance: Meter installations and trouble-shooting conducted by poorly skilled technicians often results in situations where a meter detected as online, but the necessary configurations, especially for AMR and Prepaid are not which leads to failure in communication to transmit meter data, or failure in vending. Poor maintenance of customer data (Addresses, account Number, etc.): Lack of customer data quality management and associated system updates leads to various challenges as follows: o Un-located addresses for manual read meters: Inability to respond swiftly to detected energy theft, and inability to fast-track maintenance of meter change out for customers who logged queries o Poor data capturing of meter readings: Meter readers often capture data that throws exception during the validation phase. Some of these errors are not resolve within the meter reading window and therefore impact on accurate billing of customers. Meter readers must face penalties for poor data capturing. o Inaccurate billing of customers: Inaccurate billing tends to promote the culture of non-payment with disgruntled customers. Inefficient management of meters or not fulfilling work orders often leads to customers been billed on estimates rather than actual consumption. There are cases where customers on prepaid are still billed and invoiced for some time after they have been converted to prepay. Inaccurate billing is a major contributor for customers having negative sentiments about the organisation. o “Ghost” prepaid vending: Ghost vending is a resultant of poor metering asset management and customer or meter location data management. Meter are not properly tagged and linked to the vending systems. Rightfully, a customer should be able to purchase prepaid token for particular meters, so that zero-consuming meter can be .detected more effectively Corruption and fraud on the side of utility or distributer’s employees: A number of City Power employees and electricians have been in the past found to be guilty of illegally connecting customers, where employees have willfully swopped registered meters for unregistered ones. Proper processes and controls must be introduced that dictate meter handling and issues at stores
Board Approved Page 39
City Power Business Plan (2013 - 2016)
Integrated Loss Management Approach
In order to predictably deliver outcomes that yield effective results City Power has undertaken an approach that, in a re-iterative manner, allows the organisation to quantify and resolve losses through the various initiatives it has underway. The diagram below demonstrates the four-stage integrated loss management approach to leverage the strengths of existing initiatives on losses and introduce additional capabilities where required
Review and Evaluate existing interventions on losses
The business has conducted a review of the distribution losses through a series of initiatives as described below:
Distribution Losses Data Analysis
An Energy Balancing study to confirm the indicative values on losses has been completed. The main purpose of the study was to compute a viable electricity tariff for City Power‟s tariff submission to NERSA. In conducting the energy balancing a determination of the quantum of total losses was also established. The outcome of the energy balancing study is provided below for 2010/11 FY:
Board Approved Page 40
City Power Business Plan (2013 - 2016)
Key Customer Engagement
City Power is engaging key customers to achieve a number of outcomes to achieve the following objectives: To collect baseline customer data, to validate initial statistics on losses by area and develop loss control targets based on geographical spread on the network and key customer impact To re-establish relationships with the larger, high consumption key customer who contribute a large and significant component of the City Power revenue-base The expectation is that the target of the customer engagement effort must be the top 100 customers, who through their intervention and co-operation in reporting the advent of losses in areas close to their location can assist City Power to attend to these timely whether it is in the form of theft, meter tampering or even anomalies in metering and/or billing.
Loss Determination City Power has undertaken efforts to determine the source and size of losses within the business. These have the collective objective to ensure that the business has ability to conduct sound metering from purchasing points, across the distribution network and customer delivery points. The projects are at different stages of implementation and the table below provides a summarised of each one:
Board Approved Page 41
City Power Business Plan (2013 - 2016)
Initiative Status Key Outcomes Priority Metering Data In Progress Metering data collection and audit of High Audit Expected metered stands completion Meter status information (type, condition date and connection status) December Reconciliation of meter data against 2013 customer data on billing and prepaid systems Check Meter In planning Installation of forty-three (43) meters at High implementation phase bulk intake points from Eskom and Kelvin Power stations Statistical In planning Ability to measure losses at levels that Medium Metering phase can be ring fenced for targeted Implementation interventions February, 2013 Completed An assessment of technical losses Low Technical Losses completed every three to five years Study
Execute Loss Reduction Programme
In the previous sections the various initiatives that must be completed to assist in ascertaining and managing total losses have been outlined. An integrated loss management approach however requires an integrated focus with an enterprise wide view of all initiatives.
This allows for proper sequencing, management of dependencies and resolution of various issues that may permeate the different projects. For this to happen effectively, City Power recognises that a detailed set of plans must be a precursor to project execution. At this point the business is working on finalising these and will be categorising the various interventions along three time horizons as described below: Short-term planning horizon (6 to 12 months’ time) o To achieve full capability in the metering of bulk electricity purchases and power distributed across different parts of the network
Medium-term Planning Horizon (24 to 36 months’ time) o To develop capability in the AMI and supporting application systems such as MDMS o To achieve capacity to resolve prepaid metering fraud through advanced meter technology and protective structures Long-term (48 to 60 months and beyond) o To implement and deploy a network infrastructure upgrade to reduce technical losses.
Key Interventions
Stats- Metering Capability- Create Ability to monitor losses per feeder from substations Board Approved Page 42
City Power Business Plan (2013 - 2016)
City Power has managed losses using data received from billing and the prepaid systems. However, this data doesn‟t identify the root cause or location of losses. There was a need to identify the root cause of the losses per area so that we could target our reduction strategy to the specific cause of the loss. Therefore, the reason behind installation of statistical meters at strategic points are to measure inflow of electricity to an area. This information will assist in identifying areas with losses and zoom into the specifics thereof.
City Power will be installing statistical meters across its distribution network to measure inflow of electricity to areas. Information received from statistical meters will be compared to data from billing and prepaid sales. There is dependence on regular and accurate sales or unit reports being made available from R & CRM for the exercise to be successful.
Implement Smart Metering- Installation of smart meters for domestic consuming above 1000 kWh a month and large customers
Current meters do not have bidirectional communication to report tampering or bypassing of the meter, therefore the reaction to deal with these matters is delayed by a month or so which contribute to losses. The installation of smart meters will enable City Power to identify tampering and/or bypassing immediately as it happens and it can be attended to immediately or the next day. Installing smart meters will allow City Power to conduct load management, offer customers tariff flexibility such as Time-of use (TOU) tariff options and also offer customers the choice to be either on prepaid or post pay without changing the meter. In addition City Power will achieve full compliance with the Electricity Regulation 773 of 2008 which requires all electricity distributors to install smart systems for all customers that consume in excess of 1000 kWh per month.
Implementation of the Remote Access Terminals (RAT) Implementation
City Power has more than 200 000 split and non-spilt prepaid meters installed. These meters are easily tampered with, therefore increasing the losses. Installation of RAT system will assist in identifying customers with consumption but without loading or buying electricity units, this will further direct where the audits should be happening.
Protective structures are steel structures that are used to host meters and control access to the meters. These structures are used to proactively deter customers from bypassing or tampering with meters.
Implement the Mass Prepaid Metering: Secure Prepaid Metering installations of bi- directional split prepaid meters with protective structures
In the areas where customers do not use more than 1000 kWh a month, split prepaid meters will be installed with protective structures as a deterrent to tampering and bypassing. There will be a response team that will be established to monitor and timely respond to the issues related to meter tampering events, interference with protective structures and general incidents of electricity theft and fraud.
Board Approved Page 43
City Power Business Plan (2013 - 2016)
Complete the on-going LPU AMR Conversion
Industrial and Commercial customers contributes more than 60% of City Power‟s revenue. It is therefore necessary to put more focus on them to ensure completeness of billing, accurate metering and timely meter reading.
There are currently 14 000 industrial and commercial customers, of which only 8000 are on AMR. With a view of metering accurately and timely meter reading the remaining 6000 customers will also be converted to the AMR system.
Progress on interventions
Initiative Status Comments Metering Data Audit In Progress The programme is expected to be completed in December 2013 Check Meter In Planning stage Installation is expected to commence in implementation April 2013 as contract with the supplier is being finalised. Statistical Metering In Planning stage Installation is expected to commence in Implementation April 2013 as contract with the supplier is being finalised. Installation of smart In planning stage Expected to start after the engagement meters for customers with the suppliers consuming average of above 1000 kWh a month Installation of Remote In progress 6 RATS are installed and 586 meters Access Terminal system are visible on the system. (RATS) and protective structures Conversion of LPU to AMR In planning stage Expected to start after the engagement with the suppliers
Board Approved Page 44
City Power Business Plan (2013 - 2016)
SECTION 5: HUMAN CAPITAL PLAN
Management and Organisational Structures
Board of Directors
City Power has a unitary board, which consists of one Executive Director and six Non- Executive Directors. The Board is chaired by a Non-Executive Director: Rev. Frank Chikane. The Board meets regularly, at least quarterly, and retains full control over the Company. The Board is accountable to the City of Johannesburg Metropolitan Municipality (the Company‟s sole shareholder) and its stakeholders, the Citizens of Johannesburg. A Service Delivery Agreement (SDA), concluded in accordance with the provisions of the (Municipal Systems Act) (MSA) governs the Company‟s relationship with the City of Johannesburg. The Board provides monthly, quarterly, bi-annual and annual reports on its performance and service delivery to its parent municipality as prescribed in the SDA, the MFMA and the MSA. Such reports are submitted within the stipulated timeframes.
The Non-Executive Directors contribute an independent view to matters under consideration and add to the depth of experience of the Board. The roles of Chairperson and Managing Director of the Company are separated, with responsibilities divided between them. The Chairperson has no executive functions. Members of the Board have unlimited access to the Company Secretary, who acts as an advisor to the Board and its Committees on matters including compliance with company rules and procedures, statutory regulations and best corporate practices.
The Board, or any of its Members, may, in appropriate circumstances and at the expense of the Company, obtain the advice of independent professionals. A Board evaluation is undertaken on an annual basis by the Shareholder. The Articles of Association provide that the Directors of the Company will be elected by the Shareholder and appointed by the Board of Directors. The Board membership of the Directors is reviewed at the Annual General Meeting of the Company. The Managing Director is appointed by the Board.
Board Members
The Board currently consists of six Non-Executive Directors and one Executive Director who is the Managing Director as indicated in the table below:
TABLE BOARD MEMBERS
Member Portfolio 1 Rev. F Chikane Chairperson of the Board 2 Mr N Galawe Non-Executive Director 3 Ms Z Hlatshwayo Non-Executive Director 4 Mr N Hlubi Non-Executive Director 5 Ms N Mohlala Non-Executive Director 6 Mr T Sithole Non-Executive Director 7 Mr S Xulu Executive Director (MD) Executive Directors are regarded as contract employees in terms of the Company‟s conditions of service.
Board Approved Page 45
City Power Business Plan (2013 - 2016)
Board Sub-Committees
The following Committees have been formed, each of which is chaired by a Non-Executive Director: Audit Committee Human Resources Committee Risk, Assurance & Compliance Committee Quarterly Review Committee Social and Ethics Committee a. Audit Committee The role of the Audit Committee is to assist the Board by performing an objective and independent review of the functioning of the Company‟s finance and accounting control mechanisms. It exercises its functions through close liaison and communication with senior Management and the internal and external Auditors. The Audit Committee operates in accordance with a written charter authorised by the Board, and provides assistance to the Board with regards to: Ensuring compliance with applicable legislation and the requirements of regulatory authorities; Matters relating to financial accounting, accounting policies, reporting and disclosures; Matters relating to risk management; Internal and external audit policy; Activities, scope, adequacy and effectiveness of the internal audit function and audit plans; Reviewing and recommending the approval of external audit plans, findings, reports and fees; Compliance with the Code of Corporate Practices and Conduct; and Compliance with the Code of Ethics. Recommend approval of the GRAP Demand Plan Recommend and provide input into the multi-year Business Plan b. Human Resources Committee The Human Resources Committee advises the Board on remuneration policies, remuneration packages and other terms of employment for all Directors and senior Management. Its specific terms of reference also include recommendations to the Board on matters relating to general staff policy, remuneration, performance bonuses, executive remuneration, Director Remuneration and fees and service contracts, performance compact, and compliance with relevant legislation and strategic alignment with the objectives of the Company. c. Risk, Assurance & Compliance Committee The Risk, Assurance & Compliance Committee assist the Board in fulfilling their responsibility of ensuring that there is an effective and embedded risk management process in place throughout the Company. The Committee‟s specific terms of reference also include recommendations to the Board on matters relating to internal control systems in compliance with the provisions of, inter alia, Sections 95 to 99 of the MFMA, the effectiveness of the system for monitoring compliance with laws and regulations and the results of Management's investigation and follow-up (including disciplinary action) of any instances of non-compliance with the MFMA, the annual Division of Revenue Act and any other applicable legislation.
Board Approved Page 46
City Power Business Plan (2013 - 2016)
The Committee‟s responsibilities relating to regulatory compliance are to monitor compliance of quality of supply in terms of NRS 048 and quality of service in terms of NRS 047, oversee and monitor any other licence and/or reporting requirements of NERSA.
The Committee further advises the Board and assists the Board in discharging its responsibilities for information technology (IT) governance.
The Committee maintains oversight over the implementation of the Company‟s Supply Chain Management Policy in terms of the Local Government: Municipal Finance Management Act (56/2003): Municipal Supply Chain Management Regulations (Gazette no. 27636/ 30 May 2005), Section 6(a).
In addition to the above the Board has delegated the Committee to: Monitor any sourcing strategy for Acquisition Management for all items over R10 million. Monitor any spend planned outside of the approved Business Plan/Demand Plan. Monitor implementation and progress of spend against the approved budget and Business/Demand plan. Monitor deviations and exceptions from supply chain policy and procedures. Monitor all emergency procurements.
The Committee ensures that the Company has a Fraud Prevention Policy which outlines the Company’s focus and commitment to the reduction and possible eradication of incidences of fraud and misconduct. It also confirms the Institution’s commitment to legal and regulatory compliance.
The Committee also ensures, on behalf of the Board, that the Company has an enterprise content management policy with data management controls, and advise on policies and procedures for enterprise data sharing and management. The Committee ensures that data, information and intellectual property are protected and managed effectively to ensure their confidentiality, integrity and availability, and that Management has taken steps to protect such data. d. Quarterly Review Committee The main role of the Committee is to monitor and assess the achievement of the Key Performance Areas as set out in the Company Compact, including any special projects relevant to the performance of the Company on a quarterly basis. The Committee also ensure that information is appropriately and effectively shared between the various Committees of the Board and align reporting and integration of internal and external reporting requirements. e. Social and Ethics Committee The Social and Ethics Committee was formed pursuant to the new Companies Act (no. 71 of 2008) and its regulations which require that all state-owned companies must have a Social and Ethics Committee. The Social and Ethics Committee advises the Board on the institutionalisation of ethics in the internal structures, systems and processes of the company. The Social and Ethics Committee ensures that there is strong emphasis on the responsibility of the Company towards the communities in which the company operates, social transformation within the workplace, and the protection of the safety, health and dignity of employees.
Board Approved Page 47
City Power Business Plan (2013 - 2016)
The mandate of the Social and Ethics Committee, as per the regulations that accompany the Companies Act, is threefold: the Committee has to monitor whether the Company complies with relevant social, ethical and legal requirements and best practice codes; the Committee has to bring to the attention of the Board any relevant matters within the scope of its mandate; and the Committee has to report to shareholders on matters that fall within the scope of its mandate.
Section 43(5) of the Regulations of the Companies Act set out the areas of social responsibility and standards against which the Committee should measure the Company against. The areas of responsibility and relevant standards are listed explicitly as: Social and economic development (relevant standards: United Nations Global Compact; OECD recommendations on corruption; Employment Equity Act; Broad- based Black Economic Empowerment Act). Good corporate citizenship (including promotion of equality, prevention of unfair discrimination, reduction of corruption; contribution to community development; sponsorship, donations and charitable giving; environment, health and public safety). Impact of the company's activities, products or services on communities. Consumer relationships (including advertising; public relations; compliance with consumer protection laws). Labour and employment (including employment relationships; contributions towards the educational development of employees. Relevant standards: International Labour Organization Protocol on decent work and working conditions).
City Power High Level Organisational Structure
Below is the City Power high level structure:
Board Approved Page 48
City Power Business Plan (2013 - 2016)
HR Overview
HR Overview Actual 09/10 Actual 10/11 Actual 11/12 Number of employees 1697 1670 1642 Affirmative Action – Employment Equity 73.98% 88.38% 1642 (Supervisory and above) Affirmative Action – Gender Equity (All 18.85% 20.42% 22.72% levels) People with disabilities 0.00% 2.88% 2.92%
Staff Establishment
STAFF ESTIMATES
ESTABLISHMENT Approved 10/11 - DESIGNATION Vacancies Plan Variance Number of positions 10/11 11/12 11/12 on organogram Managing Director 1 1 1 0 Directors 5 1 5 0 General Managers / Senior Managers 28 4 28 0 Specialists / Managers / Professionals 444 195 444 0 Skilled Technical / Supervisors / Technicians 270 32 270 0 Artisans (All types) 473 132 473 0 Administrative 294 128 294 0 Semi-skilled 2004 1367 2004 0 Elementary positions 0 0 65** 65 TOTAL (Permanent and Contract) 3519 1860 1724 65 ** 65 Positions were planned for and advertised after 30/6/2011
Human Capital Expenditure
STAFF EXPENDITURE
Total Staff Expenditure Salaries and Wages Actual 08/09 Actual 09/10 Actual 10/11 Actual 11/12 Projected Percentage Growth / Decrease 536,864,358 625,016,771 649,538,360 696,754,000 6,78% TOTAL 536,864,358 625,016,771 649,538,360 696,754,000 6,78%
EXPENDITURE ON CONTRACTED SERVICES
Contracted Services (Consultancy Services) Services Rendered Actual Actual Actual Actual Projected 08/09 09/10 10/11 11/12 Percentage Growth / Decrease 200,805,854 553,146,624 554,307,796 500,876,794 (10.67%) TOTAL 200,805,854 553,146,624 554,307,796 500,876,794 (10.67%)
Board Approved Page 49
City Power Business Plan (2013 - 2016)
STAFF EXPENDITURE VS. OPERATIONAL EXPENDITURE
Ratio of Staff to Operating Expenditure Actual 08/09 Actual 09/10 Actual 10/11 Actual 11/12 Projected Percentage Growth / Decrease Staff Expenditure 536,864,358 625,016,771 649,538,360 696,754,000 6,78% Operating 1,668,251,75 765,925,549 850,691,113 955,919,000 11,01% Expenditure 8 Ratio 32,18% 81,60% 76,35% 72,89%
Employment Equity
EMPLOYMENT EQUITY - ACTUAL 2011/12
Male Male Female Female Categories TOTAL A C I W Total A C I W Total Top Management (Executives) 1 0 0 1 2 1 0 0 0 1 3 Senior Management 12 1 2 4 19 3 0 0 1 4 23 Professionally qualified and experienced specialists and 117 6 5 68 196 99 1 1 8 109 305 mid-management Managers and Professionals Skilled technical and academically qualified workers, 80 19 4 29 132 24 2 0 5 31 163 junior management, supervisors and Technicians Artisans (All types) 230 16 3 73 322 16 1 0 0 17 339 Administrative 39 3 0 5 47 86 6 3 27 122 169 Semi-skilled and discretionary 520 9 0 5 534 38 2 0 1 41 575 decision making Elementary positions 17 0 0 0 17 46 2 0 0 48 65 Total (Permanent and 1,016 54 14 185 1,269 313 14 4 42 373 1,642 Contract)
Staff Turnover / Movement during previous financial year
STAFF TURNOVER – ACTUAL 11/12
African Coloured Indian White Staff Movement TOTAL Male Female Male Female Male Female Male Female Recruitment* 17 46 0 2 0 0 0 0 65 Appointments** 0 0 0 0 0 0 0 0 0 Promotion*** 1 1 0 0 0 0 0 0 2 Transfer 0 0 0 0 0 0 0 0 0 Resignation 4 0 0 0 0 0 0 0 4 Early Retirement 0 0 0 0 0 0 0 0 0 Retirement 8 0 0 0 0 0 2 0 10 Retrenchment 0 0 0 0 0 0 0 0 0 Medical Boarding 0 0 0 0 0 0 0 0 0 Dismissal 0 0 0 0 0 0 0 0 0 Demotion 0 0 0 0 0 0 0 0 0 Deceased 2 1 1 0 0 0 0 0 4 Contract Expiring 2 1 0 0 0 0 0 0 3 34 49 1 2 0 0 2 0 881
1 Explanatory Notes : Recruitment * – This refers to external appointments based on external advertisements Appointments ** – This refers to the absorption of bursars, learners, apprentices, technicians / engineers-in-training into our organisational structure, based on written motivations approved by the Managing Director Promotion *** – This refers to internal appointments based on internal circulars
Board Approved Page 50
City Power Business Plan (2013 - 2016)
SECTION 6: FINANCIAL PLAN
Tariff Plan
City Power‟s tariff proposal for 2013/14 Financial year was based on a drive to rationalise tariffs over a three year window. This rationalisation was necessitated by a number of issues that needed to be addressed if City Power tariffs are to be in line with the rest of the industry and regulatory benchmarks. City Power intended to implement the restructuring of tariffs over a three year period.
City Power applied for a 7% tariff increase to NERSA. Embedded in this application were a number of structural changes intended to address the following: IBT implementation for the prepaid customer category Minimisation of cross-subsidisation across customer categories Implementing a steeper sloped curve for escalating prices for energy / block consumption The alignment of the Time Of Use tariffs to Demand tariffs
While NERSA‟s approval allowed a 7% revenue increase, most of the structural changes as proposed by City Power were not approved, except for the proposed prepaid IBT implementation. Since there was no difference in estimated revenue increase between the application and the final approval by NERSA, and it became clear that NERSA did not appreciate the full tariff rationalisation strategy, City Power decided to recommend to the City that the NERSA approved tariffs be accepted for the 2013/14 financial year. However, City Power remains committed to implement the tariff rationalisation strategy over the remaining two years of the three-year window, and that a much more intensive engagement with NERSA would be followed to convince them of the merits of the proposed tariff restructuring.
The engagement with NERSA during the 2013/14 financial year will be around the following key considerations and principles: Compliance to regulatory and industry benchmarks Normalisation of cross-subsidisation Introduction of new tariffs for: o Renewable and alternative energy technologies o Resellers o Non-profit organisations Simplifying City Power tariff structure Revision of Time of Use tariffs to become competitive with other Metro distributors
Below are a number of detailed fundamental principles that will have a bearing on our future tariff proposals.
NERSA guidelines
City Power has to comply with the MFMA regulations and satisfy the requirements from the City of Johannesburg (COJ). One of the important milestones to pass is compliance to the NERSA proposed regulation. Every year NERSA provides a guideline for general tariff increases by municipalities and distributors, as well as updates to a standard set of
Board Approved Page 51
City Power Business Plan (2013 - 2016) benchmarks which are meant to guide the tariff structure development of licensees. The benchmarks recently proposed by NERSA are the following: Bulk purchase energy costs as percentage of total costs: 58% - 78% (expected mean of 70%) Surplus as percentage of electricity sales: 10% - 20% (expected mean of 15%) Total system losses: 5% - 12% (expected mean of 10%) Average sales price ratio to average purchase price: 1.5 – 2.1 (expected mean of 1.64) Cross-subsidisation between commercial and domestic consumers: 1.2 Cross-subsidisation between industrial and domestic consumers: 1.25 Time of Use tariff as percentage of the Eskom Megaflex price: 120%
It is generally accepted that tariffs should reflect costs as far as possible and that cross- subsidisation of domestic consumers by commercial and industrial customers would be preferred. NERSA expects municipalities to conduct cost of sales studies, and if this cannot be done, NERSA intend to benchmark their tariffs with Eskom tariffs.
Bulk Purchases
The cost of bulk purchases from Eskom and Kelvin essentially consists of an energy charge, a demand charge and a variety of service charges and levies. These can be classified broadly as variable (energy) and fixed (service, levies) and hybrid (demand) costs. For the purpose of this review, the demand charges are, however, taken as “fixed” over the short term. This is based on the assumption that load factors and notified maximum demands are not extremely volatile but rather stagnant.
In order to balance the demand and supply of electricity in City Power, the fixed/variable cost ratio of sales will be compared to that of bulk purchases. The basic assessment for the fixed/variable ratio in bulk purchases was estimated at 26/74 for the 2012/13 financial year. This ratio is not expected to vary significantly in future.
NERSA has indicated in the latest consultation paper that municipalities that have customers with high demand charges are encouraged to shift a portion of the demand cost recovery from the demand charge to the energy charge.
COJ Tariff Policy
The COJ has a policy for tariff setting by utility distributors. The principles for electricity tariff setting are captured in the following summary: Social norms o Tariffs should be equitable and affordable; o Tariffs must allow provision of basic services to everyone; o Tariffs must provide for transparent cross-subsidisation of poor households where necessary and feasible; o The tariff structure and levying process should be simple and easy to implement. Economic norms o Tariffs should encourage local economic development in line with the GDS of the COJ; o Tariffs should have a positive influence on economic input factor costs for industrial and commercial firms;
Board Approved Page 52
City Power Business Plan (2013 - 2016)
o Tariff setting should be aligned with economic policies of the country. Financial norms o Whenever feasible the tariffs should be cost reflective and cost effectively link into the COJ financial framework; o Tariffs should be linked to unit costing and efficiency improvements; o Tariffs should promote sustainability and extension of service provision.
Current Tariff Structure The current tariff structure consists of the following categories: a) Domestic tariffs Lifeline Prepaid (5 inclining blocks) Post-paid (single-phase seasonal and non-seasonal, 5 inclining blocks) Post-paid (three-phase seasonal and non-seasonal, 5 inclining blocks) b) Agricultural tariffs ≤ 50 kVA maximum demand 50 kVA maximum demand c) Business tariffs All business facilities consuming ≤ 100 kVA (5 inclining blocks) d) Demand tariffs All business facilities consuming > 100 kVA (5 inclining blocks) e) Large power user tariffs Low voltage (400V) Medium voltage (3,3-11 kV) f) Time Of Use tariffs Customers with installed capacity exceeding 500 kVA
Tariffs normally consist of three types of charge, i.e. Energy – reflecting direct consumption of electricity Service – reflecting cost of access to the grid Demand – reflecting network transmission costs
All categories are subject to an energy charge. All consumption categories, except prepaid and lifeline, are subject to a service charge. Only large power users are subject to demand charges.
Current Process for Tariff Structuring
The tariff structuring process needs to contain the following major activities and milestones: Analyse the NERSA guidelines for the average tariff escalation rate for the next term; Consider the revenue requirements for the next term; Confirm the socio-economic goals to be achieved through the tariff structure; Consider national legislation; Consider the requirements of the COJ growth and development strategy; Consider local economic development requirements; Determine and evaluate escalations per user category and charge type; Clarify distribution of tariff increases across the various user categories and the implication of adjustments to the tariff structure; Submit the proposed new tariff structure to the COJ Council and NERSA for approval – this may be done in more than one round. Board Approved Page 53
City Power Business Plan (2013 - 2016)
Current Market Segmentation
The following table indicates the expected distribution of customers, typical consumption levels and the categorised contribution to overall electricity sales by City Power during 2012/13 and which is expected to remain the same for the 2013/14 financial year:
Tariff category Number of customers Typical consumption Contribution to turnover Lifeline 24 023 2.2% 1.4% Domestic – billed 154 327 28.8% 37.7% Domestic – prepaid 248 454 4.4% 3.9% Agricultural 31 <0.1% <0.1% Business 11 106 6.6% 9.6% Large power users 4 194 43.0% 43.3% Time-of-Use 19 5.0% 4.2% Total 442 155 11.4 TWh/a R12.4bn/a
From this it is evident that the domestic customers consume a higher portion of the total electricity delivered by City Power than their proportional contribution. This is to be expected since the business (commercial) and industrial customers cross-subsidise the domestic consumption according to the business principles. However, the TOU category indicates a similar case of cross-subsidisation. It is also noteworthy that the “business” category contributes most to turnover in ratio to their consumption levels.
Current Cross-Subsidisation Levels
The following table summarises the levels of cross-subsidisation that is evident in the current financial year (2013/14):
Tariff category Contribution (R/kWh) Contribution (Rm/a) Lifeline (0.439) (113) Domestic – billed (0.016) (143) Domestic – prepaid (0.188) (102) Agricultural 0.096 0.09 Business 0.552 395 Large power users 0.030 63 Time-of-Use (0.160) (100) Total 1.169 --
Positive values indicate a positive contribution towards subsidisation, while negative numbers indicate the receipt of subsidies. It is evident that “Business” contributes by far the most to subsidising the domestic and TOU market categories and that the TOU category receives in total more than the prepaid domestic category.
It should be noted that the above estimation of cross-subsidisation is based on a comparison between the average sales price per customer category and the overall average charge to the market in total, e.g. the domestic prepaid category is charged 18,8 c/kWh less than the overall average market price of 116,9 c/kWh. This reflection of cross-subsidisation is not ideal and should be seen as a proxy to the real values, which would be based on the cost of supply to each of the tariff categories. City Power will initiate a project during the 2013/14 financial year to determine reasonable estimates of the cost to supply each of the tariff categories, which will enable the proper estimation of cross-subsidisation. Meanwhile, the above proxy indicator will be used as the best estimate.
Board Approved Page 54
City Power Business Plan (2013 - 2016)
Design Principles for 2014/15 and Beyond
The following design principles have been compiled to direct the tariff setting required for the 2014/15 financial year. This would form the basis for the cycle of submissions to the COJ and NERSA during the first half of 2014. The following principles are considered: Determine reasonable estimates for cost of supply to each of the tariff categories; Determine TOU tariffs for industrial customers that would be competitive with Ekurhuleni and Tshwane; Cross-subsidy generation by industrial and commercial should be normalised – high- end consumers should generally contribute more per unit of consumption than low- end consumers; Cross-subsidy of domestic customers should be normalised – lower income categories should receive more than high-income consumers; Introduce telescopic inclining block tariffs for all domestic customer categories. While the prepaid category will not be subject to any fixed charges, the billed domestic customers will have to pay a nominal service charge. Smooth transitions between tariff blocks should eliminate the current experience of significant jumps in energy charges when customers move between consumption blocks; Assume load factors of LPU/TOU customers at 60%; The Megaflex differentials between high/low demand seasons, as well as peak, standard, off-peak categories are applied to all seasonal and TOU categories where applicable; Allow a price elasticity of demand impact for high-end consumers on stepped tariffs – it is assumed to be 5%; Allow reasonable targets for non-technical losses recovery.
Since current inconsistencies in fixed/variable ratios and cross-subsidisation between the broad categories cannot be changed at once (it will result in exorbitant changes to tariffs in certain categories) it is proposed that the tariff changes be introduced over a three year period.
Legal and Constitutional Implications
By virtue of Section 28 (6) of the Local Government: Municipal Finance Management Act, 2003 (Act 56 of 2003) (MFMA), once the new tariffs have been determined in respect of the 2014/15 financial year, it may not be further increased during that financial year, except when required in terms of a financial recovery plan as contemplated in the Act. It should be noted that any increases approved by Council, are subject to final approval by the National Energy Regulator of South Africa (NERSA).
Board Approved Page 55
City Power Business Plan (2013 - 2016)
Financial Plan
Background Section 87(4) and (5)(a),(b) and (c) of the Municipal Finance Management Act requires that the Board of Directors of a municipal entity must approve the budget for a municipal entity not later than 30days before the start of the financial year. It also states that the budget must be within the limits set by the entity‟s parent municipality including any limits on tariffs, revenue, expenditure and borrowing. The budget covered both the Operating and Capital budget for 2013/14 financial year.
The City of Johannesburg issues guidelines to all CoJ departments and MOEs on the process to be followed that is aligned with the requirements of MFMA. The guidelines or budget parameters were applied to the 2012/13 financial year‟s budget in order to develop the budget for the 2013/14 financial year‟s budget.
Income Statements
Revised Approved Approved Approved Details budget Revised Budget Variance Budget Budget Budget Budget 2012-2013 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Total Operating Income 13 762 477 13 629 411 (133 066) 14 488 605 15 737 317 17 136 553 18 285 550 Turnover 12 633 515 12 381 904 (251 611) 13 276 206 14 453 158 15 834 268 16 942 667 Sales to Eskom 458 711 687 129 228 418 568 000 550 294 578 244 613 714 Other Income 116 451 107 981 (8 470) 98 289 149 800 155 976 162 409 Grants & DSM 553 800 452 397 (101 403) 546 110 584 065 568 065 566 760 Cost of Sales (9 006 929) (8 616 342) 390 587 (9 608 990) (10 444 846) (11 240 174) (12 026 986) Gross margin 4 755 548 5 013 069 257 521 4 879 615 5 292 471 5 896 379 6 258 564 Gross margin % 31.81% 34.61% 31.08% 31.07% 32.16% 35.32%
Operating overheads (2 769 425) (2 937 534) (168 109) (2 683 838) (2 907 420) (3 152 097) (3 360 460) Employee Related Costs Salaries (773 680) (772 579) 1 101 (793 439) (830 909) (871 704) (914 585) Gen.exp - Other (868 483) (1 105 053) (236 570) (725 497) (797 709) (848 113) (874 015) Repairs and maintenance (405 966) (405 966) (0) (472 647) (520 553) (571 711) (625 820) Contribution bad debts (422 128) (435 000) (12 872) (433 782) (480 392) (553 979) (633 979) Depreciation and amortisation (299 168) (218 936) 80 232 (258 473) (277 857) (306 590) (312 061) Capital Expenditure
Operating Profit before interest and taxes 1 986 124 2 075 535 89 411 2 195 777 2 385 051 2 744 282 2 898 104 Operating Profit % 14.43% 15.23% -67.19% 15.16% 16.01% 15.85%
Net interest (257 750) (252 171) 5 580 (300 632) (320 495) (262 086) (113 939) Interest income/(Expense -ve) 82 140 79 989 (2 151) 47 297 118 262 190 580 250 276 Interest on COJ shareholder loans (-ve) (109 617) (109 617) - (109 617) (109 617) (109 617) (109 617) Interest on Capex loans (-ve) (278 531) (278 531) (0) (278 388) (353 898) (366 285) (275 544) Interest on outstanding Debtors 48 257 55 988 7 731 40 077 24 758 23 236 20 946
Add Back Prior year adjustments Profit before fair value adjustments 1 728 373 1 823 364 94 991 1 895 145 2 064 556 2 482 196 2 784 165 Net Fair Value Adj Profit before tax 1 728 373 1 823 364 (94 991) 1 895 145 2 064 556 2 482 196 2 784 165 Taxation (445 561) (428 890) (16 671) (530 641) (578 076) (695 015) (779 566) Grants & DSM (553 800) (453 112) (100 688) (546 110) (584 065) (568 065) (566 760) Attributable income 729 013 941 362 212 350 818 395 902 415 1 219 116 1 437 839
Board Approved Page 56
City Power Business Plan (2013 - 2016)
Attributable Income The profit for the year increased by R89,4 million from R729 million in 2012/13 financial year to R818,4 million in 2013/14 financial year and to arrive at that amount, the following income statement categories were affected as follows:
Turnover Turnover has increased by R643 million from R12,6 billion in the 2012/13 financial year to R13,3 billion in the 2013/14 financial year. The increase is driven mainly by the average tariff increase of 7,2% which is driven by the increases in the tariffs for Eskom of 7%, and Kelvin Power Station of 4,5%.
Management has embarked on the Revenue Step Change (Revenue Generation and Protection) project and program that will see losses coming down to acceptable levels from the 2013/14 financial year actual losses that stood at 17,21%.
Sales to Eskom Sales to Eskom increased by R109,3 million from R458,7 million to R568 million and the increase is based on the estimated output from Kelvin in 2013/14 financial year.
Other Income Other Income decreased by R18,2 million from R116,5 million to R98,3 million and this is due to decrease in other sources like test of meters, move in fees and cut off revenues.
Grants & DSM levy Grants & DSM have increased by R40,4 million from R553,8 million in the 2012/13 to R546,1million in the 2013/14 financial year. This is due to the decrease in grants expected from National Department of Energy and Urban Settlement Grant.
Direct cost Computation for the 2013/14 bulk purchases budget has been done as follows as per the table B below as follows:
Computation of 2013/14 bulk purchases budget
Description Revised 2013 - 2014 Budget 2012 – 2013 Budget Variance Variance % R’Millions 8 155 8 750 595 7.30% Eskom GWh 12 553 12 553 0 0.00% R c/kWh 0.65 0.70 0.05 7.69% R’Millions 822 859 37 4.50% Kelvin GWh 807 807 0 0.00% R c/kWh 1.02 1.06 0.04 3.92% R’Millions 8 976 9 609 633 7.05% Total GWh 13 360 13 360 0 0.00% R c/kWh 0.67 0.72 0.05 7.46%
The computation of the 2013/14 bulk purchases budget was based on the follows assumptions: The revised budget units for bulk purchases formed the basis of the calculation of the 2013/14 budget Eskom increase of 7.3%
Board Approved Page 57
City Power Business Plan (2013 - 2016)
Kelvin increase of 4,5% Units to be 13 360 GWh
The budget for bulk purchases has increased by R633 million from the revised budget R8,9 billion in 2012/13 to R9,6 billion in 2013/14 financial year. The increase is driven tariff increase from both Eskom and Kelvin which is 7,3% for Eskom and 4,5% for Kelvin, Both average to 7,46% increase. Budget amounts indicated herein include the R360 million for the capacity charge.
Operating Expenditure Operating expenditure budget for 2013/14 has increased by R85,6 million from the original budget of R2,8 billion in 2012/13 financial year to R2,7 billion in 2013/14 budget. The R85,6 million increase is due to movements on the following expenditure categories:
Salaries and Allowances Salaries and allowances budget for 2013/4 financial year has increased due to: Annual increase of 2,7% which amounts to R20,9 million
Repairs and maintenance Repairs and maintenance budget has increased by R81,7 million from the revised budget of R390,9 million in 2012/13 financial year to R472,6 million in 2013/14 financial year. The revised budget has been used as the base of the 2013/14 budget. The increase is due to the following: Annual increase of 8,3% amounting to R31,7 million Additional R50 million to cater for network growth as maintenance programmes for additional assets will be coming into effect
General expenses General expenses budget has decreased by R202,8 million from the original budget of R868,5 million to R 725,5 million in 2013/14 financial year. The increase is due to the following: R360 million which was accounted for as an operating lease has been added back to Direct cost Additional R157,2 million has been added to the budget for the following: 1% annual increase R100 million on stores and materials for Solar Water geysers which has been allowed for in the adjustment or revised budget. R55 million is additional cost allowed for in the 2012/13 adjustment or revised budget
Depreciation The budget for depreciation has decreased from R299,2 million in 2012/13 financial to R258,5 million in 2013/14 financial year and this is due to the revised useful lives of different classes of assets that has been extended. The revision of useful lives is as follows: Buildings from 50 years to 60 years Infrastructure assets from 30 years to 60 years Furniture and Office equipment from 6 years to 10 years.
Board Approved Page 58
City Power Business Plan (2013 - 2016)
Contribution to bad debts Provision for bad debts was increased to R433,9 million in 2013/14 from an approved of R422,1 in 2012/13 financial year and the increase was based on current level of debt, collection levels and trends from the previous two financial years.
Balance Sheet Details Budget Budget Budget Budget Budget Budget 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018 Assets
Non Current Assets
Employment of Capital Fixed assets (net book values) 7 985 218 9 281 780 11 626 988 14 065 184 16 151 043 16 451 587 Land and buildings 127 568 183 560 179 760 175 929 171 873 166 614 Plant & equipment 7 490 062 8 560 773 10 897 580 13 337 322 15 444 395 15 819 475 Motor vehicles Fixtures and fittings 1 127 19 079 13 864 8 422 2 610 347 Office equipment 24 802 30 095 26 705 21 231 12 348 3 191 Other fixed assets 341 660 488 273 509 079 522 279 519 818 461 960
Intangible Assets - Goodwill
Other non-Current Assets 67 954 137 041 111 215 85 388 59 562 33 735 Other Long Term Assets 67 954 137 041 111 215 85 388 59 562 33 735 Derivative financial assets Employee benefit investment
Current Assets 4 953 460 5 816 565 4 938 552 4 905 188 5 150 414 4 899 253 Debtors 5 084 298 6 849 374 7 315 662 7 826 507 8 410 228 9 257 035 Less :Provision for Bad Debts(-ve) (2 199 971) (3 831 188) (4 297 476) (4 808 321) (5 392 042) (6 238 849) Sundry Debtors 7 499 73 846 77 760 81 648 85 403 90 271 Stock / Projects in progress 74 733 78 694 82 865 87 008 91 010 96 198 Cash & equivalents 1 840 295 2 088 131 1 513 331 1 491 481 1 729 003 1 556 373 COJ 146 606 557 708 246 411 226 865 226 811 138 225
Total Employment of Capital 13 006 631 15 235 385 16 676 754 19 055 760 21 361 019 21 384 575
Equities and Liabilities
Capital and Reserves 5 781 908 7 542 215 9 028 693 10 815 873 11 815 293 11 914 616 Share Capital and Premium 112 466 112 466 112 466 112 466 112 466 112 466 NDR on corporatisation and revaluation Retained Income 5 669 442 7 429 749 8 916 227 10 703 407 11 702 827 11 802 150
Non-Current Liabilities 2 794 523 3 257 288 2 848 794 3 133 920 3 904 110 3 733 770 Mirror Conduit External Loans 0 0 0 0 0 Shareholders Loans 624 793 624 793 624 793 624 793 624 793 624 793 Other External Loans 2 052 523 1 516 894 2 069 279 2 285 635 2 667 162 2 690 900 Other parastatal and govt Loans Deravitive financial liabilities Deferred Income 0 0 0 0 0 0 Deferred Tax Liability 117 207 1 115 601 154 722 223 492 612 155 418 077 Employee Benefit Obligations Property Mortgage Bonds
Current Liabilities 4 430 200 4 435 882 4 799 268 5 105 966 5 641 616 5 736 188 Trade creditors 2 413 998 3 344 362 3 805 842 4 060 223 4 584 451 4 606 137 Accruals and provisions 148 267 158 446 169 062 179 544 191 034 201 923 Short term portion of long term liabilties 487 550 470 792 461 914 460 255 411 473 418 912 Consumer Deposits 279 448 323 616 362 450 405 944 454 657 509 216 Overdraft & other short term debt COJ Other UAC's of COJ 1 100 937 138 666 0 0 0 0 Other Current Liabilities
Total Equities and Liabilities 13 006 631 15 235 385 16 676 754 19 055 760 21 361 019 21 384 575
Board Approved Page 59
City Power Business Plan (2013 - 2016)
Cash flow Statement Details Budget Budget Budget Budget Budget Budget 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018
Profit Before Interest and Taxes 2 075 535 2 195 777 2 385 048 2 744 282 1 470 215 776 494 add: Depreciation and amortisations 218 936 258 473 277 857 306 590 334 181 425 283 Add loss on disposal of assets Add Exceptional items Less: Interest (paid)/ received (252 170) (300 631) (320 495) (262 086) (82 133) 32 552 Less: Taxes paid/fair Value Adjustments (376 780) (530 641) (578 075) (695 015) (388 663) (226 533)
Cash generated from operations 1 665 521 1 622 978 1 764 335 2 093 771 1 333 601 1 007 797
Increase/decrease in net current assets -649 780 772 891 666 599 318 213 527 945 329 859 Less : (Increase)-decrease in stock 71 4 039 (4 171) (4 143) (4 002) (5 188) ( Increase)-decrease in debtors (2 114 255) (3 184) (3 914) (3 888) (3 756) (4 868) (Increase)-decrease in other current assets 37 404 (41 134) 311 297 19 546 54 245 342 add: Increase-(decrease) in creditors 189 446 649 111 461 480 254 381 524 228 21 686 Increase- (decrease) in accruals and provisions 13 882 8 581 10 616 10 482 11 491 10 889 Increase-(decrease) in short term portion of LTL 84 035 0 -8 878 -1 659 -48 782 7 439 Increase-(decrease) in consumer deposits 38 701 37 805 38 834 43 494 48 713 54 559 Increase-(decrease) in other current liabilities 1 100 937 117 673 -138 666 0 0 0 Prior year adjustments Net cash generated / (absorbed) 1 015 741 2 395 869 2 430 934 2 411 984 1 861 546 1 337 656 from operations
Cash impact from investing activities (1 097 337) (1 658 485) (2 597 239) (2 718 960) (2 394 214) (1 200 771) Increase in intangible assets Acquisition / (realisation proceeds) of fixed assets (1 097 337) (1 658 485) (2 597 239) (2 718 960) (2 394 214) (1 200 771) Proceeds on disposal of Assets Cash impact from financing activities -339 921 -489 548 -408 495 285 127 770 190 -170 340 Increase -(decrease) in shareholder loans 0 0 0 0 0 0 Increase-(decrease) in long term liabilities () () Increase-(decrease) in Capex Loans -339 921 -489 548 552 384 216 357 381 527 23 738 Increase-(decrease) in Deferred Income 0 0 0 0 0 0 Increase in Deferred Tax 0 0 -960 879 68 770 388 663 -194 078
Net movement in cash position (421 516) 247 836 (574 800) (21 850) 237 522 (33 455)
Opening cash position 2 261 811 1 840 294 2 088 130 1 513 330 1 491 481 1 729 003
Closing net cash position 1 840 294 2 088 130 1 513 330 1 491 481 1 729 003 1 695 547
Board Approved Page 60
City Power Business Plan (2013 - 2016)
Capital Expenditure: Infrastructure & Service Delivery Capital Plan
Background
City Power is currently faced with the enormous task of addressing the following challenges: Reducing the average age of our transmission and distribution network where it is in excess of 40 years through refurbishment and replacement Obsolete and unreliable equipment for which we are no longer able to obtain spares Addressing and improving safety on the network i.e. replacement of high risk equipment A network that, due to densification, has in many areas exceeded its firm capacity and in some instances reached its installed capacity Reduction in outages and restoration times to restore power following outages Increased economic activity which will lead to increased demand on our networks Extending the transmission and distribution networks in support of new development, the electrification programme and projected 9% growth rate Dramatic increase in the cost of key resources i.e. labour and materials Meeting the Mayoral priorities i.e. Inner City, BRT Comply with the Cluster programs while trying to refurbish and extend our network Alignment with the City GDS Upgrading of the networks to ensure reliable supplies Increasing backlogs due to insufficient capital
Long Term Capital Budget Indicatives
12/13 13/14 14/15 15/16 16/17 17/18 Measure Unit Indicator Plan Plan Plan Plan Plan Plan
Network Assets R m 902,900 1,939,810 4,516,315 4,425,159 2,593,680 1,344,215
Other Assets R m 50 164,660 130,000 52,000 57,000 52,000
Total R m 952,900 2,104,470 4,646,315 4,477,915 2,650,680 1,396,215
5 Year Capital Requirements
City Power developed a 10 year rolling capital plan, the table below outlines the six (6) year requirements based on the projects identified from the ten year master plan.
Six (6) year capital requirements
Six (6) year Capital Plan Financial Year 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 R'000 RX1000 RX1000 RX1000 RX1000 RX1000 RX1000 Requirements 2,104,470 4,291,185 4,199,785 2,585,680 1,396,215 1,024,565
Board Approved Page 61
City Power Business Plan (2013 - 2016)
Funding Requirements 2013/14
Table below outlines the budget requirements for the 2013/14 financial based on the projects already committed and projects which are critical for sustainability of the company going forward. Contractually Funding requirements 2013/14 committed and Urgent Important Total Critical X R1000 X R1000 X R1000 X R1000 Buildings R60,000 R60,000 Bulk Infrastructure R538,500 R459,100 R196,800 R1,194,400 Bulk Infrastructure (Electrification) R163,000 R30,000 R193,000 Bulk Infrastructure (88 kV overhead lines) R100,000 R 5,000 R105,000 Demand Side Management R5,000 R103,400 R108,400 Electrification R93,120 R10,000 R103,120 Fire and Security R10,000 R10,000 Information Technology R43,000 R50,000 R93,000 Meters R635,000 R 20,000 R655,000 Network Development R32,000 R54,900 R86,900 Operating Capital R41,660 R41,660 Protection R31,399 R10,001 R41,400 Public Lighting R27,715 R5,000 R32,715 SCADA R10,000 R10,000 Service Connections R135,395 R29,300 R164,695 Support Services R5,000 R15,000 R20,000 Telecommunications R16,000 R13,300 R29,300 Township Reticulation R0,000 R30,000 R30,000 Training R10,000 R10,000 Upgrade Electrical Network R165,500 R170,550 R264,200 R600,250 Total R2,082,289 R714,550 R792,001 R 3,588,840
2013/14 Allocation of budget
The following table is the comparison of the total budget requirements for 2013/14 vs the proposed indicative budget allocation. If only the indicative budget is allocated, it must be noted that a further R 1,507 M backlog will be created which will put more pressure on the 2014/15 and future financial year‟s budget requirements and might result in some commitments not being honoured by City Power. The approved budget for 2013/14 is R 1,727,058.
2013/14 allocations
Description Budget (R'000) Total Requirements 3,588,840 Indicatives budget allocation 2,082,289 Deficit 1,506,551
Board Approved Page 62
City Power Business Plan (2013 - 2016)
CAPEX Fund Allocation
The table below shows the approved long term capital budget:
Programme 2013/14 2014/15 2015/16
Improved Network performance and quality of R 293 399 000 R 318 200 000 R 289 200 000 supply
Refurbishment of ageing R 90 450 000 R 202 500 000 R 207 500 000 infrastructure
Expansion and R 711 834 000 R 1 468 395 000 R 1 131 015 000 strengthening of network Demand Side Management R18 000 000 R 15 000 000 R 5 000 000 Revenue Step Change R 505 000 000 R 580 000 000 R 535 000 000 Programme
Improve Customer Centricity R 27 715 000 R 30 000 000 R 60 000 000 and People Development
Continuous Improvement of R 80 660 000 R 10 000 000 - the business Total R 1 727 058 000 R 2 624 095 000 R 2 227 715 000
The allocation of funding is largely driven and prioritised by the City‟s Capital Investment Management System (CIMS). This looks at Mayoral initiatives i.e. Inner City, Bus Rapid Transport (BRT), Gautrain, Social Projects etc. From a City Power perspective we also use the following criteria: Quality of Supply Safety Return on investment Interdependence
Increasing network availability – visible reduction in outages
Decrease in maintenance costs Social benefits of project Revenue generation Risk
CAPEX Allocation Impact
Major impact on projects not funded comes from the network and bulk infrastructure related projects which, in turn, impose a significant contribution towards service delivery. Therefore, there is no doubt that this reduction will have a significant impact on service delivery and, due to the nature of these projects, natural load growth and network deterioration.
Board Approved Page 63
City Power Business Plan (2013 - 2016)
The required investment will have to be made sooner or later. It is most likely that this reduction will put pressure on future capital budget allocations. The following are some of the areas which will see the negative impact in the near future: Impact in the reduction of unplanned outages Impact in the improvement of restoration times Provision of new service connections will be negatively impacted There will be an increase in OPEX (R&M) due to emergency repairs Stock Levels will be impacted negatively (most likely to be high) Township developments will slow down due to capacity constraints N-1 contingency will be violated, impacting negatively on network reliability Deferred budgets will place additional burden on future financial year budgets
Focus Areas when compiling the budget The construction / upgrading of substations to alleviate loading problems and the elimination of non-standard voltages Upgrade of all transmission and/or distribution equipment in order to alleviate the current overloading situations Upgrade all equipment where safety of personnel is jeopardised Upgrade / replace all un-maintainable cable networks Upgrade of protection systems with modern technology equipment The expansion of the SCADA system to make it possible to monitor / operate substations remotely Roll out of DSM / Load Management Upgrade metering to improve revenue collection.
Board Approved Page 64
City Power Business Plan (2013 - 2016)
Major Infrastructure Initiatives
Major Intake Points
Two new Eskom intake points are being planned to provide security of supply and to provide the capacity required to support development into the future.
These are major projects, and will take approximately four years each to complete. “Sebenza” will be situated in the North-East of Johannesburg adjacent to Kelvin Power Station and “Quattro” in the South West of Johannesburg in the vicinity of the old Orlando Power Station site.
The identification of funding for these two projects is now critical. The tender for Sebenza substation has been adjudicated and currently with Legal department. The estimated cost is approximately R 900 M over the four to five year construction period. This cost cannot be funded from the allocated budget only. External funds/grants will have to be sourced.
A site has been identified in conjunction with Eskom for Quattro intake station. The detail design of the station as well as the two 88 kV switchyards at Mondeor and Pennyville is being done at present. The tender will be advertised during the 2014/2015 financial year.
Eskom Upgrades
To support immediate and future capacity upgrades our load projections have been communicated to Eskom. Eskom have indicated that to provide the capacity required they will have to upgrade their transmission networks. Initial payments have been made to Eskom for some of these upgrades. Further upgrades have to be done especially in the South.
Eskom‟s transmission networks will also need to be extended to supply our planned 275/88kV intake points at both Quattro and Sebenza.
Sustainable Services cluster
Transport Orientated Development (TOD) program
There are significant funds required to provide electricity for the development of the TOD precincts. At this stage we cannot fund this from our normal capital budget allocation and alternative sources of funding will be required.
High level budgets are as follows: New substation for the Park station precinct R 100 M New substation for the Westgate precinct R 110 M
Board Approved Page 65
City Power Business Plan (2013 - 2016)
Project Status
This section highlights the status of payments for applications made to Eskom for the upgrade of their substation and backbone infrastructure in order to cater for additional backbone capacity requirements.
Project status
Eskom payments towards the Infrastructure upgrade for additional capacity Project Name Total(Budget quote) Amount Paid Outstanding Vorna Valley 7,619,439 7,619,439 0 Allandale 21,286,281 21,286,281 0 Lufhereng 24,319.667 25,000,000 680,333 Lehae and Trade Route 30,011,877 30,011,877 0 Vlei (Tshepisong) 11,613,822 11,613,822 0 Lutz 40,098,380 16,039,352 24,059,027 Klipfontein View 592 592 0 Total 134,950,058 111,571,363 23,378,695
Substations
Upgrade of Existing Substations
The upgrading of substations which commenced in previous financial years has been completed. Two new upgrading projects, Cydna and Observatory substations, commenced in 2012/2013 and will be completed in the course of 2013/2014.
The upgrading of a further three substations will commence in 2013/2014 and three in 2014/2015.
New Substations
The construction of five new substations will commence in 2013/2014 and will be completed in 2014/2015. Four new substations will commence in 2014/2015.
Board Approved Page 66
City Power Business Plan (2013 - 2016)
Project Status
The table below indicates the status of upgrade and new substation projects, aimed at addressing capacity constraints and refurbishment backlog as alluded to above. No. Substation Area to Benefit Progress Birdhaven, Melrose, Oaklands 1 Cydna substation Tender awarded area Sebenza 275 kV intake 2 All areas Tender stage substation Quattro 275 kV intake 3 All areas Final design stage substation Mulbarton, Glen Vista. Liefde en 4 Mulbarton substation Final design stage Vrede, Bassonia Parkhurst, Linden, Victory Park, 5 Parkhurst substation Final design stage Greenside, Sandringham, Linksfield, 6 Sandringham substation Design stage Fairvale, Glenkale 7 Cleveland substation Cleveland, Herriotdale Design stage 8 Vlei substation Tshepisong Design stage 9 Lutz substation Alsef, Ruimsig, Honeydew Final Design stage Kloofendal, Allens Nek, Little 10 Kloofendal substation Design stage Falls, 11 Longlake substation Phase 1 Longlake, Modderfontein Execution stage 12 Fleurhof substation Fleurhof, Robertville Design stage 13 Lufhereng substation Lufhereng, Doornkop Tender award stage 14 Lehae and Traderoute Lehae, Nirvana, Lenasia Design stage 15 John Ware substation CBD Planning stage 16 Haggie Rand and PPC Haggie Rand and PPC Planning stage Mondeor substation and 17 Southern areas of Jhb Design stage switchyard 18 Westgate substation Westgate, Selby Planning stage 19 Pennyville switchyard Southern areas of Jhb Design stage 20 Pritchard Substation CBD Final design stage 21 AEL Substation Modderfontein Final design stage
It should be noted that the committed budget requirements for the 2013/2014 financial year includes some of the above projects.
Overhead and Underground Transmission networks
We are currently experiencing transfer capacity problems on our transmission line networks and significant upgrades are required to support capacity upgrades at existing and new substations being planned. These upgrades need to be undertaken before the load reaches a critical level, when we will no longer be able to take these lines out of service to do the upgrades. Live re-conductoring with high temperature conductor is already being done in selected areas
In areas where we are no longer able to get servitude corridors, underground cables are being planned. The cost of underground networks is two to three times that of overhead lines. Where new overhead lines are being planned the acquisition of land and the
Board Approved Page 67
City Power Business Plan (2013 - 2016) environmental process that has to be followed has proven to be a major challenge and is delaying projects.
Refurbishment of the Transmission Networks
The refurbishment of existing substations and replacement of high risk transformers and switchboards will continue to be implemented, in order to bring the network within the acceptable average age. In many instances these transformers are replaced as part of planned upgrades. A transformer condition model was developed to assist with the prioritization of transformer replacements.
Upgrading & Refurbishment of the Medium & Low Voltage networks
This still presents a major risk and is where the majority of outages occur. However, due to limited funds being made available and the need to first upgrade the transmission networks with the majority of the available funds, the backlog on refurbishment and upgrading of these networks is growing each year. As soon as the transmission networks have been upgraded the focus will change to the refurbishment and upgrading of the medium and low voltage networks.
Township Establishment, Densification and New Service Provision
This remains our single biggest risk, and a source of frustration for City Power staff, developers and consultants. Considering that City Power has seen an overall natural growth in maximum demand of approximately 5% over the last few years, our networks in a growing number of areas have been placed under severe strain and have become overloaded.
This has been further compounded by the demand for housing which has resulted in an exponential boom in many areas due to densification and natural load growth. In many areas, particularly the Midrand, Randburg and Roodepoort areas, the growth has been in excess of 30%. As a consequence we have no capacity to support further development, and have for some time now been forced to turn down applications for densification, township establishment and the provision of new service connections. This will have to continue until these networks have been upgraded. This will ensure that our networks are not further overloaded and will protect the existing customer base
Board Approved Page 68
City Power Business Plan (2013 - 2016)
Sources of Funding
TABLE BELOW GIVES THE BREAKDOWN OF THE ANTICIPATED SOURCES OF FUNDING:
National 2013/2014 Cash CRR Loans USDG Other Description Grant X 1000 X 1000 X 1000 X 1000 X 1000 X 1000 Buildings 50,000 50,000 Bulk Infrastructure 488,091 311,851 43,500 9,620 88000 35,120 Demand Side Management 5,400 5,400 Electrification 61,380 18,000 28,380 15,000 0 Fire and Security 20,000 20,000 Information Technology 41,000 41,000 Meters 675,000 455,855 219,145 Network Development 6,000 0 6,000 Operating Capital 41,660 41,660 Protection 28,221 20,894 7,327 Public Lighting 27,715 22,715 5,000 SCADA 0 0 Service Connections 120,730 120,730 Support Services 0 SCADA 10,000 10,000 Telecommunications 15,000 15,000 Township Reticulation 0 Training 8,000 8,000 Upgrade Electrical Network 128,861 128,789 72,000 Total 1,727,058 1,121,049 56,899 38,000 125,715 467,695
Board Approved Page 69
City Power Business Plan (2013 - 2016)
SECTION 7: RISK ASSESSMENT
Background
City Power is a Municipal Owned Enterprise (MOE), owned by the City of Johannesburg (COJ) and as such City Power is continuously ensuring alignment and compliance to COJ requirements. City Power‟s Risk Management process is aligned and has adopted the COJ Risk Management Framework.
„Risk‟ is defined as an event that may have an impact on the ability of the company to achieve its business objectives. Risk Management Process City Power's Risk Management process has four broad steps: Risk identification Risk Assessment and treatment Monitoring and Reporting Auditing
RISK MANAGEMENT PROCESS
Risk Risk Assessment and Identification treatment
Monitoring Auditing and reporting
Risk Identification
The City Power risk identification process is aligned to the COJ framework. The company risks are identified annually and they form part of the risk register. These risks are influenced by the executive committee, taken for the Audit Committee of the board and then approved by the board. The approved risks are then incorporate in the business plan.
Risk Assessment and Treatment Once risks have been identified, they must then be subjected to a consistent assessment process to ensure that City Power achieves an objective and holistic result that can inform its risk profile.
Board Approved Page 70
City Power Business Plan (2013 - 2016)
Risk is measured in two ways: By the likelihood or frequency of the risk occurring By the severity / impact on City Power of the risk occurring The City of Johannesburg has developed a two-stage assessment process to assess and quantify the identified risks.
Stage One – Impact and likelihood The first stage involves an assessment of the potential impact (or severity) of each risk, and then the likelihood of the event actually occurring. Each risk is scored on a scale of one to five. Table below: shows the criteria used to assess the potential Impact / Severity of each risk occurring
THE CRITERIA USED TO ASSESS THE POTENTIAL IMPACT / SEVERITY OF EACH RISK OCCURRING
Assessment of impact / severity Financial Reputation Stakeholders Customers Employees may Customers may have have suffered minor Event would have Contained within individual service been minimally first aid injuries. little financial area. From a regulatory perspective, impacted. Event may 1 Event may have impact on either minor fines or penalties may have impact minimally on resulted in localised income or budget been suffered. achieving a performance staff morale target.
problems. Not significant Not Affects significant number of service Employees may Event would have areas but with likely short-term Event may impact on have suffered moderate impact on public memory. From a achieving a performance temporary disabling financial impact regulatory perspective, fines or target where a major injuries. Event may 2 – 3 (>2% on penalties >R50k may have been milestone was missed have resulted in budget/income or suffered. Customers may have been by more than 1 month, staff loss causing
>2%) on either impacted resulting in complaints with impacting on a client minor to moderate income or budget. media coverage (suburban segment. consequences.
newspaper). Minor Employees may Regulator inquiry with medium-term Event may impact on have suffered Event would have impact on public memory. From a achieving a performance multiple temporary serious financial regulatory perspective, fines or target where a major disabling injuries. impact (>4 -6% penalties >R100k may have been milestone was missed 4 – 5 Event may have
on budget/income suffered. Customers may have been by more than 3 months resulted in staff or >4%) on either impacted resulting in complaints with and subsequent loss, causing income or budget. media coverage (local newspaper interruption over several serious not front page). days to customers.
consequences. Moderate Medium-term public impact with Employees may Event would have minor political implications. From a have suffered Event may impact on very serious regulatory perspective, fines or multiple permanent achieving a performance financial impact penalties >R150k may have been disabling injuries. target where a major 6 – 7 (>8% on budget/ suffered. Customers may have been Event may have milestone was missed income or >8%) impacted resulting in complaints with resulted in staff by more than 6 months,
on either income media coverage (national TV loss, causing very resulting in a major or budget. headlines) and loss of service >1 serious customer impact.
month. consequences. Major Long-term impact on public memory Event would have and major political implications. From Employees may Event may impact on a catastrophic a regulatory perspective, fines or have suffered performance target, financial impact penalties >R500k may have been fatalities. Event may where a major milestone 8 – 9 (>15-25% on suffered. Customers may have been have resulted in was missed by more budget/income or impacted resulting in complaints with staff loss, causing than 8 months to over 1 >15%) on either media coverage (national TV catastrophic year. income or budget. headlines) and loss of service >6 consequences.
months. Catastrophic
Board Approved Page 71
City Power Business Plan (2013 - 2016)
Table below shows the criteria used to assess the likelihood of the risk occurring: Likelihood Description Probability Descriptor Almost Certain – 8- The event is certain to occur within Event has occurred within the last year repeatedly. 9 this financial year. The event is likely to occur within Likely – 6-7 Event has occurred within the last financial year. this financial year. Event has been recorded within The event has a probability of occurring at some Possible – 4-5 organization as well as within the time, in the next year. sector in the last 2 years. Very few recorded or known incidents. Reasonable The event may occur at some time, Unlikely – 2-3 opportunity to occur or has occurred within other within the next 2 years. organizations within sector. Event may occur in exceptional circumstances. No No event recorded in the last 3 Rare - 1 recorded incidents or little opportunity for years. occurrence.
The product of this stage one assessment of impact and likelihood is an "Inherent Risk Score", which can range from a minimum of 1 to a maximum of 25, by multiplying the frequency and impact scores.
Stage two – Development of Risk Drivers and Risk Casual Model Risk drivers are those elements which tend to be the cause of the risk occurring. Risk drivers are a key process in risk management as they provide an in-depth understanding of the risk. Analysis of the drivers‟ lead to the effective monitoring of the risk as well as the development of control measures to mitigate or manage the risk. These will be measured and monitored as per the next phase of this project. The formulation of risk drivers is to assist with the understanding of the risk (i.e. make the risk more tangible) and in the formulation of controls, both pre- and post and to manage / minimise the risk drivers, which in turn reduces the overall headline risk. If the drivers are not identified, then the process only provides a snapshot of the risks at a point in time.
Monitoring and Reporting Monthly, quarterly and annual reporting on progress with status of action items.
Auditing This process will be audited continuously.
Board Approved Page 72
City Power Business Plan (2013 - 2016)
Strategic Risks Report
TOP 13 STRATEGIC RISKS STATUS REPORT
Objectives Risk Risk Background to the Risk Consequence Impact Likelihoo Inheren Current controls Risk Owner Actions to Time scale Category Description risk d t Risk improve management of the risk 1 Energy Financial / Poor Revenue 1. Inadequate credit Poor cash flow and Major Almost Red 1. Conversion from Director : 1. Continuous 1. Monthly Management Process / Collection control measures liquidity problems. Certain conventional to pre- paid Retail management of 2. Monthly as Governance 2. Billing not correct/ 2. Manage the Service Services & the SLA. per project complete Level Agreement with the Director 2. Conversion plan. City. 3. Advised the City Finance from 3. Discussed to segment customer as Conventional to with the City required by accounting Pre-Paid Meters. on a monthly standards and NERSA. 3. Need to basis. 4. Advised the City to re- segment introduce key customer customers and executives. reintroduce the key customer exec. 2 Improve Asset External Cable theft Increase in copper 1. Power interruptions. Major Almost Red 1. Improved security in Director RAC Review additional Review management Environmen price led to increase 2. Company image. Certain hot spot areas. prevention annually t / Financial in network tempering 3. High insurance claims. 2. Implemented Crime strategies. within 1st / Network and vandalism 4. Loss of revenue. Intelligence systems. quarter of 5. Increase in operational 3. Crime prevention financial year. expenditure. strategy in place. 4. Implementation of crime prevention technologies. 3 Business Integrity / Customer Causes include: 1. Low payment level. Major Almost Red 1. Manage SLA with the Director : Reviewing value Review Model Review Financial / dissatisfaction outages, capacity 2. Poor company image. Certain City. Retail chains. Quarterly Process . demand, billing, etc. 3. Loss of NERSA 2. Working with City to Services *Low level of positive License 4. Loss improve processes. public opinion of Customer Satisfaction 3. Internet faults logging (company image) system. Poor performing Call 4. SMS messaging Centre system for planned outages. 5. BC Forums. 4 Energy Financial High primary Inadequate capacity Increased cost of bulk Major Likely Red 1. Strict control over PPA Director: 1. Explore Monthly Management energy pass nationally will result purchases. and penalties on poor Engineering additional funding review through in the starting up of delivery. Operations for the gas costs.(OCGT the gas turbines and 2. Hold monthly meeting turbines. (e.g. & KPS) increase in Kelvin with Kelvin Management. Off-takers) dispatch resulting in 3. Limited provision for 2. Engage with high pass through the gas turbines in the 3rd parties to buy energy costs. current budget. power at the cost of generation. 5 Energy Financial Business's Lack of funding. 1. Unable to meet the Major Likely Red 1. Revenue Generating Director : 1. Exploring the Quarterly Management inability to Company not able to GDS, IDP, and projects Finance off Balance Sheet review fund high obtain own funding. Business Plan 2. PPP initiatives Director : Arrangements
Board Approved Page 73
City Power Business Plan (2013 - 2016)
Objectives Risk Risk Background to the Risk Consequence Impact Likelihoo Inheren Current controls Risk Owner Actions to Time scale Category Description risk d t Risk improve management of the risk capital and targets including 3.Sourcing additional Engineering with Funding operational electrification, inner- Grant Funding Services institutions. requirements city project, public 2. See additional out of current light, SHEQ etc. grants from cash flows nor 2. Unable to refurbish National Treasury future tariff the aging network at and other applications an acceptable rate departments. *Not enough funds to upgrade the network e.g. 4th and 5th intake points 3. Compliance to MFMA requirements. 6 Business Technology Non 1. Extensive reliance 1. Low productivity Major Likely Red Currently reviewing and Director: 1. Programme to Quarterly Model Review / availability on ICT 2. Negative company updating the Information Engineering align to King III Governance and reliability 2. Lack of image security policies and the Services recommendation / Process of Information investment in ICT 3. Poor business Disaster recovery s. & due to competing performance strategy 2. Review and communicatio business priorities strengthen the n technology current controls. (ICT). 3. Modernising and upgrading infrastructure. 7 Human Capital Human Fraud & Any form of Fraud & Loss of assets and Major Possible Red 1. A fraud Policy has Director RAC 1. Awareness Quarterly Investment Capital / Corruption Corruption taken funds. been introduced. campaigns on Process / place, including Entity image is tarnished. 2. A fraud & corruption anti-fraud and Governance financial, asset, gift, prevention plan is in corruption. collusion, etc. place. Conflict of interest 3. An illustrative list of strategic fraud risks is in place. 8 Obtain Financial / Qualified Inadequate internal Weak Internal Controls. Major Possible Red 1. Practicing good Managing 1. Alignment with Quarterly Unqualified Governance audit report. controls. Non Compliance to governance Director King III Audit Opinion. Insufficient Financial GRAP Non- 2. Actively addressing all requirements. Staff. compliance to MFMA issues raised in the 2. Continue to Non-compliance to Improper Reporting previous year's comply with GRAP standards. Management Report. legislation. 3. Implementation of GRAP 4. Integrated Reporting 5. Staff Development 9 Energy Technology Increase in 1. Meter tampering. Loss of revenue and or Major Almost Red 1. Installation of semi Director : Continue with Monthly as Management / Financial / non-technical Illegal Connections. cash NERSA Certain AMR, Tamper proof Retail & present controls per project Process losses 2. Faulty Meters and Licence meters and pre-paid Director: and monitor the plans no-access unable to meters with protective Engineering effectiveness. bill customers structures; Services
Board Approved Page 74
City Power Business Plan (2013 - 2016)
Objectives Risk Risk Background to the Risk Consequence Impact Likelihoo Inheren Current controls Risk Owner Actions to Time scale Category Description risk d t Risk improve management of the risk 3. No meters at all 2. Removal of illegal Connections and replaced with tamper proof meters with protective structures. 3. Currently utilising JMPD & SAPS to enforce by-laws. 4. Continuous installation audits;5. Customer education programs; 10 Improve Asset Process / Network 1. Age of the Low productivity Major Almost Red 1. Maintenance & Capital Director: Introduction of Annual management Network interruptions network Negative company image Certain Investment program in Engineering condition review 2. Uncontrollable Poor business place. Operation monitoring events such as performance 2. Asset Management project and insufficient capital for system in place. continue to upgrading and 3. Crime prevention review additional refurbishment of MV strategy in place. crime prevention and LV network. strategies 3. Theft & vandalism of infrastructure. 11 Improve Asset Process / Inadequate 1. Eskom's failure to Load Shedding. Major Likely Red 1. City Power has applied Director: 1. Investigating Quarterly management Financial capacity to supply (generation for increased capacity Engineering alternative meet the and transmission) from Eskom. Operations sources of demand. 2. Ability of the 2. Investigating energy e.g. (Eskom & Eskom network to distributed generation 2. Piloting Solar Kelvin) sustain the new options. Implementing Powered capacity demand. DSM Program. Streetlights. Inability of Kelvin Resuscitate Gas Power Station to Turbines. supply at the required level in terms of the PPA. 12 Human Capital Human Impact of Increased Reduced productivity. Moderat Possible Amber 1. Reinforcing partnership Director: Continue to Monthly Investment Capital HIV/AIDS and absenteeism due to e with CoJ and other RAC improve the newsletter other sick leave , stakeholders. awareness and annual sicknesses on impacting on overall 2. Provision of immune campaign. campaign productivity in performance. Loss boosters and nutrition. the company of skills. Dispense and administer ARV's. 3. Staging of wellness days. 4. Voluntary testing 13 Human Capital Human Insufficient Ineffective talent Low productivity. Minor Likely Amber Retention strategy Director:HR 1. Monitor the Quarterly Investment Capital/ Skills capacity management. implemented. effectiveness of review Financial to support the Vacant positions Remuneration strategy current controls. business partly implemented. 2. Training Training and development of staff.
Board Approved Page 75
City Power Business Plan (2013 - 2016)
SECTION 8: CONCLUSION
City Power is a wholly owned Company of the City of Johannesburg thus its Business Plan is aligned to the GDS and IDP of the City Of Johannesburg.
The City Power Business Plan is being submitted to the Board and Council in compliance with Sections 16(2) and 87(2) & (3) of the Municipal Finance Management Act, 56 of 2003 (MFMA) for consideration and comment prior to the final approval of the business plans and budgets (during May 2012) as is required by the MFMA and the Municipal Budget and Reporting Regulations to the MFMA.
In the ten years of the City Power‟s existence it has faced challenges and had great achievement. Going forward the organisation will spend a significant amount of effort to ensure that structures and processes are put in place to address the concerns raised in the audit report. City Power identified and is implementing interventions as part of the Revenue Step Change (Revenue Generation and Protection) project working with all its stakeholders to reduce nontechnical losses.
City Power is committed to continually improving its performance and the company is confident that it will meet and exceed the expectation of all our stakeholders thus attaining its vision of being a “world class electricity distributor.”
Board Approved Page 76
City Power Business Plan (2013 - 2016)
SECTION 9: BUSINESS ACRONYMS AND APPENDICES
Business Acronyms
AA – Affirmative Action LPU – Large Power Users
AMR – Automated Meter Reader LV – Low Voltage
AMP – Amperes MD – Managing Director
BBBEE – Broad Based Black Economic Empowerment MFMA – Municipal Finance Management Act
BSC – Balanced Score Card MOE – Municipal Owned Entity
CAIDI – Customer Average Interruption Duration Index MSA – Municipal Systems Act
CAIFI – Customer Average Interruption Frequency Index MV – Medium Voltage
CAPEX – Capital Expenditure MVA – Mega Volt Amperes
CFL – Compact Fluorescent Light NERSA – National Energy Regulator of South Africa
COJ – City of Johannesburg NPR – Network Performance Related
DIFR – Disabling Injury Frequency Ratio OPEX – Operating Expenditure
DOE – Department of Energy RDP – Reconstruction and Development Programme R&CRM – Revenue and Customer Relationship DSM – Demand Side Management Management RED – Restructured Electricity Distributor EDI – Electricity Delivery Industry R & D – Research and Development
EE –Energy Efficiency SAIDI – System Average Interruption Duration Index EISD – Environment, Infrastructure and Services SAIFI – System Average Interruption Frequency Department Index EPWP – Expanded Public Works Programme SBA – Sale of Business Agreement
GDS – Growth Development Strategy SCADA – Supervisory Control and Data Acquisition
GE – Gender Equity SDA – Service Delivery Agreement
HV – High Voltage SHEQ – Safety, Health, Environmental and Quality
JMPD – Johannesburg Metro Police Department SOC – State Owned Company
KPI – Key Performance Indicator SPU –Small Power Users
KWH – KiloWatt Hour TBA – To Be Announced
IDP –Integrated Development Plan
Board Approved Page 77