City Power (PTY) LTD BUSINESS PLAN 2009 – 2014 City Power Draft Business Plan 09/14 TABLE OF CONTENTS SECTION 1: EXECUTIVE SUMMARY 6 1.1 Highlights and Challenges of the business 6 1.2 Structure of the document 7 SECTION 2: COMPANY OVERVIEW 8 2.1 Vision, Mission and Mandate 8 2.1.1 Vision 8 2.1.2 Mission 8 2.1.3 Aspired values 8 2.1.4 Business Operations Principles 8 2.1.5. Company Details 8 2.1.6 Operating History 9 2.1.7. Organisational Management and Structure 9 2.2 Description of day-to-day operations 14 2.3 Quantitative Indicators 15 2.3.1 Provide Network Infrastructure 15 2.3.2 Distribute Electricity 16 2.3.3. Network Restoration 18 2.3.4 Suppliers of Materials 18 2.3.5 Quality of key customer Relations 19 2.4. Support Processes 23 SECTION 3: STRATEGIC AGENDA 24 3.1 Strategic Agenda Priorities 24 3.2 Strategy Management Processes 24 3.4 Strategic Goals 24 3.5 Mayoral Priorities 25 3.6 Company Strategic Priorities 25 3.7 Strategic Issues 26 3.8 Top 10 Priorities for 08/09 and 09/10 26 3.9 Five year strategy, IDP and delivery agenda 27 SECTION 4: OPERATIONS AGENDA 34 4.1. Service Delivery 34 4.1.1. Key Operations and Financial Impact 34 4.1.2 Core Processes 59 SECTION 5: PERFORMANCE FRAMEWORK 60 5.1 Balanced Scorecard Perspectives 60 5.2 Key Performance Indicators 60 5.2.1. Financial Perspective 60 5.2.2 Customer Perspective 62 5.2.3 Internal Process Perspective 64 5.2.4 Learning and Growth Perspective 65 5.2.5 Community Value Perspective 66 SECTION 6: RISK MANAGEMENT AND INTERNAL CONTROLS 70 6.2 Risk Management Process 71 6.2.1 Background 71 6.2.2 Broad Definition 71 6.2.3 Risk Management Process 71 6.3 City Power’s Top 13 Risks 75 SECTION 7: FINANCIALS 79 7.1. Capital Expenditure 79 Continuous Strategy Improvement - Rev 17 – Page 2 of 131 Approved by Board on 6 Aug 2009 City Power Draft Business Plan 09/14 7.1.1 Infrastructure & Service Delivery Capital Plan 79 7.1.2 Major Infrastructure Initiatives 93 7.1.3 Sources of Funding 97 7.2. Operational Expenditure 98 7.2.1 Financial Planning Assumptions 98 7.2.2 Income Statement 99 7.2.3 Cash Flow 104 7.2.4 Balance Sheet 106 7.3 Tariff Plan (NERSA and Mayoral approvals are not align, the tariff may change subject to Mayoral approval) 108 7.3.1 Tariff Assumptions 108 7.3.2 Tariff Objectives 108 7.3.3 Proposed tariff increase 108 7.3.4. Structural changes per rate category 109 SECTION 8: WARD PRIORITIES 113 SECTION 9: HUMAN CAPITAL 121 9.1. Human Capital Plans 121 9.1.1 Human Capital Achievement: Performance Management 121 9.1.2 Employee Productivity 121 9.1.3 Human Capital Salary Costs 122 9.1.4 Other Human Capital Related Costs 122 9.1.5 Human Capital Ratios 123 9.1.6 Human Capital Staffing Levels 123 9.1.7 EE Report 126 9.1.8 Skills Development 127 9.2 BEE 128 9.2.2 Training and Capacity Development 128 9.2.3 Supplier Summit 128 9.2.4 Supplier Audits 128 9.3 HIV and AIDS 129 9.3.1 HIV/Aids Structures 129 9.4.2 Education 129 9.4.3 Monitoring and measuring of performance 129 9.4.4 Case Management 129 SECTION 10 DEPENDENCY MATRIX 130 Continuous Strategy Improvement - Rev 17 – Page 3 of 131 Approved by Board on 6 Aug 2009 City Power Draft Business Plan 09/14 BUSINESS ACRONYMS AA – Affirmative Action AMR – Automated Meter Reader AMP -Amperes ASGISA –Accelerated and Shared Growth Initiative BEE – Black Economic Empowerment BSC – Balanced Score Card CAIDI – Customer Average Interruption Duration Index CAIFI – Customer Average Interruption Frequency Index CAPEX – Capital Expenditure CBD – Central Development District CFL – Compact Fluorescent Light COJ – City of Johannesburg DIFR- Disabling Injury Frequency DME – Department of Mineral and Energy DSM – Demand Side Management EDI – Electricity Distribution Industry EE –Energy Efficiency EPWP – Expanded Public Works Programme GAAP – Generally Accepted Accounting Principles GDS – Growth Development Strategy GE – Gender Equity HV- High Voltage IDP –Integrated Development Plan IEP – Integrated Energy Planning ISD - Infrastructure and Services Department IT – Information Technology JDA – Johannesburg Development Agency JMPD – Johannesburg Metro Police Department JRA – Johannesburg Road Agency KPI – Key Performance Indicator KVA- Kilo Volt Ampere KWH- Kilowatt Hour LPU – Large Power Users LV- Low Voltage MD – Managing Director MV- Medium Voltage MVA – Mega Volt Amperes MFMA- Municipal Finance Management Act MOE – Municipal Owned Entity MSA – Municipal Systems Act NERSA – National Energy Regulator of South Africa NPR – Network Performance Ratio OPEX – Operating Expenditure RACI – Responsible Accountable Consulted and Informed RDP – Reconstruction and Development Programme RED – Regional Electricity Distributor R & D – Research and Development SAIDI –System Average Interruption Duration Index SAIFI - System Average Interruption Frequency Index Continuous Strategy Improvement - Rev 17 – Page 4 of 131 Approved by Board on 6 Aug 2009 City Power Draft Business Plan 09/14 SBA -Sale of Business Agreement SCADA – Supervisory Control and Data Acquisition SDA- Service Delivery Agreement SHER – Social Health Environmental Responsibility SHU – Shareholder’s Unit SPU –Small Power Users STI – Small Ticket Item Continuous Strategy Improvement - Rev 17 – Page 5 of 131 Approved by Board on 6 Aug 2009 City Power Draft Business Plan 09/14 SECTION 1: EXECUTIVE SUMMARY This document spells out City Power’s expected course of action for the period 2009/2014. It provides an analysis of the day-to-day operations, the financial and budgetary environment, the people, inter-governmental initiatives as well as information on collaboration with other sectors. City Power has been in existence since January 2001, as an electricity distributor. Its mandate is to purchase, distribute, and sell electricity in the City of Johannesburg, as well as managing the City’s street and public lights. The City of Johannesburg has developed a strategic thrust which acts as a central theme of principle guiding the direction that City Power should follow. This includes the following: • Maximising access to electricity • Reducing maintenance backlogs • Reducing losses • Infrastructure upgrading • Implementation of Demand side Management (DSM) 1.1 Highlights and Challenges of the business During the past financial year, City Power has made significant progress. Some examples of this are: • Prompt response to the energy efficiency crisis in the country; • Leading in the implementation of a detailed demand side management programme; • Exceeding target on a number of performance measures, including payment levels for both key customers, on bulk outages, query resolution times, Expanded Public Works Programme (EPWP), employment equity, gender equity, Black Economic Empowerment and Engendered expenditure; • 98% of the capital budget was spent on improving and upgrading of the network, and, • Compliance to the NRS 048 standards and SHER In order to realise our vision, of being a “World-class electricity distributor”, City Power is striving to become a customer-focused organisation by incorporating the voice of the customer as part of our business analysis. This effort will help us ensure that we deliver the right service to our customers in the most efficient and effective manner. One of the major opportunities for the company to practice the above has been presented by the 2010 FIFA World cup, to be hosted by South Africa. As we build on the previous year’s accomplishments, we are continuing to address the following challenges: • Funding of infrastructure upgrade and refurbishment; • Energy supply constrains; • Increase in the price of primary energy and other resources; • Expedite research and deployment of renewable energy technologies; • Skills constraints; and, • Uncontrollable increase in theft and vandalism Continuous Strategy Improvement - Rev 17 – Page 6 of 131 Approved by Board on 6 Aug 2009 City Power Draft Business Plan 09/14 This plan highlights the methodology which City Power will use to ensure continuous performance improvement in the business and improving service to its customers. 1.2 Structure of the document Section1 is the Executive Summary. Section2 provides a detailed description of the company Overview by outlining what the core business of the company is, the various types and number of customers to whom we provide our services. Section3 is the Strategic agenda which provides the company goals, Mayoral priorities, strategic priorities, as well as the company’s response to the IDP & GDS. Section 4 discusses the Operational agenda: which provides a progress report on various projects that the company has embarked on, with special focus on the 2010 FIFA World Cup and the City of Joburg strategic agenda. Section 5 is the Departmental Balanced Scorecard, a framework for performance monitoring. Section 6 gives a detailed description of the methodology used to assess and analyse risks holistically. The top business risks are listed, along with information on their background, the control measures in place, and actions that will be followed to mitigate and manage these risks (how they will be addressed). Section 7 has the financials and is divided into CAPEX, OPEX and Tariff Plan. The CAPEX section presents a comprehensive overview of the long-term capital budget and a skeleton of the five-year capital budget. It also shows what funds are used by the company to acquire or upgrade physical assets, such as plants and equipment, in order to provide sustainable, affordable, safe and reliable electricity; and how these funds are deployed. At the end of this subsection, the impact of not receiving sufficient funds is discussed. Section 8 gives a profile of the Ward priorities. It provides details of various projects which will be undertaken per ward enlisting the following: ward number, issues, the corresponding action, who and when, as well as budget resources Section 9 provides the analysis of such aspects as employee satisfaction, skills development, employee productivity, salary costs, staffing, capital outflow and employment equity, together with the plan which has been developed to address these aspects.