FREE BASIC ALTERNATIVE ENERGY/ FREE BASIC ELECTRICITY 6/14/20161

PRESENTATION OUTLINE 6/14/20162 Background Mandates Funding Implementation Challenges and Possible Interventions Status Conclusion

BACKGROUND OF FBE/FBAE 6/14/20163 The government announced a statement of intent in respect of the provision of free basic services in 2000 and the main areas of focus were free basic water and free basic energy. Implementation of free basic electricity programme started in 2003 with the following intentions: To provide basic energy to poor households to ameliorate poverty. Minimise the health impact arising from the use of certain fuel. The Free Basic Electricity (FBE) for the provision of both grid and non-grid. Acknowledging that not all poor households in South Africa process of electrification to cover remaining households.

BACKGROUND OF FBE/FBAE The provision of FBE sounds unfair to un-electrified households hence the lack of infrastructure for the provision of FBE necessitated Free Basic Alternative Energy (FBAE) Guidelines for subsidizing alternative energy carries. The provision of alternative energy carries is more expensive compared to grid and non-grid electricity since most of these energy carries are unregulated. 6/14/20164

5 Other programmes presently complementing FBE in the Energy Sector as further measures introduced to address affordability and protecting the poor: Implementation of Inclining Block Tariff (IBTs) even though other Municipalities currently experience challenges with regards to the implementation; Facilitating access to electricity through government subsidised electrification; BACKGROUND OF FBE/FBAE

Free connections provided to Eskom’s low consumption residential customers; Lower price increases applied to low consumption domestic customers. (15% vs general increase of up to 31.3%) 6/14/20166 BACKGROUND OF FBE/FBAE

Section 104 (4) of the Constitution provides for provincial legislation with regard to a matter that is reasonably necessary for, or incidental to, the effective exercise of power concerning any matter listed in schedule 4 of the constitution. Section 139 (1) of the Constitution provides for provincial intervention when Municipalities does not fulfil its executive obligation. 6/14/20167 MANDATE OF PROVINCES IN RESPECT OF FBE

Section 156 (1) A Municipality has executive authority in respect of, and has the right to administer local government matter listed in schedule 4, part B and Schedule 5(B) – markets (energy markets). Municipalities are Service Authority over energy related matters: Equitable Share allocation facilitates provision of access to other forms of energy (there is an energy component). Municipal health services (influence the support of certain fuel through FBE support). 6/14/20168 MANDATE OF MUNICS IN RESPECT OF FBE

Section 156 (1) (continued) Air quality (environment). Municipalities have authority over energy financing and can influence environmental issues associated with energy through support or non-support of energy services. 6/14/20169 MANDATE OF MUNICS IN RESPECT OF FBE

Energy source are given as FBE/FBAE: 6/14/ Provision of free 50kWh of grid electricity per month to all households with concomitant blocked or stepped tariffs for electricity consumption beyond 50kWh to mitigate the cost implication of the free basic electricity provided. The pilot study suggested that 35 to 60KWh/month was considered adequate electrical energy to meet lighting, media access, limited heating needs for a poor household. After consultation taking into account the funding aspects, 50KWh was deemed appropriate FBE amount per month per household.

Provision of free non-grid electricity to all non-grid electrified households (connected through the National Electrification Programme) funded from the energy component of the Equitable Share to the minimum of R48-00 FBAE given to indigent include: Petroleum products to un-electrified Paraffin LPG Candles and etc. Renewable energy to un-electrified Fire wood Coal / Low smoke fuel, and Biogas 6/14/ Energy source are given as FBE/FBAE:

CHALLENGES RELATING TO IMPLEMENTATION 6/14/ Disconnections: Eskom and municipalities are using of the practice of disconnecting households and businesses as a credit control measure, defaulting indigents on the Poorest-of-the-Poor (POP) programme lose their free basic electricity (FBE) monthly entitlement when their electricity supply is disconnected due to a default in payment while understanding that free basic electricity can only be disconnected to the POP if the POP has tempered with the meter or has been found to be stealing electricity. The free basic electricity does not also accumulate if not used and cannot be claimed retrospectively.

Limited funds: Free basic electricity accrues to a designated POP on a monthly basis subject to funding availability from a municipality. Notwithstanding municipal credit control measures and policies which are subject to council approval and are unknown to the department, to be streamlined at Provincial, District and Municipal Capacity: Lack of human Capacity at Municipality level but presently there are National initiatives and Provincial to support Municipalities them to implement functions under the Constitution. Cogta, DoE, SALGA, ESKOM and other utilities are assisting Municipalities. 6/14/ CHALLENGES RELATING TO IMPLEMENTATION

6/14/ Other challenges include the following: Lack of indigent policies and registration, verification & management of indigents. Cogta, DoE, SALGA, ESKOM and other utilities are assisting Munics. Token collection, enhancement and provision of FBS levels of service in contravention of policy. Munics to assist beneficiaries on collection and advice on enhancement. Lack of communication - Ongoing communication (stakeholders). Lack of reporting, monitoring & evaluation system and limited coordination - Cogta is now facilitating this. CHALLENGES RELATING TO IMPLEMENTATION

FUNDING ALLOCATION OF FBE/FBAE 6/14/ Apportionment of the Free Basic Electricity/Energy allocation in line with the FBAE guidelines. The cost of providing Free Basic Electricity and Free Basic Alternative Energy is included in the MTEF budget allocation of the Department of Provincial and Local Government and Munics have revenue generation challenge. Where Service Authorities have been allocated with inter- governmental grants to provide for operating costs in respect of basic services (other unconditional components of the Equitable Share),

Municipalities shall pass on the benefits of such grants to targeted indigent households in respect of providing Free Basic Electricity allocations as contemplated in this policy document and the Free Basic Alternative Energy guidelines for the corresponding financial year. Municipalities must further allocate funds from their budgets for FBE/FBAE to supplement allocation to cover all the indigent households. 6/14/ FUNDING ALLOCATION OF FBE/FBAE

ESKOM Free Basic Electricity for January /14/ PROVINCE No of Munics on Local Govt Directory Total Munics on CC&B Actual Signe d Munics not signed Actual % Munics signed – Jan 2012 CC&B total prepaid customer s Municipalit y approved FBE + MFFBE customers (number of FBE + MFFBE customers received) Municipali ty approved FBE + MFFBE customers configure d to receive FBE + MFFBE % Configur ation Municipality approved FBE + MFFBE Customers Configured that collected FBE + MFFBE Tokens % Consump tion Eastern Cape Free state Gauteng Kwa Zulu Natal Limpopo Mpumalanga North West Northern Cape Western Cape Unallocated Total FBE Cons vs Conf - National - Provincial Report Jan 2012.xlsx

6/14/ PROVINCE % Config uration % Consu mption Eastern Cape Free state10081 Gauteng9859 Kwa Zulu Natal 8657 Limpopo10081 Mpumalang a North West9872 Northern Cape 9872 Western Cape 10089

2012 Free Basic Energy Snapshot 6/14/ PROVINCES August '12 FBE Total Indigent Households (Census 2001) Total Indigent Household s(Munic data) EskomMunicipality non- grid Total% Eastern Cape939,776717,759141,340218,68410,096370,12039 KwaZulu- Natal1,162,490220,269130,498143,12934,202307,82926 Gauteng967,539233,776389,358428, ,70285 Mpumalanga444,112197,30584,948114,2734,100203,32146 Limpopo744,676525,959190,674104,12321,928316,72543 North West440,733143,21073,94922, ,54222 Free State425,049229,435106,923373, , Northern Cape118,19495,73643,58747, ,07377 Western Cape290,213204,821182,508441, , Total5,532,7822,568,2701,343,7851,893,89271,9733,309,65069

CONCLUSION 6/14/ Estimated national implementation of Free Basic Electricity/Free Basic Alternative Energy (FBAE) is about 70% to the all the qualifying indigents as there are diverse number of challenges. DoE will review the policy when the necessity comes to incorporate new policy developments. The criterion used to identify the recipients of FBE depends on municipalities to apply their own indigent policies to identify the recipients.

Due to a lack of a monitoring mechanism on the ground it is difficult to establish accurate figures. Cogta has reported that they are undergoing structural change to incorporate resources to monitor FBS. Poverty alleviation is an important challenge for the country. The links between poverty and energy are clear, and as such the policy on free basic electricity is an important key to uplifting the poor. 6/14/ CONCLUSION