FFC Briefing to Portfolio Committee on Energy 13 January 2019

FFC Briefing to Portfolio Committee on Energy 22/03/2012 Presentation Outline Introduction Access to Free Basic Electricity (FBE) and Free Basic Alternative Energy (FBAE) Financing FBE and FBAE Implementing FBE and FBAE Electricity cross subsidies Is 50kwh sufficient? FFC Views on block tariffs Conclusions FFC Briefing to Portfolio Committee on Energy 22/03/2012

1. Introduction SA has pro poor electricity policies & strategies Electrifying low income areas and rural regions Universal electrification as a national goal FBE improved livelihoods of poor. Energy access is critical for accessing basic necessities of life: FBE has particular incidence on women and children With FBE expenditure on energy went down and income freed for other services. Environmentally unfriendly fuel alternatives abandoned for cleaner electricity

2. Implementation of FBE and FBAE FFC Briefing to Portfolio Committee on Energy 22/03/2012

FFC Briefing to Portfolio Committee on Energy 22/03/2012

FFC Briefing to Portfolio Committee on Energy 22/03/2012 Consumer Units (CUs) Receiving Electricity Consumer Units (CUs) receiving electricity are on the increase Consumer Units (CUs) receiving FBE are on the increase after some decline between 2006-2009 FFC Briefing to Portfolio Committee on Energy 22/03/2012

FBE Coverage Against Indigent Registers FFC Briefing to Portfolio Committee on Energy 22/03/2012

FFC Briefing to Portfolio Committee on Energy 22/03/2012

FFC Briefing to Portfolio Committee on Energy 22/03/2012 3. Funding FBE and FBAE FFC Briefing to Portfolio Committee on Energy 22/03/2012

FFC Briefing to Portfolio Committee on Energy 22/03/2012

4. Implementation of FBE and FBAE FFC Briefing to Portfolio Committee on Energy 22/03/2012

Implementation of FBE and efficiency Generally 4 methods used to implement FBE Targeted approach (use of indigent registers) Broad approach (use of stepped/block tariffs) Technical approach (use of pre-paid metering) Geographic approach (targeted poor area/region) FFC research suggests that method used impacts on municipal expenditure and revenue efficiencies Targeted approach, provided indigent registers are a good reflection of targeted individuals or households Prepaid metering most efficient Ensures efficient expenditure of resources (no resource wastage) Ensures better debt recovery and revenue raising efficiencies Social implications are the concerns as self elimination is possible FFC Briefing to Portfolio Committee on Energy 22/03/2012

FFC Briefing to Portfolio Committee on Energy 22/03/2012

FFC Briefing to Portfolio Committee on Energy 22/03/2012 5. Cross subsidies FFC Briefing to Portfolio Committee on Energy 22/03/2012

Inter and Intra Cross-subsidisation Many municipalities make surpluses from electricity Surpluses used to cross subsides other services (Inter service cross subsidisation) (see Graph below) But within electricity poor consumers are subsidised by well to do ones. Prices increases are another indicator of cross subsidisation (see next graph below): Price increase for high income people are high & for poor..maximum is 15%. FFC Briefing to Portfolio Committee on Energy 22/03/2012

Electricity Surpluses FFC Briefing to Portfolio Committee on Energy 22/03/2012

FFC Briefing to Portfolio Committee on Energy 22/03/2012 Price Subsidies FFC Briefing to Portfolio Committee on Energy 22/03/2012

Effect of Administered Prices FFC Briefing to Portfolio Committee on Energy 22/03/2012

FFC Briefing to Portfolio Committee on Energy 22/03/2012 6. Is 50kwh sufficient? FFC Briefing to Portfolio Committee on Energy 22/03/2012

But is 50KWH per month adequate? Free Basic Electricity (FBE) (2003) – 50 kwh hours per month free to most households that have access to electricity -FBE Cover : -Basic lighting Small black and white TV Small radio Basic ironing Boiling of water using an electric kettle According to Earthlife Johannesburg (2010) & EG: 4 light bulbs of 60W used for four hours a day for a month consume 20kWh, an electric stove that is used for one hour a day for a month uses 42kWh boiling a kettle at least 30min a day for a month uses 21kWh. Based on above...50kwh hours per month insufficient. Some municipalities provide more than 50KWH per month (see graph below) FFC Briefing to Portfolio Committee on Energy 22/03/2012

FFC Briefing to Portfolio Committee on Energy 22/03/2012 Some Municipalities offer more than the 50KWH recommended. More metros give more! FFC Briefing to Portfolio Committee on Energy 22/03/2012

FFC Briefing to Portfolio Committee on Energy 22/03/2012 Inefficiencies FFC Briefing to Portfolio Committee on Energy 22/03/2012

FFC Briefing to Portfolio Committee on Energy 22/03/2012 7. View on Block Tariffs Block Tariffs mean “the more you use, the more you pay and the more your average price of electricity will be” Decreases unnecessary electricity consumption- induces savings, efficient use and proper conservation Induces substitution towards other efficient energy alternatives e.g. Solar But may penalise poor HH with large families! FFC Briefing to Portfolio Committee on Energy 22/03/2012

FFC Briefing to Portfolio Committee on Energy 22/03/2012 8. Conclusion FFC Briefing to Portfolio Committee on Energy 22/03/2012

FFC Briefing to Portfolio Committee on Energy 22/03/2012 Conclusion FFC notes that FBE is critical for people’ s livelihoods FBE requires proper targeting Electricity must be provided efficiently...minimise electricity leakages losses (unaccounted for electricity), elimination of illegal connections and energy savings by households and industry, institute adequate repair and maintenance Reiterate recommendation on compact cities: Energy savings in a compact city compared to a sprawling urban form, and 22% less carbon emission resulting from more efficient public transport and less travelling FFC Briefing to Portfolio Committee on Energy 22/03/2012

Thank You. Financial and Fiscal Commission Montrose Place (2nd Floor), Bekker Street, Waterfall Park, Vorna Valley, Midrand, Private Bag X69, Halfway House 1685 www.ffc.co.za Tel: +27 11 207 2300 Fax: +27 86 589 1038 FFC Briefing to Portfolio Committee on Energy 22/03/2012