© 2008 Eskom. All rights reserved. From Strategy to Implementation UPDEA – Durban March 2009 Maboe Maphaka Energy Losses Management Programme

© 2008 Eskom. All rights reserved. 1 Agenda Background Strategy formulation Implementation Results Concluding Remarks

© 2008 Eskom. All rights reserved. 2 Challenge Background to Energy Loss Programme Distribution experienced higher than expected energy losses over the past few years Initiated the Energy Losses Management Programme Action  Arrest negative trend  Improve current energy loss management practices  Introduce new strategies  Establish acceptable level at which losses should be managed as an inherent risk of the business  Ensure operational sustainability  Leverage other internal business competencies In support of the Eskom Financial Sustainability Objective Objective

© 2008 Eskom. All rights reserved Total Distribution Energy Losses Trend 12 month moving average (MMA) Total Energy Losses 5.34% YTD Rising Energy Losses Trend, a major concern for the utility

© 2008 Eskom. All rights reserved. 4 Reasons For Energy Losses Management Initiative TheftIllegal connections and revenue lost due to theft of electricity is a public domain risk for Eskom Regulatory Management In light of Eskom’s impending tariff hikes over the next three years, the public (and NERSA) will potentially criticise Eskom for rate hikes while not managing energy and revenue losses. Eskom would have to demonstrate its serious interventions to address the problem Reputation RiskEskom need to show all reasonable attempts to get the SA public to be aware, informed and encouraged to be compliant by addressing behaviour Revenue Recovery The considerable revenue loss suffered, necessitates Eskom to explore and employ all possible avenues to recover and prevent these losses Base Load Electricity theft impacts demand (load) on the grid. LPUs, SPUs and PPUs who are illegally connected, tampering with metres, etc, will have no incentive whatsoever to use electricity efficiently

© 2008 Eskom. All rights reserved. 5 Agenda Background Strategy formulation Implementation Results Concluding Remarks

© 2008 Eskom. All rights reserved. 6 6 Strategy Formulation Strategy Development:  Literature reviews –International best practices –Technology investigations  International consultant input (PA Consulting)  International visits (Brazil and Argentina)  Conducted national industry workshops  Internal workshops with subject matter experts Strategic Objectives:  Arrest the current upwards energy loss trend  Manage the trend to an acceptable level  Ensure sustainability at an acceptable level

© 2008 Eskom. All rights reserved. 7 Detailed Losses Management Strategy 1.Normalise Losses to an agreed level in the medium term. 2.Build the mechanisms to sustain at that level as part of normal business. Audit, measure and fix customer installations Audit, measure and fix customer installations Ringfence electrical networks to balance energy delivered Ringfence electrical networks to balance energy delivered Implement tested technologies to manage energy losses Ensure sustainability through proper resourcing Use business intelligence to identify high loss customers Resource and prioritise customer audits Co-ordinate customer audits Measure results nationally Identify network based boundaries Install metering to measure energy flows Audit and clean data per measured area Balance energy inflows and outflows to determine anomalies Investigate all possible options to reduce energy losses Pilot and test scalability of identified technologies Implement and measure benefits of tested technologies Determine business RACIs for revenue losses management activities Perform detailed environmental analysis and identify gaps Implement measures to address identified gaps Build competence and certify revenue loss management resources Measure results and adjust resource strategy accordingly Communicate and educate internal and external stakeholders Improved Data Accuracy critical to process How? How? How? How?

© 2008 Eskom. All rights reserved. 8 Non-Technical Losses Technical Losses Strategic Objective Strategies for Managing Energy Losses Communicate and educate internal and external stakeholders Build mechanisms to control losses Reduce Losses to agreed level (medium term) Audit, measure and fix customer installations Ring fence electrical networks to balance energy delivered Implement tested technologies Ensure sustainability Actions 1234 Strategic Objective Achieve cost optimised level of technical losses throughout network Initiated Power Factor correction project Reactive Power Compensation Working Group Reviewing energy losses criteria during network design and operations Actions 1 23

© 2008 Eskom. All rights reserved. 9 Strategic Objective Strategies for Managing Technical Losses Achieve cost optimised level of technical losses throughout network Initiated Power Factor correction project Reactive Power Compensation Working Group Reviewing energy losses criteria in project design and planning Actions  Focuses on preventing voltage collapse in poor power factor networks  Improves transfer capacity of networks and reduce technical line losses in the short term  Develop guidelines for application to Sub transmission networks  Going forward network planning incorporate principles of reactive compensation and the loss reduction effects thereof  Design and planning of new or refurbished networks in line with energy loss objectives, network standards and related investment criteria's Detail 123  Review current technical loss calculation methods & assumptions (clean slate review)  Review of technical losses imbedded in terms of long term cost of supply Approach

© 2008 Eskom. All rights reserved. 10 Strategic Objective Strategies for Managing Non-technical Losses Communicate and educate internal and external stakeholders Build mechanisms to control losses Reduce Losses to agreed level (medium term) Audit, measure and fix customer installations Ring fence electrical networks to balance energy delivered Implement tested technologies Ensure sustainability Actions  Use business intelligence to identify high loss customers  Resource and prioritise customer audits  Co-ordinate customer audits  Measure results nationally  Identify network based boundaries  Install metering to measure energy flows  Audit and clean data per measured area  Balance energy inflows and outflows to determine anomalies  Investigate all possible options to manage; reduce energy losses  Pilot and test scalability of identified technologies  Implement and measure benefits of tested technologies  Determine business RACIs for revenue losses management activities  Detailed analysis and identify gaps  Build competence and certify revenue loss management resources  Measure results and adjust resource strategy accordingly Approach 1234

© 2008 Eskom. All rights reserved. 11 ELP Public Communication Initiative Detail To influence the voluntary behaviour of SA consumers to be legal electricity users by:  Reducing the number of illegal electricity consumers  Mobilising South Africans to report and prevent illegal connections  Building partnerships to deal with illegal electricity consumption Objective Through-the-line 1 campaign that supports, publicises and drives behaviour-change utilising:  Community mobilisation: building compliant behaviour through norms, values, partnerships, etc  Amnesty & Reporting line campaign  Partnership campaign with Organised business, Civil society & Communities  Compliance campaign, Eskom Audit roll-out, Trend analysis  Communication: Publicising all the above Tool 1 Through-the-line: Utilising both Above-the-line (National media such as TV, radio, national press) and Below-the-line (Community media, brochures, etc.) channels  Focus on both LPUs/ Large SPUs and residential SPUs.  Two integrated pillars: a Pro-active Integrity-based Program and a Compliance-based Program  Show target audiences the impact & risk of illegal use of electricity  Show target audiences the benefits of legal electricity usage  Empower target audiences through partnerships, organised structures and mobilisation  Tie this campaign in with broader energy efficiency education  Aligned with existing Eskom campaigns Approach 1. Reduce energy losses 2.Improve safety 3.Reduce non-payment 4. Improve availability of supply Benefits

© 2008 Eskom. All rights reserved. 12 Agenda Background Strategy formulation Implementation Results Concluding Remarks

© 2008 Eskom. All rights reserved. 13 Realising Results In order to realise results, the following has been put in place to assist in the management of energy losses:  Energy Losses Audit Methodology –To enhance the value derived from customer meter audits  Energy Losses Management Scorecard –For measurement and target setting – links to Strategy –Breaks down the weighting per performance measure / KPI  Energy Losses Management RACI –Assigns RACI principles (i.e. who should be accountable, responsible for results, etc) to various roles and departments  Functional Job Compacting –Proposed ELP Compacting assigns a weighting (% of Functional Compact dedicated to EL) to each department / role identified in RACI

© 2008 Eskom. All rights reserved. 14 Programme Plan Efforts to be integrated into normal business practice Pilot and Quantify. Assign, Resource, Train, Measure Ongoing Communication Initiatives Account for energy delivered by balancing energy at feeder level Identify and resolve structure, process, skills and resource constraints 2006/ Ongoing communication initiatives to create awareness and understanding of, and change behaviour in managing energy losses (both internal and external) Prioritise and Measure Ringfence and Balance Pilot and Apply Manage and Resource Audit, measure and fix customer installations Ringfence electrical networks to balance energy delivered Implement tested technologies to manage energy losses Ensure sustainability through proper resourcing Communicate to and educate internal and external stakeholders Build governance and capacity to sustain as part of normal business Proactive identification, auditing, fixing and measurement of customer audits Build governance and capacity to sustain as part of normal business Build governance and capacity to sustain as part of normal business Build governance and capacity to sustain as part of normal business Identify, investigate, pilot and implement tested technologies to manage energy losses

© 2008 Eskom. All rights reserved. 15 Measurement and Target Setting How the Scorecard Supports the Strategy

© 2008 Eskom. All rights reserved. 16 REC Regional Project Manager Regional ELP Task Team Communication Regional ELP Sponsor Regional ELP Champion/s Technology Network Ring Fence Manage & Resource Audit, Measure & Fix Proposed Regional ELP Implementation Structure Should be a REC Member Dedicated Regional resource National PMO To be chaired by ELP Sponsor

© 2008 Eskom. All rights reserved. 17 Agenda Background Strategy formulation Implementation Results Concluding Remarks

© 2008 Eskom. All rights reserved. 18 Trend of Total Distribution Energy Losses Jan 02 – Jan month moving average (MMA) Dx wide energy losses initiatives Total Energy Losses 5.34% YTD Energy Losses Trend improving after the implementation of the Energy Losses Management Programme

© 2008 Eskom. All rights reserved. 19 Current Distribution losses National trend 12 month moving average Monthly actual losses

© 2008 Eskom. All rights reserved. 20

© 2008 Eskom. All rights reserved. 21 Programme Status – LPU Audits Distribution Audit and Measure Workstream Up to end January ,371 10,371 9,419 11,002 1,

© 2008 Eskom. All rights reserved. 22 Programme Status – SPU Audits Distribution Audit and Measure Workstream Up to end January , , , ,125 14,125 6, ,885 13,243

© 2008 Eskom. All rights reserved. 23 Programme Status – PPU Audits Distribution Audit and Measure Workstream Up to end January ,829,911 1,380,075 1, ,103,114 29,415 77,879 22,788 45,233 34,108

© 2008 Eskom. All rights reserved. 24 Agenda Background Strategy formulation Implementation Results Concluding Remarks

© 2008 Eskom. All rights reserved. 25 Lessons learned  Energy theft solution requires joint efforts in different kinds of areas –Technical –Commercial –Governmental  A close follow up is necessary to facilitate payments for low income clients  Personnel commitment is fundamental for success  Isolated actions are not useful  Persistent actions are required with close follow up  Standard procedures are important  KPIs are necessary for objective progress measurement  Senior management involvement is highly critical  Beware of the enemy within

© 2008 Eskom. All rights reserved. Questions

© 2008 Eskom. All rights reserved. 27 The End