FREE BASIC ELECTRICITY/FREE BASIC ALTERNATIVE ENERGY March 2012

1. FREE BASIC ELECTRICITY/FREE BASIC ALTERNATIVE ENERGY March 2012

2. PRESENTATION OUTLINE • Background • Mandates • Funding • Implementation Challenges and Possible Interventions • Status • Conclusion

3. BACKGROUND ON FBE/FBAE • 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 2003with the following intentions: • To provide basic energy to poor households to alleviate poverty. • Minimise the health impact arising from the use of certain fuel.

4. BACKGROUND ON FBE/FBAE cont… • Free Basic Electricity (FBE) for the provision of both grid and non-grid. • Acknowledging that not all poor households in South Africa have access to grid or non-grid electricity, • provision of FBE sounds unfair to un-electrified households • lack of infrastructure for the provision of FBE necessitated Free Basic Alternative Energy (FBAE) Guidelines for subsidising alternative energy carriers. • Provision of FBAE is more expensive than FBE since most of the alternative energies are unregulated.

5. BACKGROUND ON FBE/FBAE • 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 experiencing challenges with regards to the implementation.

6. BACKGROUND ON FBE/FBAE • Facilitating access to electricity through government subsidised electrification; • Free connections provided to Eskom’s low consumption residential customers; and • Lower price increases applied to low consumption domestic customers. (15% vs general increase of up to 31.3%)

7. MANDATE OF PROVINCES IN RESPECT OF FBE • 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. • MANDATE OF MUNICIPALITIES IN RESPECT OF FBEsection 156 (1)

8. ENERGY SOURCE GIVEN AS FBE/FBAE • Provision of free 50kWh of grid electricity per month to all households with concomitant blocked or stepped tariffs (IBT) 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 and taking into account the funding aspects , 50KWh was deemed appropriate FBE amount per month per household.

9. ENERGY SOURCE GIVEN AS FBE/FBAE • Provision of free non-grid electricity to all non-grid electrified households (connected through the National Electrification Programme). • FBAE given to indigent households include:

10. CHALLENGES - IMPLEMENTATION • Disconnections • Eskom and Municipalities are using 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 of other services.

11. CHALLENGES - IMPLEMENTATION • Made worse by the fact that FBE does not accumulate if not used within a particular month 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. Inconsistency in Policy Application • Between municipalities and Eskom. • Amongst municipalities themselves.

12. CHALLENGES - IMPLEMENTATION • Other challenges include the following • Lack of indigent policies and registration, verification & management of indigents. • Cogta, DoE, SALGA, ESKOM and other utilities are assisting Municipalities. • Token collection, enhancement and provision of FBE/FBAE levels of service in contravention of policy. • Municipalities to assist beneficiaries on collection and advice on enhancement.

13. CHALLENGES - IMPLEMENTATION Lack of communication. • Continues improvements on communication by all stakeholders. Lack of reporting, monitoring & evaluation system. • Cogta committed to incorporate this responsibility in the current restructuring of the Department. • Coordination of FBS implementation at provincial & municipal level.

14. FUNDING ALOCATION: FBE/FBAE • 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 resulting in Municipality revenue generation challenge.

15. FUNDING ALOCATION: FBE/FBAE • 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), such municipalities shall pass on the benefits of such grants to targeted indigent households. • Municipalities must further allocate funds from their budgets for FBE/FBAE to supplement allocation to cover all the indigent households.

17. 2011 FREE BASIC ENERGY SNAPSHOT

18. Access to Electricity National Progress Access - 1996 Access - 2010

19. CONCLUSION • Estimated national implementation of Free Basic Electricity/Free Basic Alternative Energy (FBAE) is about 70% to all the qualifying indigents. • DoE will review the policy in the future to incorporate new policy developments. • Municipalities use their policies to identify the recipients of the FBE. • Lack of a monitoring mechanism on the ground makes it difficult to establish accurate figures.

20. CONCLUSION • Cogta reported that they are undergoing structural changes 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.