GENFLEX TARIFF AND INCOPORATION OF THE MEC INTO THE NMD RULES

1. GENFLEX TARIFFANDINCOPORATION OF THE MEC INTO THE NMD RULES As approved by NERSA

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4. Executive summary In December 2014, NERSA published its approval of the Genflex tariff on the NERSA website as follows: • The introduction of a new tariff category (Genflex) for customers consuming (importing) and generating (exporting) energy at the same point of supply (or metering point) for urban and rural supplies connected to either the Distribution or Transmission networks be approved. • This tariff category is based on Eskom’s existing tariff rates and deals specifically with the treatment of network-related charges where there is consumption and generation of energy at the same point of supply to avoid double-charging of network charges. • All customers where there is consumption and generation of energy at the same point of supply are encouraged to convert to the Genflex tariff to avoid paying for network charges twice.

5. Executive summary • It is proposed that the rules applicable to loads with regards to NMD are also applicable to generators with regards to MEC with the exception of the treatment of the excess MEC charges. It is proposed that the following is applicable to generators with respect to excess MEC charges: • The excess MEC charge will be raised with respect to the excess MEC registered which is above the contractual MEC. • Depending whether the generator is connected at Transmission or Distribution level, the charge will be based on network charges applicable for generators connected at Distribution or Transmission. • With regards to medium voltage connected generators, the excess MEC charges will be based on the network charges applicable to Distribution high voltage connected generators. • There will be no increasing penalties in accordance with the event number of the MEC exceedance.

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7. Background • In March 2012, NERSA published the “Regulatory rules on network charges for third party transportation of energy”. • These rules are to be republished • Provide guidance on the treatment of use of system charges for loads and generators • In its MYPD3 determination, NERSA approved the introduction of use of system charges for generators. • The above raised the question of howshould customers be charged where there is consumption and generation at the same point of supply? • There was no tariff category dealing with charges for customers that are both generators and consumers of energy from the same point of supply.

8. Where are we? 05/2013 04/2015 01-04/2015 12/2014 09/2013 Introduction of Genflex NERSA posted Genflex approval with comments Resubmission of Genflex to NERSA We are here Preparation for implementation 04/2012 NERSA Public Hearing scheduled Eskom governance approvals obtained

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10. What is the Genflex tariff • Genflex is a tariff category proposed for scenarios where there is both consumption and generation of energy at the same point of supply (metering point). • Whether a generator requires energy for auxiliary usage when not generating, or a customer that is a co-generator produces more energy than is consumed (at times) and exports the excess energy onto the grid, there is a case for the Genflex tariff. • The same network assets are used for the purposes of generating (delivering energy into the grid) and for consumption (importing energy from the grid). • The proposed Genflex tariff is developed for the purpose of ensuring that customer are not disadvantaged in terms of payment of the use of system related charges. • Es • Eskom metering is capable of measuring import and export of energy from the same point of supply

11. What is the Genflex tariff (continued) • There is currently no tariff category dealing with charges for customers that are both generators and consumers of energy from the same point of supply. • There is also a need to review the NMD Rules to accommodate Maximum Export Capacity rules. • A separate submission to be made to the Regulator • This submission suggests some of the principles that could be incorporated into the Maximum Export Capacity rules.

12. Comparison of use-of-system charges payable – loads and generators

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14. Criteria for allocation of customers to the Genflex tariff • There must be consumption and generation at same point of supply (metering point) • The customer must be synchronised with the Eskom grid (and supplied MV or HV or Tx connected) • Where there is synchronisation, CUOSA must be in place (applicable MEC) • Generators/ consumers connected behind the Municipality network are not considered for this tariff as they use the Municipality network • The customer must have the appropriate metering i.e. 4 quadrant metering • Currently LPU customers have this metering • Where this metering is not available the customer must convert to the tariff and pay the applicable fees for the metering installed

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16. Tariff charges

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20. Proposed charges payable where consumption and generation of energy occurs at the same point of supply – Transmission connected and Distribution HV generators (>66kV) Consumption Generation + Energy charges- energy generated to be recorded for purpose of calculating reliability service charge and losses + Energy charges + Network charges + Network charges Greater of + Excess network charges (MEC excess charges) +Excess network charges (NMD penalties) Review in NMD rules + /- Losses Sum of + Losses + Reliability services + Reliability services Sum of + NERSA approved subsidy + Service and admin charges + admin charges

21. Proposed charges payable where consumption and generation of energy occurs at the same point of supply –MV generators (<66kV) Consumption Generation + Energy charges- energy generated to be recorded for purpose of calculating reliability service charge and losses + Energy charges + Network charges No Network charges applicable Review in NMD rules + Excess network charges (MEC excess charges) +Excess network charges (NMD penalties) + /- Losses Sum of + Losses + Reliability services + Reliability services Sum of + NERSA approved subsidy + Service and admin charges + admin charges

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23. NMD rule changes • The NMD/MEC Rules shall apply to both the NMD and the MEC. An excess MEC charge will be raised when the MEC is exceeded. The excess MEC charge will be raised as follows: • The excess MEC charge will be raised with respect to the excess MEC registered which is above the contractual MEC. • Depending whether the generator is connected at Transmission or Distribution level, the charge will be based on network charges applicable for generators connected at Distribution or Transmission. • With regards to medium voltage connected generators, the excess MEC charges will be based on the network charges applicable to Distribution High voltage connected generators. • There will be no increasing penalties in accordance with the event number of the MEC exceedance. • Exceedance of MEC constitutes a material breach and consequences of such exceedance are dealt with the Connection and use of system agreement. • The excess NMD and MEC charges will be raised for both generation and consumption.

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25. Contracting A hybrid agreement which merges the current the Electricity Supply Agreement and Connection and use of system agreement has been developed for Genflex customers. Customers are to be converted to the tariff once agreement is signed. Once the customer no longer meets the criteria for the Genflex tariff i.e. is no longer a generator and consumer of energy, then the customer may revert to other standard tariff options.

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27. Other implementation issues All customers converted to the tariff must comply with the existing pricing policies. Depending on the outcome of the process to be followed in terms of the Regulatory rules on third party transportation of energy, the Genflex tariff structure may change.

28. Thank you