Service Delivery Framework

1. Service Delivery Framework Update for Portfolio Committee of Public Enterprises By Jacob Maroga

2. Contents • Background stats on Distribution • Customer profile • Debt Statistics • History of Takeover debt • Bulk Debt • Individual Debt • SDF • Background • Objectives • Principles • Progress feedback

3. THE MAP OF ESKOM REGIONS

4. Total number of Customers LPU- Large Power Users SPU- Small Power Users

5. The History of Customer Numbers • Historically Eskom was mainly a bulk supplier • Residential customers grew from 140k in 1991 to 3,3m in 2003 • Areas of growth • Take-overs of former Black Local Authorities • Take-overs of former Homelands • Electrification programme

6. Sales and Revenue by category

7. Total Debt (R’m)

8. LPU over 90 days (R’m)

9. LPU over 90 days per Region (R’m)

10. SPU Debtors over 90 days per Region (R’m)

11. SPU Debtors over 90 days (R’m)

12. Local Authority Debt (R’m) over 30 days and R10 000

13. History of Problems with BLA’s • Financial collapse of former Black Local Authorities( BLA’s) in late 80’s • Bulk debt problems • Two processes unfolded to solve BLA debt problems • Eskom take-overs of customers and assets • Bulk debt agreements with newly formed TLC’s

14. Bulk Debt Agreements with Municipalities • In the early 90’s Municipalities owed Eskom close to R800m • Bulk of debt was due to BLA take over • Former ‘White’ Municipalities were reluctant to take over former BLA’s as a result hereof • This created a problem with the formation of TLC’s

15. Bulk Debt Agreements with Municipalities • A process chaired by the then Transvaal Provincial Administration was embarked on to find a solution • The process included various stakeholders • In 1995 an agreement was reached with Eskom to write back some of the debt in such a way that the culture of payment was restored.

16. Bulk Debt Agreements with Municipalities • The parties agreed that: • 30th June 1995 be used as a cut off point for the Municipal debt • All amounts owed to Eskom before this date be put in suspense account 1 and accrue no interest • All debt accumulated from 01 July 1995 up to the date when the Bulk Debt Agreement was signed be put into suspense 2 account and accrue interest

17. Bulk Debt Agreements with Municipalities • The current account and suspense 2 accounts be paid on due date without fail • On settlement of the suspense 2 account, suspense 1 would be written back • Should the municipality default on its current account, both suspense1 & 2 become due and payable • The choice to take advantage of this arrangement depended on the individual municipality.

18. Bulk Debt Agreements with Municipalities

19. Results of Bulk Debt Agreements • BDA’s have performed very well • Debt owed by municipalities have been normalised • There are still a few municipalities which are being monitored closely • The risk on bulk debt is currently manageable • Municipalities, Eskom and communities have benefited from this.

20. Take-over of for BLA Customers • The failure of BLA to manage supply and pay bulk debt • Assets and customers taken over by agreement with communities • Debt of BLA’s written -off against assets • Projects initiated to normalise infrastructure and service delivery • Limited success wrt to payment levels • Billing, account management and meter reading also not efficient after take-overs.

21. Challenges with take over areas • Account management processes • Accuracy of bills • Frequency of meter readings • Integrity of metering equipment • High level of account estimations • Data integrity • Quality of Supply • Need for refurbishment and upgrade of major installations • High level of equipment theft and vandalism • Illegal connections

22. Challenges with take over areas • Pre take-over issues • Low tariffs viz Eskom’s • Flat rate • Ineffective debt management • Social issues • Affordability • Lack of respect of service infrastructure • Tolerance of vandalism • Pressure groups taking advantage of the situation • Other services competing for same income

23. Soweto Payment levels - %

24. Soweto payment levels Jan 01 – Dec 01

25. Payment Levels

26. Background of SDF • Increasing debt in Central Region to R1.4b • Implementation of stricter credit management practices • Increase tensions between Eskom and communities • Customer complaints about service delivery issues • Need for a consultative approach

27. Background to SDF • The formation of the SDF was preceded by a various discussions with wide range stakeholders in the Central Region through: • mass meetings • briefings of various committees of both Local and Provincial government • roadshows involving the DPE Minister • customer forums • meetings with community leaders and organisations

28. Background (cont..) • SDF endorsed on 30 November 2001 • Minister J Radebe sponsored the SDF • Stakeholders represented on the SDF: • SANCO • Human Rights Commission • City of Johannesburg Council • City Power • DPE • DPLG • Gauteng Provincial Government • Sedibeng Council • Tshwane Metro • Various residents associations

29. SDF - Building Blocks The six categories of focus within the Service Delivery Framework are:

30. SDF Objectives The objectives of the SDF are to: • Develop a joint undertaking between Eskom, Stakeholders and Customers • Develop a community-centric solution • Address service delivery issues, problems and barriers • See solution as a journey instead of a single event • Start with Central Region for later application in similar areas

31. Review of the SDF: Principles of SDF: • Specified debt part of SDF • Normalisation of operational and social issues • SDF accountability of all stakeholders • Payment of current account first priority • Normal credit management part of SDF • Addressing of illegal practices • Joint communication interventions by all stakeholders

32. Business Operations Prog. • 120 000 customers pledged support to SDF • 63 000 faulty meters replaced • Estimations reduced from 58% to 20% since Oct ’02 • Extensive communication on various issues • Extensive internal awareness All in all Investment made = R62m

33. Additional Projects 2003

34. Key SDF Developments • Implementation of Debt Relief decision • Payment plan for outstanding debt • Resumption of Credit Management • Conversion to Prepayment Meters • Update on Free Basic Electricity

35. Debt Relief • Eskom Council approval for write-off of debt incurred before 31 September 2001 in the SDF arrears in Central Region based on • high level of disputed accounts in the Region • history of the take-over areas in Central • facilitate effective credit management • Announcement on 30 April 2003 • The process will take appr. 3 months to implement • The debt to be written off is R1.391b

36. Payment Plan • All debt incurred from 1 May 2002 is all due and payable • A 20 month payment plan for outstanding debt will be offered to customers • Customers will be expected to pay current account and a portion on the payment plan.

37. Resumption of Credit Management • Suspension of Credit Management in Central Region is now lifted • Full payment of current account is expected from customers for April 2003 • Credit Management processes will apply for default on current account plus payment plan

38. Conversion to prepayment • 63 000 customers have been converted to prepayment • Initial reports shows a positive reception of prepayment • A formal assessment report is being finalised • More prepaid conversions will be made available to customers based on the results of the report.

39. Free Basic Electricity • Pilots completed in 13 areas on behalf of DME • The FBE framework is being finalised by DME and DPLG • A self targeted approach will be followed • 50kWh will be offered to customers who apply • A 10 amp limited supply will be applied to applying customers • Planned phased roll-out from 1 July 2003

40. In Conclusion • The debt problems are associated with the history of take-overs • Each take-over has its unique challenges • The SDF currently focuses on Central Region • Some of the lessons learned may be applied to other areas • The normalisation of Service Delivery is a country challenge • We believe we are on the correct path.

41. Thank you !!!