FFC Briefing to Portfolio Committee on Energy

1. FFC Briefing to Portfolio Committee on Energy 16 August 2014

2. 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

3. 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

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

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

6. 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

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

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

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

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

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

12. 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

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

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

15. 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

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

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

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

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

20. 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

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

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

23. 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

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

25. 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

26. 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