Ensuring Universal Service May 15, 2012

1. STRIKING A BALANCE IN THE MIDST OF CHANGE May 13-16, 2012 Québec City, Québec (Canada) Ensuring Universal ServiceMay 15, 2012 Phindile Nzimande, CEO, National Energy Regulatory of South Africa

2. Discussion Outline • Energy poverty • The concept of energy poverty • Energy poverty in the South African market context • Interventions to tackle energy poverty • Role of Regulators in ensuring access to energy:- • Meeting the energy needs of remote customers • Sharing costs of universal access service • Challenges faced by Regulators in dealing with energy poverty in developing markets 2

3. Energy Poverty: Electricity Consumption in Africa Electricity consumption per capita in Africa is still very low compared to that of Western economies But this map shows that even within Africa, there are stark differences in levels of access to electricity between South Africa and the rest of sub-Saharan Africa. South Africa, electricity access at > 80%, while in some sub-Saharan Africa countries less than 20% of population has access to electricity 3

4. Energy poverty Concept • Energy poverty refers to when a population does not have access to regular, modern, clean and affordable energy fuel supplies • In the South African case, our population’s access to electricity (the electrification rate) would be the best indicator of our country’s energy poverty status • Because, electricity is the most predominant energy fuel used in South Africa 4

5. Addressing Energy poverty in South Africa • Electrification programme is a government of South Africa’s policy agenda – resulting from the White Paper on Energy Policy (1998) • Electrification rate has increased from 30% in 1994 to about 80% in 2011 (5.4 million households connected) –Map on the next slide shows electrification intensification • Under universal access objective - 92% access to electricity by 2014/15 for all formal households • Off Grid supplies:- 18 projects supply 28 845 households of which 19 320 get Free Basic Electricity (FBE) • Free Basic Alternative Energy is supplied to 52 653 households • Government budget allocation of US$375Million annually 5

6. Addressing Energy poverty in South Africa Baseline: Access in 1996 (country was red to green) 6

7. Addressing Energy poverty in South Africa National Progress: Access in 2010 (only pockets of red left, country becoming more blue) 7

8. Interventions to tackle energy poverty Policy • The White Paper on Energy Policy (1998) underpins increasing access to affordable energy services • “Government commits itself to implementing reasonable legislative and other measures, within its available resources, to progressively realise universal household access to electricity.” • Regulation • Inclining Block Tariffs • Allowance of transparent cross subsidies 8

9. Interventions to tackle energy poverty Implementation • Establishment of National Electrification Fund • Establishment of entity to drive electrification Education • Education on conservation & improve efficiency of biomass fuel cook-stoves Non-grid electrification programmes • promise arising from renewable energy sources Affordability • lifeline tariffs, free basic electricity and inclining block tariffs 9

10. Challenges faced by regulators in dealing with energy poverty • Infant regulatory framework/policy about-turns? • Lead time for the economy to transition from current prices to cost-reflective prices – potential public/political backlash • Affordability – setting prices that maintains sustainable cross-subsidies • Enforcement powers and capacity of judiciary to allow reviews/appeals of regulator decisions 10

11. Conclusion • Addressing energy poverty requires a variety of measures and sustained investments • Regulators have a role to play – engender regulatory certainty to attract investments, transparency, predictability, pricing and advising policy makers • Renewable energy – an opportunity to increase access to clean energy for all via off-grid/mini grids generation • Pro-poor tariff still required to deal with energy fuel affordability 11

12. Thank you “WWW.NERSA.ORG.ZA”