FFC Briefing to Portfolio Committee on Energy

FFC Briefing to Portfolio Committee on Energy

22 April 2023

Presentation OutlinePresentation Outline

1. Introduction

2. Access to Free Basic Electricity (FBE) and Free Basic Alternative Energy (FBAE)

3. Financing FBE and FBAE

4. Implementing FBE and FBAE

5. Electricity cross subsidies

6. Is 50kwh sufficient?

7. FFC Views on block tariffs

8. ConclusionsFFC Briefing to Portfolio Committee on Energy 22/03/2012 2

1. Introduction1. 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 3

2. Implementation of FBE and FBAE2. Implementation of FBE and FBAE

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

Municipal FBE Authority and Providers

Type of Municipality Number Electricity Authority Electricity Provider FBE Policy FBE Implementing

Metros 6 6 6 6 6

Secondary Cities 21 21 21 21 21

Larger Towns 29 26 26 29 29

Smaller Towns 111 109 104 111 111

Rural Municipalities 70 31 25 58 56

Total 237 193 182 225 223

5

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Metros Secondary Cities Larger Towns Smaller Towns Rural Municipalities

National Average

Access to energy 2007

Electricity Gas Paraffin Candles Solar Other

86% 84%82% 80%

65%

80%


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1. Consumer Units (CUs) receiving electricity are on the increase

2. Consumer Units (CUs) receiving FBE are on the increase after some decline between 2006-2009

Consumer Units (CUs) Receiving Electricity


FBE Coverage Against Indigent FBE Coverage Against Indigent RegistersRegisters

0

100000

200000

300000

400000

500000

600000

700000

800000

Metros Secondary Cities Larger Towns Smaller Towns Rural Municipalities

FBE coverage against indigent registers 2010

Identifed indigents Indigents receiving FBE

89%

77%

61%

77% 43%

7


8


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3. Funding FBE and FBAE3. Funding FBE and FBAE


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LES Allocations for Basic and Free Basic Electricity

Type of Municipality Total LES

Total Electricity

Allocation %

Basic and Free Basic

Electricity %

Basic and Free

Basic Alternative

Energy

Metros 6,773,262,505 1,981,442,127 29% 1,667,254,358 84% 314,187,770

Secondary Cities 4,653,159,124 1,541,502,957 33% 1,302,856,270 85% 238,646,687

Larger Towns 1,915,568,522 739,549,057 39% 574,095,152 78% 165,453,904

Smaller Towns 3,866,486,543 1,411,887,225 37% 1,097,460,626 78% 314,426,599

Rural Municipalities 4,943,573,738 2,808,615,121 57% 1,921,016,652 68% 887,598,469

Total 22,152,050,432 8,482,996,488 38% 6,562,683,058 77% 1,920,313,430 FFC Briefing to Portfolio Committee on Energy 22/03/2012

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4. Implementation of FBE and 4. Implementation of FBE and FBAEFBAE


Implementation of FBE and Implementation of FBE and efficiencyefficiency

• 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 12

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5. Cross subsidies5. Cross subsidies


Inter and Intra Cross-subsidisationInter 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%.

15FFC Briefing to Portfolio Committee on Energy 22/03/2012

Electricity Surpluses Electricity Surpluses


Price SubsidiesPrice Subsidies


Effect of Administered Prices Effect of Administered Prices



6. Is 50kwh sufficient?6. Is 50kwh sufficient?

But is 50KWH per month adequate?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)


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1. Some Municipalities offer more than the 50KWH recommended.

2. More metros give more!


InefficienciesInefficiencies


7. View on Block Tariffs7. 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!


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8. Conclusion8. Conclusion


ConclusionConclusion

• 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


THANK YOU.THANK YOU.

Financial and Fiscal CommissionMontrose Place (2nd Floor), Bekker Street,Waterfall Park, Vorna Valley, Midrand,Private Bag X69, Halfway House 1685

www.ffc.co.zaTel: +27 11 207 2300Fax: +27 86 589 1038

26FFC Briefing to Portfolio Committee on FFC Briefing to Portfolio Committee on Energy 22/03/2012Energy 22/03/2012

FFC Briefing to Portfolio Committee on Energy

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