COMPLIANCE MONITORING REPORT OF BLUE CRANE ROUTE MUNICIPALITY

Transcription

1 COMPLIANCE MONITORING REPORT OF BLUE CRANE ROUTE MUNICIPALITY Monitoring Date: 05 July 2016

2 All enquiries and correspondence to be directed to the Head of Department unless indicated otherwise by means of a formal letter signed by the head of department: Electricity Licensing, Compliance and Dispute Resolution. Tel: National Energy Regulator of South Africa Kulawula House 526 Madiba Street Arcadia Pretoria PO Box Arcadia 0007 Tel: +27 (0) Fax: +27 (0) DISCLAIMER This is a final report considered a true reflection of the implementation of the CAP based on information and evidence obtained from both the licensee and site verification of plant condition conducted during the monitoring process. Page 2 of 19

3 TABLE OF CONTENTS EXECUTIVE SUMMARY INTRODUCTION OVERVIEW MONITORING AND ENFORCEMENT OBJECTIVES METHODOLOGY NERSA AND BLUE CRANE ROUTE MUNICIPALITY DELEGATES GENERAL INFORMATION ON BLUE CRANE ROUTE MUNICIPALITY AUDIT FINDINGS BLUE CRANE ROUTE MUNICIPALITY S PERFORMANCE ON NERSA COMMUNICATION PROGRESS ON THE IMPLEMENTATION OF THE CORRECTIVE ACTION PLAN PLANT CONDITION DURING AUDIT VS. MONITORING TIME CONCLUSIONS RECOMMENDATIONS NEXT STEP Page 3 of 19

4 EXECUTIVE SUMMARY The National Energy Regulator (NERSA) conducted a compliance audit on Blue Crane Route Municipality ( the Licensee ) from 19 to 20 August 2014 to determine its level of compliance with the licence conditions. The objective was to determine the compliance of Blue Crane Route Municipality with the legal, financial and technical conditions of the electricity distribution licence. During the audit, Blue Crane Route Municipality representatives gave an overview, which addressed, among others, the staff complement, asset management, infrastructure development, the maintenance strategy and infrastructure projects done to date. After the audit, findings were recorded in a draft report and forwarded to the Licensee for management comments with regard to the correctness of the findings in order to make the report final. On 17 October 2014, Blue Crane Route Municipality sent the management comments to NERSA. These were received well within the prescribed time frame. The report was then considered final by NERSA and Blue Crane Route Municipality was then requested to send NERSA a signed, time-bound corrective action plan (CAP) to address the highlighted instances of non-compliance. On 19 July 2016, Blue Crane Route Municipality sent a CAP for NERSA s perusal and this was found to be acceptable as it addressed the issues highlighted by the audit. The National Energy Regulator instituted a monitoring regime to ensure and enforce the implementation of the CAP. On 05 July 2016, the National Energy Regulator conducted a monitoring exercise on the implementation of the CAP at Blue Crane Route Municipality. The monitoring exercise was conducted in order to determine the progress made in the implementation of the CAP. The National Energy Regulator is of the view that addressing issues raised during an audit will help Blue Crane Route Municipality to be a more efficient and effective licensee. This report depicts all the findings as per the audit and presents the status quo in terms of the progress that has been made at the time of the monitoring to address the instances of non-compliance highlighted during the audit. During the monitoring exercise, NERSA conducted site inspections to verify progress made in the implementation of the CAP. The level of improvement is depicted in detail in Section 7 of the report. Page 4 of 19

5 1. INTRODUCTION 1.1 Overview The National Energy Regulator (NERSA) is required to monitor and assess whether the electricity suppliers comply with the conditions of their licences. The Energy Regulator approved a compliance monitoring framework for electricity distributors in 2011, which acts as a guide on how compliance audits and monitoring must be conducted. The framework is also supported by the Electricity Regulation Act, 2006 (Act No. 4 of 2006), Chapter 4 (a) (vii), which states that the Regulator must enforce performance and compliance; and take appropriate steps in the case of non-performance. The National Energy Regulator conducts the compliance audits on licensed electricity distributors annually. The National Energy Regulator regulates the energy industry in accordance with Government laws and policies, standards and international best practices in support of sustainable development. The organisation issues licences to electricity distributors and therefore requires audits to be conducted against key licence obligations. It is the National Energy Regulator s mandate to monitor and enforce compliance with the licence conditions as per the Act. This monitoring process enforces and ensures improvement and sustainability of the licensees for the betterment of the Electricity Supply Industry (ESI), which will lead to improved quality of supply and service to customers. 1.2 Monitoring and Enforcement Objectives The key objectives of the compliance monitoring and enforcement of the corrective action plans are to: a) enforce implementation of the corrective action plans; b) help the licensee not to lose sight of critical matters that need to be corrected; c) help the licensee to start doing self-monitoring in terms of their performance against licence conditions; d) help the licensee to ensure that the quality of service and supply does not decline; and e) inform the Energy Regulator of the progress made by the licensee in the implementation of the corrective action plans. Page 5 of 19

6 2. METHODOLOGY A corrective action plan template was developed and sent to Blue Crane Route Municipality ( the Licensee ) to populate all the instances of non-compliance highlighted during the audit, together with the intended corrective action plan (CAP) with target dates of implementation. This is to be used by the National Energy Regulator to monitor the progress made and to establish whether the timelines on the CAP were realistic and addressing the issues highlighted during the audit. The CAP was sent to the National Energy Regulator after being signed by the relevant officials of the Licensee. The National Energy Regulator agreed on the CAP and instigated a monitoring process that robustly monitors progress. Progress is checked against target dates and remedial actions are implemented on an ongoing basis. Proof and supporting documents are requested and presented to the National Energy Regulator s officials during the monitoring process. Site verification was also done to compare the current plant condition against the plant condition during the audit. 3. NERSA AND BLUE CRANE ROUTE MUNICIPALITY DELEGATES NERSA was represented by the following officials: Mr Bongani Nhlabathi Compliance Monitoring Engineer Ms Basentjeng Malatji Compliance Monitoring Technician Ms Vuyelwa Poswa Dispute Resolution Officer Mr Morris Mafuyeka Compliance Monitoring Technician Blue Crane Route Municipality was represented by the following: Mr Vuyani Appolis Technical Service Manager Mr Gerard Goliath Chief Officer Page 6 of 19

7 4. GENERAL INFORMATION ON BLUE CRANE ROUTE MUNICIPALITY Blue Crane Route Municipality is the electricity distribution licence holder for the supply area with licence number NER/D/EC102 and supplies electricity to Somerset East, Cookhouse and Pearston. It has one bulk supply point with an installed capacity of 18 MVA and a maximum demand of 17.2 MVA. The network consists of 28km of medium voltage (MV) underground cable, 928km of low voltage (LV) underground cable, 2600km of MV overhead lines and 128km of LV overhead lines. It has 36,002 customers, which are categorised as follows: 6,696 prepaid domestic; 768 domestic credit meters; 354 commercial; 572 agricultural and 21 industrial customers. The total geographical area of Blue Crane Route Municipality is approximately 11,068.65km². At the time of the monitoring, it was highlighted that some instances of non-compliance that were noted during the initial audit have been addressed. These include the appointment of a Head Electromechanical, two linesmen, one electrician and six general workers. However, all the findings pertaining to the electricity network have not been addressed. 5. AUDIT FINDINGS At the time of the audit, the following was highlighted to the Licensee as areas that need attention and improvement: a) The critical vacancies must be filled. b) There was a shortage of working/field vehicles that must be included in the budget. c) The contract issued to trainees should include a retention strategy as the Licensee is faced with serious staff shortages in two critical departments. d) The electricity affairs of Blue Crane Route Municipality must be ringfenced from other activities of the Municipality. e) Blue Crane Route Municipality should budget sufficient funds (6%) for maintenance of the electricity network as required by the NERSA tariff guideline. f) The stores strategic spare equipment need to be replenish accordingly. g) The Licensee should replace all rotten wooden distribution poles as they pose a threat to the continuous supply of power to their customers. Page 7 of 19

8 h) The Electricity Department should procure a GIS system to enable them to track the condition of all electrical assets. i) The Licensee should apply to NERSA to amend their Electricity Distribution Licence as TLCs were phased out in j) Post mortems of the network incidents need to be conducted formally and must be recorded accordingly. 6. BLUE CRANE ROUTE MUNICIPALITY S PERFORMANCE ON NERSA COMMUNICATION In August 2014, the National Energy Regulator conducted a compliance audit on Blue Crane Route Municipality to determine its level of compliance with its licence conditions. This audit was followed by a number of s from the National Energy Regulator to Blue Crane Route Municipality. This communication was sent directly to Blue Crane Route Municipality s Electricity Manager. In all this communication, Blue Crane Route Municipality s Electricity Manager cooperated and responded in a satisfactory manner as indicated below. Table 1: BCRM s response record NERSA REQUEST DATE OF REQUEST LICENSEE RESPONSE DATE OF RESPONSE Request of Management 18/09/2014 Management 17/10/2014 comments on draft report comments sent Request for Corrective Action 26/11/2014 CAP sent 08/12/2014 Plan Monitoring notification 27/06/2016 Positive response 28/06/2016 Monitoring exercise 05/07/2016 Positive response 19/07/ PROGRESS ON THE IMPLEMENTATION OF THE CORRECTIVE ACTION PLAN At the time of the monitoring, it was noted that some instances of non-compliance that were highlighted during the audit have been addressed. These include the appointment of Head Electromechanical, two linesmen, one electrician, and six general workers, as well as the purchasing of field vehicles. However all findings pertaining to the electricity network have not been addressed. The table below depicts the progress made at the time of the monitoring of the implementation of the CAP that was submitted to NERSA. Page 8 of 19

9 Table 2: CAP Implementation Progress Non-compliance Corrective action Target date Target date for completion Critical Vacancies: The Critical vacancies must be filled. Progress Condition during monitoring day The Head Electromechanical Head Electromechanical Services was appointed on 01/09/2014. N/A 2014 Completed Appointed Assistant Head Rural Distribution Linesman BCRM is looking for a suitable candidate who resides in the area and knows the area very well. 3x Linesmen have been appointed and one has resigned. BCRM is looking for an internal candidate to fill the post. 2015/16 year 2014/15 (November) year 2017/18 Moved to 2017/18 year Organogram still to be reviewed and approved by Council 1x Linesman resigned in October 2015 and the post still vacant. Not filled Still vacant Page 0 of 19

10 Electrician Linesman Assistant General Worker Electrician who was employed resigned in September BCRM will advertise the post and look for a candidate residing in the area. The 2x Linesmen Assistant posts depend on the approval of the organogram in 2016/17 year. 6x General Workers were appointed February /16 year November 2014 Moved to 2017/18 year 2017/18 year 1x Electrician resigned in September 2015 and the post still vacant. Job tittle and description to be aligned with other municipalities of the same category. Still vacant Still vacant Completed Completed Compliant Shortage of working vehicles: There were a shortage of working/field vehicles Trainees: Contract issued to trainees should include a retention strategy. Two vehicles (LDV) have been purchased and delivered to BCRM. 6 x Vehicles (LDV) will be procured soon. BCRM is in the process of writing specifications for the vehicles. Policy on the retention of trainees will be developed by Corporate Services. 2015/16 year November /18 year 2017/18 Only five LDVs were purchased due to budget constraints. It was still to be raised in the training Committee to stipulate the condition and the policy. Noncompliant Noncompliant Page 1 of 19

11 Ring-Fencing: Electricity affairs of BCRM must be ring fenced from other activities of the Municipality Partially ring-fenced June /19 The Licensee does not prepare separate financial accounts but have different ledgers. Noncompliant Insufficient Budget: BCRM should budget sufficient funds (6%) for maintenance of the electricity network as required by NERSA tariff guidelines. Stores: Stores strategic spare equipment need to be replenished. Rotten wooded poles: Licensee should replace rotten wooded poles. BCRM maintenance budget is at 1.3% and will increase by 1% yearly. Supply Chain Management is in the process of replenishing spare equipment for the Electrical Services Department. The Licensee applied to DoE for funding to refurbish the BCRM substation and the accompanying backbone infrastructure for the BCRM area of supply. 2016/17 July 2015/16 August 2016/ / /19 November 2018/19 year BCRM maintenance budget is at 1.3% and will increase by 1% yearly starting from 2015/16 financial year. The BCRM is focusing on reducing distribution losses which will greatly improve the Licensee s revenue collection. The process is not yet completed. The Suurberg line needs to be replaced. DoE is funding approximately R30 Million for a substation and the accompanying backbone infrastructure. This will be done in phases until the 2018/19 financial year. Noncompliant Noncompliant Noncompliant Page 2 of 19

12 Geographic Information System (GIS): Electricity Department should procure a GIS system. The GIS system is still under discussion by the relevant departments and will be put in place. 2015/16 July 2017/18 The licensee reported that in 2017/18 there will be a fullyfunctional GIS system in the department. Noncompliant Amendment of Electricity Distribution Licence: The Licensee should apply to NERSA to amend their Electricity Distribution Licence. Network incident: Post Mortems of the network incidents need to be conducted formally and recorded accordingly. Application forwarded to NERSA and is being attended to. Conducting post mortems is done monthly as part of Safety Meetings. 23 July 2015 Ongoing 2015/16 Ongoing as part of Safety Awareness. Completed It is done and recorded in monthly meetings Compliant Compliant Page 3 of 19

13 The management of Blue Crane Route Municipality has filled some of the vacant positions in the organisational structure that were noted during the audit. At the time of the monitoring, nine positions had been filled. However, four positions were still vacant and the Licensee did not meet the initial target dates of 2016/17 as indicated in the CAP. The Licensee has moved the target dates to 2017/18. Five vehicles as opposed to six as indicated in the CAP had been procured at the time of monitoring. According to the Licensee, these were adequate for the Department to deliver on its mandate. However, once the vacant electrician position has been filled, the Department will be in need of another vehicle. The target date for this non-compliance was October 2015, and it has been partially addressed since the Licensee have already purchased five out of six LDVs. The Licensee did not address the non-compliance regarding contracts issued to trainees at the time of monitoring. However the Licensee mentioned that the Corporate Services Department will develop a retention policy, which will be finalised in the 2016/17 financial year. The electricity affairs of the Licensee are not yet ring-fenced. The Licensee s maintenance budget is at 1.3% and will increase by 1% yearly starting from the 2015/16 financial year. The BCRM Licensee is focusing on reducing distribution losses, which will greatly improve the Licensee s revenue collection. During the monitoring it was mentioned that the Supply Chain Management Department is in the process of replenishing spare equipment for the Electrical Department. It was reported that this will be finalised in 2018/19. The Suurberg line needs to be replaced. The Department of Energy (DoE) is funding approximately R30 million for a substation and the accompanying backbone infrastructure. This will be done in phases until the 2018/19 financial year. The Licensee applied to NERSA to amend its Electricity Distribution Licence to reflect the exact areas that the Licensee is supplying with electricity. The polygons were supplied to NERSA using Google Maps and Google Earth as opposed to GIS data sets as the Licensee did not have a fully functional GIS in place at the time. During the monitoring exercise, the Licensee indicated that the GIS is still under discussion with the relevant departments and will be budgeted for in the 2017/18 financial year. Page 4 of 19

14 Post mortems of network incidents are done on a monthly basis as part of the Safety Meetings. It was also mentioned that it is an ongoing programme as part of Safety Awareness. 8. PLANT CONDITION DURING AUDIT VS. MONITORING TIME The photos below depict the condition of the network equipment during the audit compared to the condition during the monitoring process. Poor vegetation management in HV yard and no yard stones. In 2016, vegetation was well managed, but no yard stones, no proper plinth and oil catchments. Oil leaks due to lack of maintenance and repairs on transformers with cable laid on the surface. In 2016 there are still signs of oil leaks on the transformer. Page 5 of 19

15 Melting terminations, possibility from overheating due to hot spot. In 2016, the conditions are still the same. Open cable trench with safety/first aid sign inside. Still no cable trench covers in Old repaired transformer in service. In 2016, the pole-mounted transformer has been replaced. Page 6 of 19

16 Old repaired transformer in service. In 2016, the condition of the transformer was still the same. Surge arrestors and drop out fuses missing. Surge arrestors and drop out fuses still missing in Drop out fuses and surge arrestors missing. In 2016, the transformer has been replaced but drop out fuses and surge arrestors are still not installed. Page 7 of 19

17 Evidence of old fuses that are no longer in stock. Evidence that old fuses that are no longer in stock were not replaced by Evidence of rust on the battery terminals indicating lack of proper maintenance. Old batteries have been replaced and well maintained in Panel cover missing. Panel cover still missing in Page 8 of 19

18 Evidence of poor maintenance. Maintenance still not done in Plinth submerged below ground level for the MSS. In 2016, still no change for the MSS. 9. CONCLUSIONS Blue Crane Route Municipality made some progress in addressing the noncompliances highlighted by the audit. This is confirmed by the filling of some vacancies, procuring of field vehicles and amendment of the electricity distribution licence. However, no significant progress was observed on the network conditions as some equipment had deteriorated. This was evident at the Licensee s substation, as transformers had signs of oil leaks, there were melted terminations and cable trench covers had still not been installed inside the switching stations. The non-compliance that had been highlighted relating to the Municipality s network being old and obsolete has not been addressed. This was confirmed by transformers that had blown up due to being in service for prolonged periods of time without proper repairs and maintenance. The industrial mini-substation is also Page 9 of 19

19 still operating with obsolete fuses that are dangerous to operate. The Suurberg line is worse than before the audit, as the poles are leaning more than the allowable limits. This is due to the fact that the line has exceeded its lifespan and should be replaced with immediate effect. 10. RECOMMENDATIONS It is recommended that Blue Crane Route Municipality should prioritise the addressing of the CAP to improve the level of compliance with licence conditions and impose a self-monitoring regime to ensure that it does not deteriorate back to non-compliance. 11. NEXT STEP There are still instances of non-compliance that need to be addressed by the Licensee. As a result, the Energy Regulator expects the Licensee to implement the corrective action plan until all the instances of non-compliance have been fully addressed in order to improve the Licensee s level of compliance. The National Energy Regulator will continue to monitor the Licensee s implementation of the corrective action plan on an ongoing basis to ensure that all the findings are addressed. Once the remaining projects in the CAP have been concluded, the Licensee must send a closeout report to the National Energy Regulator. It is expected that the Licensee will then implement a self-monitoring regime to ensure that the improved areas do not deteriorate back to a situation of non-compliance. Further monitoring exercises to be conducted by the Energy Regulator on the Licensee will be communicated to the Licensee in due course. All communication should be forwarded to the Head of Department unless indicated otherwise by means of a formal letter signed by the head of department: The Head of Department Licensing, Compliance and Dispute Resolution: Electricity National Energy Regulator of South Africa PO Box Arcadia 0007 Fax: +27 (0) Page 10 of 19