COMPLIANCE MONITORING REPORT OF MOOKGOPHONG LOCAL MUNICIPALITY

Transcription

1 COMPLIANCE MONITORING REPORT OF MOOKGOPHONG LOCAL MUNICIPALITY Monitoring Date: 13 May 2014

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 METHODOLOGY NERSA AND MOOKGOPHONG LOCAL MUNICIPALITY DELEGATES GENERAL INFORMATION ON MOOKGOPHONG LOCAL MUNICIPALITY 6 5. AUDIT FINDINGS MOOKGOPHONG 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 Mookgophong Local Municipality ( the Licensee ) from 18 to 20 February 2013 to determine their level of compliance with the licence conditions. The objective was to determine the compliance of Mookgophong Local Municipality with the legal, financial and technical conditions of the electricity distribution licence. 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. Mookgophong failed to submit the management comments within the prescribed time frame, thus the report was considered final. Mookgophong was then requested to submit a corrective action plan (CAP) to address the instances of non-compliance highlighted in the report. On 26 June 2013, NERSA received a one-page document from Mookgophong Local Municipality indicating what it intended to do to correct the instances of noncompliance. The one-page document from Mookgophong also indicated that some issues highlighted in the audit report had already been addressed, while the rest were scheduled to be done in future subject to budget availability. The National Energy Regulator instituted a monitoring regime to ensure and enforce the implementation of the CAP. On 13 May 2014, the National Energy Regulator conducted a monitoring exercise on the implementation of the CAP at Mookgophong Local Municipality. The monitoring exercise was conducted in order to determine 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 Mookgophong Local 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 progress made at the time of the monitoring to address the noncompliances highlighted during the audit. During the monitoring exercise, NERSA conducted site inspections to verify progress made in the implementation of the CAP. It must be noted that minor progress was made to improve the network condition and business systems of the Mookgophong Local Municipality. The areas of improvement are depicted in detail in section seven of the report. 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 Page 4 of 19

5 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 plan; 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 plan. 2. METHODOLOGY A corrective action plan template was developed and sent to the Licensee to populate all the non-compliances 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 which robustly monitors progress. Progress is checked against target dates and remedial actions are Page 5 of 19

6 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 MOOKGOPHONG LOCAL MUNICIPALITY DELEGATES NERSA was represented by the following officials: Ms B Gobe Ms V Poswa Mr V Malaza Compliance Monitoring Engineer Dispute Resolution Officer Senior Distribution Compliance Engineer Mookgophong Local Municipality was represented by: Mr P Magwala Mr D Eksteen Mr W Magana Municipal Manager. Chief Financial Officer Electrical Services Manager 4. GENERAL INFORMATION ON MOOKGOPHONG LOCAL MUNICIPALITY Mookgophong Local Municipality is a licensed electricity distributor (Licence No. NER/D/NP364) located in Mookgophong in the Limpopo Province. This is a small municipality consisting of two intake points at Mookgophong town and three small rural supply lines in Die Oog and Roedtan, with a total installed capacity of 11.5MVA. At the time of the audit it had 4,037 customers, which are categorised as follows: 254 prepaid domestic; 3,859 domestic credit meters; 136 commercial and 42 industrial customers. 5. AUDIT FINDINGS At the time of the audit, the following was highlighted to the Licensee as areas that need attention and improvement: a) There were vacancies in the electricity division. b) The electricity business was not ring-fenced. Page 6 of 19

7 c) The budget and expenditure for maintenance and repairs was less than 6%. d) The bulk account was in arrears at the time of the audit. e) There was no maintenance plan. f) There was no master plan for network expansion and upgrades. g) Vegetation management was not properly done, especially at the Rondalia overhead line as well as in some other parts of the network. h) Fire extinguishers were not serviced. i) An oversized Main Circuit Breaker (MCB) was installed in a minisubstation. j) There were no signage or safety signs on the majority of minisubstations. k) The areas of supply did not correspond with those in schedule 1 of the licence. l) Transformers at Roedtan in-feed and silos were leaking oil and one transformer was positioned on the ground with no plinth and was exposed to flooding. 6. MOOKGOPHONG S PERFORMANCE ON NERSA COMMUNICATION The February 2013 compliance audit on Mookgophong Local Municipality was followed by a number of s from the National Energy Regulator to Mookgophong Local Municipality. In all this communication, Mookgophong Local Municipality did not cooperate and responded in an unsatisfactory manner, as indicated in the table below. The failure to cooperate and send the requested information to the National Energy Regulator is a noncompliance and a further violation of the Distribution licence conditions. This must be rectified by Mookgophong Local Municipality. NERSA REQUEST DATE OF REQUEST LICENSEE RESPONSE DATE OF RESPONSE Request of Management 23/04/2013 No response n/a comments on draft report Request for CAP 07/06/2013 No response n/a Reminder on CAP 21/06/2013 One page progress 26/06/2013 report sent Monitoring notification 10/04/2014 Positive response 10/04/2014 Monitoring exercise 13/05/2014 Positive response 13/05/2014 Page 7 of 19

8 7. PROGRESS ON THE IMPLEMENTATION OF THE CORRECTIVE ACTION PLAN Mookgophong Local Municipality displayed a low level of commitment during the monitoring exercise in terms of addressing all the instances of noncompliance highlighted during the audit. This is evident from the fact that even the minor non-compliances have still not been attended to. At the time of the monitoring exercise, it was observed that most few of the issues highlighted by the audit had been attended to, however with the minimum effort. The poor vegetation management under the lines and the firefighting equipment that still has not been serviced are examples that indicate Mookgophong Local Municipality s complacency with its situation. The table below depicts the progress made by the Licensee to address the instances of non-compliance highlighted during the audit. Non-compliance There were vacancies in the electricity division. Corrective action CAP not submitted Progress Electrical Head/Manager position was advertised and Mr W Magane was appointed to the position. Three labourers were appointed to assist in the electrical department on a permanent basis. An advertisement was also sent out for two electricians and a full schedule of applications has been received. Short-listing and interviews are to be Condition during monitoring day Still not 100% compliant but there is improvement. Page 8 of 19

9 The electricity business was not ring-fenced. The budget and expenditure for maintenance and repairs was less than 6%. CAP not submitted. CAP not submitted. conducted soon. No progress, still not ringfenced. This is a long-term target for the Municipality. No progress, the maintenance and repairs budget is still less than 6%. The electricity department was only given a budget allocation increase from R1.5m to R1.7m for the financial year. In the past there was no proper maintenance plan, hence it was not possible to budget more funds since it was not clear what the funds were going to be used for. An Engineer from PWC has been requested to develop a maintenance Still not compliant, no change. Still not compliant, no change. Page 9 of 19

10 plan with costs. The bulk account was in arrears at the time of the audit. There was no maintenance plan. An arrangement for payment had already been made with Eskom at the time of the audit. CAP not submitted. The situation is worse than during the audit in 2013 as the account is now R19m in arrears. At the time of the monitoring there were ongoing negotiations with Eskom to pay Eskom on a quarterly basis when equitable share is received. This is still a proposal; they are still waiting for Eskom to respond. The target proposal to settle the bulk account is July Maintenance plan was developed. The plan has been updated to track progress of what has been done. The network was investigated thoroughly to see where the hot spots of faults and Worse, still not compliant. 100% Complete. Page 10 of 19

11 There was no master plan for network expansion and upgrades. Vegetation management was not properly done especially in the Rondalia overhead line and also in some other parts of the network Fire extinguishers were not serviced. CAP not submitted. Trees were cut along the Die Oog line and Rondalia line, while in other areas the contractor is still busy cutting. CAP not submitted. outages were and faults have been reduced. Power restoration has improved. The plan was also presented to and shared with Afriforum. The challenge to implement the plan is the lack of funds. The development of the masterplan is scheduled to be done externally by consultants (PWC). At the Rondalia main line, vegetation was cut but the branching lines are not yet done. A portion of the overhead line in the Mookgophong suburb was also cut. No progress. Not compliant. It was evident that some tree pruning and cutting was done, however other portions of the network was not really attended to. Still not compliant. Page 11 of 19

12 Oversized MCB was installed in a minisubstation. There were no signage or safety signs on majority of minisubstations. The areas of supply did not correspond with schedule 1 of the licence. Transformers at Roedtan in-feed and silos were leaking oil and one transformer was positioned on the ground with no plinth and was exposed to flooding. Correct sized MCB to be installed soon as delivery has just been received. CAP not submitted. CAP not submitted. Transformer at Roedtan NTK Silos to be repaired and positioned on an elevated plinth. Contractor to complete by 28/06/13. Correct MCB installed on 12 July Nothing was done. Nothing was done. Transformer is repaired and elevated properly to prevent flooding. 100% complete. Not compliant. Not compliant. Only one transformer was attended to. Still not 100% compliant. The table above indicates that Mookgophong Local Municipality did very little to address the non-compliances. It was highlighted during the monitoring that the main challenges faced by the Municipality was a lack of funds as they owe National Treasury (NT) a huge sum of money from previous years commitments. This resulted in the municipality failing to honour its debt payment arrangements with Eskom on their bulk account as the money from their equitable share was withheld by NT due to their previous debt. Aside from the withholding of the equitable share by NT, Mookgophong also displayed a low level of commitment to address the noncompliances highlighted, which is evident from the battery back-up systems that has still not been attended to. This is a huge risk as the main substation s protection relies heavily on a properly functioning battery system. Although Mookgophong conducted some maintenance on the indoor breakers at their main substation and conducted the testing of the protection relay, all these efforts are in vain due to the battery system that is not properly maintained. The condition of the backup system is so poor, there might as well not have been any protection at this substation. Page 12 of 19

13 A lack of supervision of work done was also observed in Mookgophong Local Municipality since some of the trees that were supposed to be cleared by a contractor were still not cleared and some of those that were cleared, were poorly cleared. There is still a lot of work that Mookgophong Local Municipality needs to attend to in order to improve their level of compliance with their distribution licence conditions. 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. Mookgophong Main Substation Loose ceiling strip/cornice during audit in Ceiling cornice still not repaired due to negligence during monitoring in Page 13 of 19

14 Unmaintained batteries during audit in 2013 Batteries and Charger still not maintained during monitoring in 2014 Open cable trench during audit in 2013 Open trench with back panel cover lying on floor during monitoring in 2014 Page 14 of 19

15 Unmaintained fire extinguisher during audit in 2013 Fire extinguisher still not maintained during the monitoring in 2014 Page 15 of 19

16 Roedtan In-feed Ground-Mounted Transformer Transformer oil leaking into the ground during audit in 2013 No change during the monitoring in 2014 Ground-Mounted Transformer at Roedtan Silos Transformer with no plinth and with oil leaks during the audit Page 16 of 19

17 Proper barricaded and lifted platform for the transformer during Vegetation Management under Power Lines Vegetation on a power structure during audit in 2013 Vegetation not cut due to lack of contractor supervision Page 17 of 19

18 Vegetation management not done during the audit in 2013 Vegetation management done during monitoring in The photos indicate that Mookgophong Local Municipality s network is still in bad condition. It needs serious capital investment to bring it on par with similar licensees networks. Although the high number of outages and long duration for power failure restoration has improved since the audit, there is still a lot to be done in Mookgophong Local Municipality to increase their level of compliance with licence conditions. 9. CONCLUSIONS Mookgophong Local Municipality tried to address some of the noncompliances, however there are still non-compliances that need to be attended to. The lack of attention to detail at Mookgophong Local Municipality has contributed to the slow pace of implementation of the corrective actions. The omission of the trimming of some of the trees on portions of the network while a contractor was appointed to cut the trees under the lines, testifies to the lack of supervision and attention to detail. 10. RECOMMENDATIONS It is recommended that Mookgophong Local Municipality increases its dedication and commitment to improve the level of compliance with its licence conditions. The selection and filling of the vacant positions have to be done without delay to assist in improving the quality of service the Licensee is offering its customers. The unmaintained backup system at the main substation must be attended to urgently before the Licensee loses all the equipment in the substation due to the lack of protection. It is further recommended that Mookgophong Local Municipality imposes a self- Page 18 of 19

19 monitoring regime to ensure that it improves its level of compliance with licence conditions. 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 now 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 19 of 19