COMPLIANCE MONITORING REPORT OF NKOMAZI LOCAL MUNICIPALITY

Transcription

1 COMPLIANCE MONITORING REPORT OF NKOMAZI LOCAL MUNICIPALITY Monitoring Date: 12 August 2015 Page 1 of 18

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 Kulawula House 526 Madiba Street Arcadia Pretoria PO Box Arcadia 0007 Tel: +27 (0) Fax: +27 (0) DISCLAIMER The content of this report is based on information and evidence obtained from both the licensee and site verification of plant condition conducted during the monitoring process. Should this report not be accurate, the licensee must, in writing and within fourteen (14) days of receipt of this report, advise NERSA about such inaccuracies. Page 2 of 18

3 TABLE OF CONTENTS EXECUTIVE SUMMARY INTRODUCTION METHODOLOGY NERSA AND NKOMAZI LOCAL MUNICIPALITY DELEGATES GENERAL INFORMATION ON NKOMAZI LOCAL MUNICIPALITY AUDIT FINDINGS NKOMAZI 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 18

4 EXECUTIVE SUMMARY The National Energy Regulator (NERSA) conducted a compliance audit on Nkomazi Local Municipality ( the Licensee ) from 21 to 22 October 2013 to determine its level of compliance with the licence conditions. The objective was to determine the compliance of Nkomazi 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. On 15 January 2014, Nkomazi Local Municipality sent the management comments to NERSA. These were received well within the prescribed timeframe. The report was then considered final by NERSA and Nkomazi Local Municipality was then requested to send NERSA a signed, time-bound corrective action plan (CAP) to address the highlighted instances of non-compliance. On 23 May 2014, Nkomazi Local 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 12 August 2015, the National Energy Regulator conducted a monitoring exercise on the implementation of the CAP at Nkomazi 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 Nkomazi Local Municipality to be a more efficient and effective licensee. This is a report on all the findings as per the audit and presents the status quo in terms of the progress made 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 presented in detail in section seven of the report. Page 4 of 18

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 Electricity Regulation Act No 4 of 2006 (Act No 4 of 2006). 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 Page 5 of 18

6 e) inform the Energy Regulator of the progress made by the licensee in the implementation of the corrective action plans. 2. METHODOLOGY A corrective action plan template was developed and sent to Nkomazi Local 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 addressed 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 initiated a monitoring process, which 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 NKOMAZI LOCAL MUNICIPALITY DELEGATES NERSA was represented by the following officials: Mr B Nhlabathi Compliance Monitoring Technician Ms B Malatji Compliance Monitoring Technician Ms B Gobe Compliance Engineer Ms V Poswa Dispute Resolution Officer Mr V Malaza Senior Distribution Compliance Engineer Nkomazi Local Municipality was represented by the following official: Mr Pieter Theron Manager Electrical Page 6 of 18

7 4. GENERAL INFORMATION ON NKOMAZI LOCAL MUNICIPALITY Nkomazi Local Municipality is the electricity distribution licence holder for the supply area with licence number NER/D/MP324 and supplies electricity to Malelane, Hectorspruit, Marloth Park and Komatipoort. It has five bulk supply points with an installed capacity of 18.5MVA and a maximum demand of 16.5MVA. At the time of the audit, the Licensee had 3,735 customers, which are categorised as follows: 2,213 prepaid domestic; 1,207 domestic credit meters; 313 commercial and 2 industrial customers. The total geographical area of Nkomazi Local Municipality is approximately 3,240 km². It was also mentioned during the audit that 60% of the electricity equipment is older than 30 years and 10% is less than 10 years old. At the time of the monitoring, it was highlighted that the Licensee managed to refurbish certain parts of the network, which even though they were not inspected during the NERSA compliance audit, needed urgent attention to ensure continuous supply of power to dedicated 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 42 vacancies out of 72 approved positions. b) There was a shortage of vehicles to accommodate the 31 employees. c) There was no Competent/Responsible Person appointed in terms of the requirements of the Occupational Health and Safety Act (Act No 85 of 1993). d) The areas of electricity supply do not correspond with the supply areas in schedule 1 of the Distribution Licence. e) Nkomazi did not budget sufficient funds (6% of total budget) for the maintenance of the electricity network as required by the NERSA tariff guideline only 3% was budgeted. f) The new, approved tariffs were implemented on 01 July 2013 and customers were charged at the new tariffs for the full period. The customer s accounts should have been based on 50% of old and 50% Page 7 of 18

8 of new tariffs as the consumption was measured from 15 June to 15 July g) Nkomazi does not have any bulk stores to keep critical stock. h) Although Nkomazi is doing scheduled maintenance, there is no official maintenance plan available. i) There was an outdated (2008) master plan that made provision for upgrades and replacement of equipment, which was constrained by lack of funds and personnel. j) There was no formal power quality management system in place. k) The service date of some fire extinguishers had expired. l) There were missing cable trench covers at the back of the switchgear in Malelane substation and no single line diagram was visible at the substation. m) Some mini-substations were old and need to be replaced (Hectic 1). n) The safety signs were faded on the outside of the mini-substations. o) The open switchgear at Erf mini-substation was not locked. p) Some wooden poles were old and leaning and should be put on a replacement programme. q) There was a high level of technical and non-technical loses. 6. NKOMAZI LOCAL MUNICIPALITY S PERFORMANCE ON NERSA COMMUNICATION In October 2013, the National Energy Regulator conducted a compliance audit on Nkomazi Local 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 Nkomazi Local Municipality. This communication was sent directly to Nkomazi Local Municipality s Electricity Manager. During this communication, Nkomazi Local Municipality s Electricity Manager cooperated and responded in a satisfactory manner as indicated in table 1 below. Table 1: Nkomazi s response record NERSA REQUEST DATE OF REQUEST LICENSEE RESPONSE DATE OF RESPONSE Request of Management 22/11/2013 Management 15/01/2014 comments on draft report comments sent Request for Corrective Action 03/02/2014 CAP sent 23/05/2014 Plan Monitoring notification 28/07/2015 Positive response 28/07/2015 Monitoring exercise 12/08/2015 Positive response 12/08/2015 Page 8 of 18

9 7. PROGRESS ON THE IMPLEMENTATION OF THE CORRECTIVE ACTION PLAN Nkomazi Local Municipality displayed a lack of commitment during the monitoring exercise as most instances of non-compliance highlighted during the audit were not addressed. At the time of the monitoring exercise it was observed that certain parts of the Licensee infrastructure was in worse condition now compared to the time during which the audit was conducted. However, the Licensee indicated that certain mini-substations that had not been inspected during the audit had been in a critical condition and had needed immediate intervention. Table 2 below depicts the progress made at the time of the monitoring of the implementation of the CAP that was submitted to NERSA to address the instances of non-compliance. Page 9 of 18

10 Table 2: CAP implementation progress Non-compliance Corrective action Target date Target date for completion Shortage of personnel: 01 July September Critical vacancies must be 2014 filled according to the immediate demand. Shortage of vehicles: Sufficient work vehicles must be purchased. No responsible person: A Competent Person must be appointed according to the OHS act. Confusion of supply areas: Areas of supply should be clarified - Marloth Park All current vacancies for the 2013/2014 financial year will be filled. Additional posts will be added on the 2014/2015 personnel budget. A total of 11 posts will be advertised and filled. One LDV was purchased in May The purchase of a cherry picker truck was approved by Council, but procurement has not started. Additional vehicles will be considered on a lease agreement that must still be finalised. Pieter Fourie from lntegra Electrical Technologies was appointed as a Competent/Responsible Person on 27 March 2014 for a 12- month period. This appointment was done according to the scope of work for a responsible person as per OHS Act requirement. NERSA must intervene to resolve this matter, because this is a dispute between two Licensed Authorities. Nkomazi Municipality and Eskom have the same licences for the same area, as issued by NERSA. Progress Fifteen (15) posts were advertised and filled from November 2014 to March These posts include: 7x Electricians; 7x Electrical Labourers; and 1x Electrical driver 01 May June 2015 Only the one LDV was purchased procurement of the Cherry Picker failed. Leasing of vehicles also failed. Planned for 2015/16 FY are the following: Purchase of 1xCherry Picker Replacement of 5xLDVs Completed. Integra Electrical was appointed as from March 2014 for twelve months. The appointment was extended with an additional 12 months until March To be confirmed. As requested, the dispute was forwarded to NERSA in September 2014 as it became a serious safety risk. No response from NERSA to date. Condition during monitoring day At the time of the monitoring, 15 vacant positions had been filled. The 64% of positions that were vacant during the audit were still not filled. The shortage of vehicles was also not yet finalised during the monitoring exercise. Proof was provided. Still unresolved. NERSA is awaiting application to correct schedule 1 of the Electricity distribution licence. Page 10 of 18

11 Insufficient Budget: Operations & Maintenance budget should be increased to 6% of the total revenue generated No Bulk Stores: Bulk stores should be put in place to carry critical stock. No maintenance plan: Compile a comprehensive maintenance plan to address network backlogs. Wrong application of tariffs: Approved tariffs should be correctly im plemented. Outdated Master Plan: Electrical master plan must be reviewed and updated to accommodate the current status quo. 6% of the R 48m (revenue generated) was allocated to operations and maintenance for the new financial year of 2014/2015. Due to the shortage of capital funding, the issue of bulk stores will only be addressed in the next financial year. However the small individual stores will equipped with most critical and essential stock/material. The Maintenance Plan was originally part of the MISA programme, but due to financial constraints the focus moved to compiling a conclusive asset register. The register will form part of the maintenance plan. Additional funding required to compile the maintenance plan. From 2014 onwards billing for new tariffs will be in August instead of July. The Electrical Master Plan also formed part of the MISA programme, but was later excluded. Tough the master plan is old it is still up to date with the current challenges. However funding is required to include ESKOM projects and development to the master plan. 01 July 2014 Continuous For 2015/16 FY, 6% (approx. R4 million) was allocated to operations and maintenance from the estimated R65 million revenue. 2014/ /2016 A 3-year supply and delivery contract (for all electrical material, cables and transforming equipment) will be awarded before 30 August The budget figure of 6% was implemented. No proof was provided. A tender evaluation committee was in progress on the day of the monitoring. It was reported that this will be finalised by 30 August The stores finance at Finance Offices will also be made active for keeping essential material. Source funding. Source funding The Maintenance and the Master plans non-compliances were still not addressed. The Licensee indicated that they have a template at present that was developed in-house which they use for maintenance. No supporting documents were submitted. August 2014 Continuous According to Finance Department this was corrected. No supporting documents were submitted to the monitoring team. Source funding Source funding The Maintenance and the Master plans non-compliances were still not addressed. Page 11 of 18

12 No Supply monitoring: Quality of supply management should be implemented according to NRS 047. Expired fire extinguishers: Fire extinguishers must be inspected and serviced within the recommended periods. Hazardous e nv i r o n m e nt : Open cable trenches must be covered. Unavailability of drawings: Install single line diagrams in all the main substations, and update all drawings Replacement/ refurbishment of old substations: Old mini-substations must be replaced or refurbished according to their condition. Faded safety and warning signs : All safety and warning signs to be inspected and replaced where necessary. R1,200, is allocated for smart metering for the 2014/2015 financial year. Smart metering will include quality of supply metering. Suppliers were invited to present their products and do proposals for the municipality. The next presentation will be on 03 June Fire extinguishers will be inspected quarterly and will be serviced within recommended time frames. All open cable trenches were covered properly. Drawings and single line diagrams were installed in all the main substations. Some drawings must still be updated. (responsibility of the appointed Competent Person). 2 x Mini-substations and 1 x floor standing transformer were already replaced. The redundant units were sent for refurbishment. The only reason for replacing mini-substations, transformers and switchgear is due to failure or very bad test reports. It is very costly exercise to replace units just because of their age. All missing, damaged and faded safety and warning signs were listed. New signs will be purchased and installed. 01 July June 2016 Seventeen (17) smart meters were installed for the largest municipal consumers. Immediate revenue increase were noticed. This project will be continued in the 2015/16 FY since there are still thirty seven (37) large consumers outstanding. 01 July December 2014 Service provider was appointed in July 2015 to perform these duties. No analysis of the quality of supply information from the installed meters was available. No evidence was shown to the monitoring team. Although they have to be inspected quarterly, only 1 of the substation s fire extinguisher was serviced. Completed Completed 100% Completed 01 April December January July December 2014 All drawings will be updated and placed in newly upgraded substations in Komatipoort and Malelane. 2x new mini-substations were installed; 3x mini-substations were replaced; 2x mini-substations were refurbished; 2x Ring main units were replaced; and 2x New ring main units were installed All damaged and faded signs will be replaced in the newly upgraded substations in Komatipoort and Malelane. The service provider was appointed in July 2015 for this function. Non-compliant Only the Mini-substation in Hectorspruit, the RMU was replaced. Other relevant information were not part of the monitoring. Non-compliant Page 12 of 18

13 Inadequate lock out facilities: All transforming and switching equipment must be locked. Lack of maintenance on OH lines: OH lines - redundant wooden poles must be replaced. Lines must be retensioned. Line losses: Investigate high line losses. New padlocks were purchased and installed on all transforming, switching and distribution equipment. 3 x Overhead lines were already refurbished by replacing redundant poles, pole boxes and re-tensioning the lines. R1,267, is available on the new financial budget for refurbishments. OH lines will be restored according to priority (worst condition first). Line losses will also be addressed by the implementation of smart metering. Completed Completed 100% completed 14 April 2014 Continuous 4x Overhead lines were refurbished (LV); 2x Overhead lines were refurbished (MV); and 1x New Overhead line was build (MV) 01 July June 2016 Seventeen (17) smart meters were installed for the largest municipal consumers. Immediate revenue increase were noticed. This project will be continued in the 2015/16 FY since 37 large consumers are still outstanding. Figures to be provided. Only a section of the line in Hectorspruit was re-stringed. More work still need to be done and some of the poles were still supported by stumps of poles. This project is still to be continued and accurate figures are still to be provided. Page 13 of 18

14 The table above indicates that Nkomazi Local Municipality did not implement the majority of the activities outlined in the CAP as highlighted during the audit. Implementation of the CAP will improve the Licensee s level of compliance with the distribution licence conditions. At the time of the monitoring, about 26% of the CAP had been implemented by the Licensee. During the office session of the monitoring, some supporting documentation to substantiate the above feedback was provided to NERSA officials. 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. Corrosion on terminals of the backup batteries Terminals of the backup batteries corrosion free No safety signs on the fence at the time of audit No safety signs on the fence at the time of monitoring Page 14 of 18

15 Open cable trench in the substation during the audit Cable trench in the substation closed during the monitoring Very low battery solution during the audit Battery solution at acceptable level during the monitoring Old Hectic 1 mini-substation with broken door Old Hectic 1 mini-substation with broken door during monitoring Page 15 of 18

16 Unlocked 4 way switch behind Erf mini-substation Locked 4 way switch behind Erf mini-sub Uncovered switch at Komatipoort Central in 2013 Worse and uncovered switch at Komatipoort Central in 2015 Expired fire extinguishers at Komatipoort in 2013 Expired fire extinguishers at Komatipoort in 2015 Page 16 of 18

17 Bad pole-mounted transformer during monitoring Transformer replaced with a mini-substation in Eerste Street The photos indicate that the condition of Nkomazi Local Municipality s network has not improved since the audit. The old (type A) mini substations with magnefix switches, which are obsolete and unsafe to operate, has not yet been replaced. During the monitoring, the audit team discovered a lack of commitment to implement the CAP, especially in Komatipoort. 9. CONCLUSIONS Nkomazi Local Municipality, has managed to close only five out of 19 instances of non-compliance that were identified during the audit. However the Licensee has made noticeable progress on four instances of noncompliance that were identified during the initial audit. These are shortage of personnel, vehicles, bulk stores and Quality of Supply monitoring. It was observed during the monitoring exercise that the service providers or responsible personnel appointed to rectify the non-compliances relating to expired fire extinguishers did not apply due diligence in executing these tasks. The unavailability of the maintenance and master plans are making it difficult if not impossible for the Licensee to conduct proper maintenance and planning on the network equipment. The installation of the smart meters by the Licensee indicated willingness and commitment to reduce the line losses as these are closely related to revenue collection improvement. Page 17 of 18

18 10. RECOMMENDATIONS It is recommended that Nkomazi Local Municipality should prioritise the implementation 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. The Licensee was advised to submit an application for the correction of the areas of supply, as well as to indicate the challenge faced at Marloth Park based on the NERSA resolution made in 2004 that was not implemented. 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. On the self-monitoring report, the Licensee will be able to indicate any additional projects implemented to improve its level of compliance with the licence conditions. 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 Electricity Licensing, Compliance and Dispute Resolution National Energy Regulator PO Box Arcadia 0007 Fax: +27 (0) Page 18 of 18