Approved changes to the NMD rules Impact of the new rules & implementation February 2009
Background The notified maximum demand (NMD) is the maximum demand that is contracted between Eskom and a customer. The existing NMD rules were approved by NERSA and implemented in 2005 to manage the way that customers notify their demand and what happens when their NMD is exceeded. Some experience was gained within two years of implementing the NMD rules; consultation took place between Eskom, customers and other stakeholders and therefore a revision to the NDM rules was compiled and submitted to the NERSA in May 2008. The latest changes to the NMD rules were approved on 11 December 2008 are intended to be more accommodating to the customer around the number of allowable exceedances while at the same time, incentivising customers to correctly notify their NMD. The implementation of NMD rules will take commence on 1 April 2009 after a two-month grace period to allow customers to request a change in NMD (if required) and thereafter the additional charge will apply. 2
Changes to the NMD rules 1. Introduction of an allowable 5% deadband level (above the NMD) for the first two exceedances or any two exceedances within a 5% deadband level over a rolling 12 months. 2. Introduction of an additional charge for exceedances outside the 5% deadband level (above the NMD) or after the first two exceedances within the 5% deadband level. 3. Other changes/clauses to the existing rules include the following: The introduction of a shorter notice period for demand exemptions pending proper motivation from customer (12- months is still the applicable period) Clause which deals with the fact that levying by Eskom and payment by the customer of additional charges do not imply acceptance by Eskom of the higher demand. Clause deals with Any change in NMD would entail a renegotiation of the contract is subject to Eskom evaluating and agreeing to the change pending availability of capacity on network Clause deals with customers receiving the benefit of diversity Clause deals with exemptions for overshoots attributable to Eskom initiated programs. 3
Rationale & benefits The rules will mainly impact customers exceeding their NMD. Any exceedance of NMD is a breach of contract by the customer the customer is using capacity that has not been allocated to them. The excess network access charge (NAC) is introduced for any exceedance above the allowable 5% deadband for the fact that the customer is utilising demand that is not allocated to them. The NMD rules apply to all demand (kva) related charges. The additional charge will be raised based on the NAC charge X event number for the demand greater than NMD X amount exceeded. The additional charge is not intended to be unfair/punitive to customers but rather to encourage customers to manage their demand within the contracted NMD or alternatively to correctly notify NMD. Customers have a choice to pay the higher charge or avoid it by managing their demand. Customers are still liable for the demand exceeding NMD but this does not affect the annual utilised capacity. 4
Customer impacts A customer who is currently exceeding their NMD and has not requested Eskom to increase their supply (for demand) would likely incur additional charges for repeatedly exceeding their contracted maximum demand. If this is the case, the customer should avoid the high network charges by managing within the contracted value or by requesting for an NMD upgrade these requests should be done formally in writing to Eskom, stipulating the increase amount required. Eskom will decide based on available capacity and resources as to the timing of the upgrade. Customers planning to participate in the Energy Conservation Scheme (ECS) and are exceeding their NMD from time to time should consider upgrading their NMD or managing within their contracted NMD. Although ECS/EGM is based on energy conservation (not demand); the customer has to evaluate whether or not their energy consumption is greater than their allocated demand (where the customer deviates from historical load profile) and if that is the case, the customer should rather be on the safe side and notify their NMD correctly. Customers who cannot manage their come-back load after planned load shedding events should also upgrade their supply to avoid incurring the higher network charges. These cases will be treated on a case-by-case basis, evaluated against the new criteria in the Demand Exemption Policy. 5
Implementation of rules & a grace period If an upgrade in NMD is required Customer must request a change in NMD if currently exceeding NMD. Since the NMD is a contractual value agreed between the customer and Eskom, changes to the NMD are again, subject to agreement between both parties. Eskom will send a quote to the customer as changes to the NMD may be warrant raising connection charges and therefore Eskom will require you to sign and accept the quote and pay relevant connection charges before your NMD is upgrade. An upgrade in NMD will be subject to network availability, any electricity growth management (EGM) strategy, availability of capital required and acceptance of the quote by the customer. From 1 April 2009 the normal process regarding NMD upgrades will apply. The appearance of the charge will indicate the network charges that may be potentially if the NMD is exceeded. A model will be made available for you on the Eskom website to model your individual NMD impact From 1 August 2009 the actual charge applicable for NMD exceedances will be raised in the bills. 6
New NMD rules model Model to assist with modelling customer impact due to new NMD rules Model results are dependent on supplied information; i.e. NMD, maximum demand, tariff and if there is any exceedance of NMD See the following example of data and the resultants thereof. Model has three components; 1. A results sheet which consolidates all info provided; NMD, MD, customer name, voltage level and applicable tariff. Also shows the customer their applicable 5% limit (compared to their NMD), events, exceeded amount and the applicable charges. 2. Graph that compares the NMD, 5% limit and the maximum demand. 3. Graph that compares the current network access charge (NAC) and the total network charge (NAC charge plus applicable excess NAC).
NMD Rules results sheet Customer name Test Customer CC Premise ID 123456789 Notified maximum demand 5000 kva Tariff Megaflex Voltage < 500V Month NMD (kva) MD (kva) MUC (kva) AUC (kva) Exceedance limit (5% of NMD) Event number Excess NAC applicable Exceeded amount (kva) NAC charge X AUC Excess NAC charge (R) Total network charge Reasons / explanations 1 5000 4800 5000 5000 5250 N/A 0 R 42,000 R 0 R 42,000 2 5000 4900 5000 5000 5250 N/A 0 R 42,000 R 0 R 42,000 3 5000 5100 5100 5000 5250 1 No 100 R 42,840 N/A R 42,840 1st "free" event - no excess NAC applicable (but NAC is based on the higher of MUC/AUC), therefore exceedance amount is not multiplied by event no. 4 5000 3600 5000 5000 5250 N/A 0 R 42,840 R 0 R 42,840 5 5000 3800 5000 5000 5250 N/A 0 R 42,840 R 0 R 42,840 6 5000 3900 5000 5000 5250 N/A 0 R 42,840 R 0 R 42,840 7 5000 5050 5050 5000 5250 2 No 50 R 42,420 N/A R 42,420 2nd "free" event - no excess NAC applicable (but NAC is based on the higher of MUC/AUC), therefore exceedance amount is not multiplied by event no. 8 5000 4800 5000 5000 5250 N/A 0 R 42,840 R 0 R 42,840 9 5000 5010 5010 5010 5250 3 Yes 10 R 42,840 R 252 R 43,092 within the 5% limit, exceedance charged applicable @ (event no.) times NAC, AUC is reset. 10 5000 4800 5000 5010 5250 N/A 0 R 42,840 R 0 R 42,840 MD < NMD but pay NAC for reserved NMD for 12 months, AUC not reset because MD does not exceed previous AUC 5% limit exceded; excess NAC applicable @ (event no.) times NAC, AUC is reset because MD is now higher than 11 5000 5300 5300 5300 5250 4 Yes 300 R 44,520 R 10,080 R 54,600 previous AUC 8 12 5000 4800 5000 5300 5250 N/A 0 R 44,520 R 0 R 44,520 MD < NMD but pay NAC for reserved NMD for 12 months, AUC not reset because MD does not exceed previous AUC
Example of a graph from the data that compares NMD, MD with the 5% limit Back Print NMD comparison wit h MUC and 5 % limit 6000 5500 5000 4500 4000 3500 3000 2500 2000 1500 1000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 M ont hs NMD (kva) MD (kva) Exceedance limit (5% of NMD) 9
Example of a graph from the data that compares current network access charge (NAC) with total NAC Current NAC vs Total NAC impact R 60,000 R 58,000 R 56,000 R 54,000 Applicable charge R 52,000 R 50,000 R 48,000 Current NAC Total NAC impact R 46,000 R 44,000 R 42,000 R 40,000 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NAC is network access charge Current NAC as is - refer to results sheet Total NAC impact is the total network charge i.e. current NAC plus Excess NAC Month 10