FREE BASIC ELECTRICITY/FREE BASIC ALTERNATIVE ENERGY

March 2012

04/19/23 1

PRESENTATION OUTLINE

04/19/23 2

• Background

• Mandates

• Funding

• Implementation Challenges and Possible Interventions

• Status

• Conclusion

BACKGROUND ON FBE/FBAE

04/19/23 3

The government announced a statement of intent in respect of

the provision of free basic services in 2000 and the main areas of

focus were free basic water and free basic energy.

Implementation of free basic electricity programme started in

2003 with the following intentions:

o To provide basic energy to poor households to alleviate

poverty.

o Minimise the health impact arising from the use of certain

fuel.

BACKGROUND ON FBE/FBAE cont…

04/19/23 4

oFree Basic Electricity (FBE) for the provision of both grid

and non-grid.

oAcknowledging that not all poor households in South Africa

have access to grid or non-grid electricity,o provision of FBE sounds unfair to un-electrified households

o lack of infrastructure for the provision of FBE necessitated Free Basic

Alternative Energy (FBAE) Guidelines for subsidising alternative energy

carriers.

o Provision of FBAE is more expensive than FBE since most of the

alternative energies are unregulated.

BACKGROUND ON FBE/FBAE

o Other programmes presently complementing FBE in the Energy

Sector as further measures introduced to address affordability

and protecting the poor:

o Implementation of Inclining Block Tariff (IBTs) even though other

Municipalities currently experiencing challenges with regards to the

implementation.

04/19/23 5

BACKGROUND ON FBE/FBAE

04/19/23 6

o Facilitating access to electricity through government subsidised

electrification;

o Free connections provided to Eskom’s low consumption

residential customers; and

o Lower price increases applied to low consumption domestic

customers. (15% vs general increase of up to 31.3%)

Section 104 (4) of the Constitution provides for provincial

legislation with regard to a matter that is reasonably necessary for,

or incidental to, the effective exercise of power concerning any

matter listed in schedule 4 of the constitution.

Section 139 (1) of the Constitution provides for provincial

intervention when Municipalities does not fulfil its executive

obligation.

MANDATE OF MUNICIPALITIES IN RESPECT OF FBE section 156 (1)

04/19/23 7

MANDATE OF PROVINCES IN RESPECT OF FBE

ENERGY SOURCE GIVEN AS FBE/FBAE

04/19/23 8

Provision of free 50kWh of grid electricity per month to all

households with concomitant blocked or stepped tariffs (IBT) for

electricity consumption beyond 50kWh to mitigate the cost

implication of the free basic electricity provided.

The pilot study suggested that 35 to 60KWh/month was considered

adequate electrical energy to meet lighting , media access , limited

heating needs for a poor household. After consultation and taking

into account the funding aspects , 50KWh was deemed appropriate

FBE amount per month per household.

Provision of free non-grid electricity to all non-grid electrified

households (connected through the National Electrification

Programme).

FBAE given to indigent households include:

04/19/23 9

ENERGY SOURCE GIVEN AS FBE/FBAE

Petroleum Products to Un- Petroleum Products to Un- electrifiedelectrified

Renewable Energy to Un-Renewable Energy to Un-electrifiedelectrified

o Paraffin, LPGParaffin, LPG o Candles and other lighting Candles and other lighting fuelsfuels

o Fire woodFire woodo Coal/Low smoke fuel Coal/Low smoke fuel o Biogas Biogas

CHALLENGES - IMPLEMENTATION

04/19/23 10

Disconnections

Eskom and Municipalities are using the practice of disconnecting

households and businesses as a credit control measure.

Defaulting indigents on the Poorest-of-the-Poor (POP) programme

lose their free basic electricity (FBE) monthly entitlement when their

electricity supply is disconnected due to a default in payment of

other services.

Made worse by the fact that FBE does not accumulate if not used

within a particular month and cannot be claimed retrospectively.

Limited funds

Free basic electricity accrues to a designated POP on a monthly

basis subject to funding availability from a municipality.

Inconsistency in Policy Application

Between municipalities and Eskom.

Amongst municipalities themselves.

04/19/23 11

CHALLENGES - IMPLEMENTATION

04/19/23 12

Other challenges include the following

Lack of indigent policies and registration, verification &

management of indigents.

Cogta, DoE, SALGA, ESKOM and other utilities are assisting

Municipalities.

Token collection, enhancement and provision of FBE/FBAE levels of

service in contravention of policy.

Municipalities to assist beneficiaries on collection and advice on

enhancement.

CHALLENGES - IMPLEMENTATION

Lack of communication.

- Continues improvements on communication by all stakeholders.

Lack of reporting, monitoring & evaluation system.

- Cogta committed to incorporate this responsibility in the current

restructuring of the Department.

- Coordination of FBS implementation at provincial & municipal

level.

04/19/23 13

CHALLENGES - IMPLEMENTATION

FUNDING ALOCATION: FBE/FBAE

04/19/23 14

Apportionment of the Free Basic Electricity/Energy allocation in

line with the FBAE guidelines.

The cost of providing Free Basic Electricity and Free Basic

Alternative Energy is included in the MTEF budget allocation of the

Department of Provincial and Local Government resulting in

Municipality revenue generation challenge.

Where Service Authorities have been allocated with inter-

governmental grants to provide for operating costs in respect of

basic services (other unconditional components of the Equitable

Share), such municipalities shall pass on the benefits of such

grants to targeted indigent households.

Municipalities must further allocate funds from their budgets for

FBE/FBAE to supplement allocation to cover all the indigent

households.

04/19/23 15

FUNDING ALOCATION: FBE/FBAE

04/19/23 16

PROVINCE

% Configuration

% Consumption

Eastern Cape

100 75

Free state 100 81

Gauteng 98 59

Kwa Zulu Natal

86 57

Limpopo 100 81

Mpumalanga

100 78

North West 98 72

Northern Cape

98 72

Western Cape

100 89

2011 FREE BASIC ENERGY SNAPSHOT

04/19/23 17

PROVINCES December '11

FBE

Total Indigent

Households (Census

2001)

Total Indigent

Households(Munic

data)

Eskom Municipalitynon-grid

Total %

Eastern Cape 939,776 717,759 141,340 218,684 10,096 370,120 39

KwaZulu-Natal

1,162,490 220,269 130,498 143,129 34,202 307,829 26

Gauteng 967,539 233,776 389,358 428,344 0 817,702 85

Mpumalanga 444,112 197,305 84,948 114,273 4,100 203,321 46

Limpopo 744,676 525,959 190,674 104,123 21,928 316,725 43

North West 440,733 143,210 73,949 22,467 126 96,542 22

Free State 425,049 229,435 106,923 373,968 920 481,811 113

Northern Cape

118,194 95,736 43,587 47,186 300 91,073 77

Western Cape 290,213 204,821 182,508 441,718 301 624,527 215

               

Total 5,532,782 2,568,270 1,343,785 1,893,892 71,973 3,309,650 69

18

Access to Electricity National Progress

Access- 1996

Access - 2010

CONCLUSION

04/19/23 19

Estimated national implementation of Free Basic Electricity/Free

Basic Alternative Energy (FBAE) is about 70% to all the qualifying

indigents.

DoE will review the policy in the future to incorporate new policy

developments.

Municipalities use their policies to identify the recipients of the

FBE.

Lack of a monitoring mechanism on the ground makes it difficult

to establish accurate figures.

Cogta reported that they are undergoing structural changes to

incorporate resources to monitor FBS.

Poverty alleviation is an important challenge for the country. The

links between poverty and energy are clear, and as such the policy

on free basic electricity is an important key to uplifting the poor.

04/19/23 20

CONCLUSION