Eskom’s energy and revenue loss management

June 6th, 2014, Published in Articles: EE Publishers, Articles: Energize

 

Energy losses continue to be a challenge for utilities globally, both in developed and developing economies. As a result of increasing production costs in the value chain, utilities have to manage these losses at acceptable levels. In South Africa the problem is exacerbated by Eskom’s generation capacity challenges.

Losses incurred in electrical power systems are generally characterised by two components: technical and non-technical losses. Technical losses are caused by network characteristics and the nature of the load flow during the delivery of electric energy. Technical losses are related to equipment, i.e. energy dissipated in the conductors and equipment used for distribution of power. Technical losses can be accurately calculated or estimated using load flow studies as long as network configuration and load flow data is available. Non-technical losses on the other hand stem from internal process issues (inaccurate billing information, defective meters, etc.) and external issues (electricity theft, tampering, etc.) and cannot always be directly measured, but can be estimated. Non-technical losses can be calculated as the difference between total losses and technical losses.

Illegal connections Affordability compounded by escalating tariffs Electrification demand exceeding supply
Meter tampering Affordability compounded by escalating tariffs Sense of entitlement Opportunism, greed
Illegal vending Business opportunity spawning criminal syndicates Affordability compounded by escalating tariffs Sense of entitlement Opportunism, greed
Technical losses Normal energy dissipation in electricity distribution Overloaded networks Ageing networks
Data and processing issues Meter information errors Customer information errors CNL errors
Metering problems Meters and peripheral metering infrastructure not functioning Meter programming errors
Table 1: Factors contributing to energy losses.

Over the past four years distribution energy losses grew from just below 6% to 7,13%. Energy losses are generally expected to increase with the increase in load. But in our case generally the load did not grow at the levels which could support the argument for the level of losses increments seen in that period. However, in the past two years the total distribution losses have stabilised around 7%. The growth in distribution energy losses can be explained by:

  • Increasing number of customers supplied at lower voltages (mainly due to electrification), while sales to the HV customers reduced significantly
  • Harsh economic conditions leading to potential high levels of electricity theft (illegal connections and meter tampering)
  • Sweating of networks

Latest benchmarks carried out by the World Bank put the best performing utilities globally at 10% and below. Generally Eskom is doing well compared to other utilities with regard to energy losses, but it wants to do even better, which is why the utility embarked on the Energy and Revenue Losses Management Programme. The benchmark exercise carried out by PA Consulting also puts Eskom in the first quartile of the top performing utilities in terms of energy losses performance.

The size of the problem

Actual 2014 GWh Actual 2013 GWh Actual 2012 GWh Actual 2011 GWh
Total Eskom energy flow 246 358 254 300 253 084
Total distribution network energy flow 218 916 226 424 224 328
Actual loss – distribution 15 594 14 312 12 734
Actual loss – transmission 6757 7686 8157
Total actual loss 22 351 21 998  20 891 
Energy loss (%) (12MMA)
Total distribution loss 7,13% 7,12% 6,32% 5,68%
Total transmission loss 2,34% 2,74% 3,08% 3,27%
Total Eskom loss 8,88% 9,07% 8,65% 8,25%
Table 2: Total distribution energy losses for the past four financial years.

Even though the total average losses are at the levels where the utility can be favourably compared with the best performing utilities globally, residential losses percentages in some areas are still unacceptably very high. The bulk of the residential areas where losses are generally higher than the acceptable average are within Gauteng province, with townships like Soweto, Sebokeng, Orange Farm, Randfontein, Evaton and Benoni topping the charts with average percentage losses above 40%. The biggest challenge in this province is the highly politicised communities which are either illegally connecting themselves onto the grid or tampering with their electricity meters and prevent the utility’s staff or contractors from entering their areas, to the point of becoming violent. Mpumalanga and Free State are the other provinces where higher losses are recorded within the residential market, even though the utility does not face the violence experienced in Gauteng. Sometimes the energy losses figures either in volumes or percentages do not properly demonstrate the seriousness of the situation, but when one looks at the financial impact it starts to make sense. For the 2013 financial year Eskom lost more than R4-billion due to non-technical energy losses (mainly attributable to electricity theft).

What Eskom is doing to manage this risk

Energy and revenue losses have been receiving increasing focus within the business. Eskom is tracking these losses continuously and, where necessary, projects are initiated to address the problem. Currently Eskom is running a national Energy Losses Management Programme (ELP) with the primary objective of managing the losses trend. This programme addresses the energy losses problem holistically from a technical, commercial and social perspective. The strategic objectives of the ELP are to:

  • Arrest the current upwards energy loss trend
  • Manage the trend to an acceptable level
  • Ensure sustainability at an acceptable level

In the past year Eskom focussed on carrying out revenue protection audits, where customer metering installations were inspected to detect theft or faults. Where faults were found the meter was replaced and where tampering (theft) was detected the customer was disconnected and only reconnected after tamper and reconnection fees were paid. The tamper fee is increased for customers who are found to have tampered with their meter more than once. The utility is also running a public communications campaign (Operation Khanyisa) which is aimed at driving behavioural change and influence the voluntary behaviour of consumers to be legal users by reducing the number of illegal electricity consumers, mobilising citizens to report and prevent illegal connections. This will also assist in building and maintaining good solid relationships with key stakeholders to enable Eskom to implement and drive the ELP within communities without fear.

Achieving results

The results from the time ELP was launched to-date are promising. Even though the trend was negative, there are signs that it is stabilising and the activities on the ground are producing remarkable results in terms of identifying problematic installations and recovering revenue. In the past few years Eskom always managed to achieve total energy losses below the regulatory target. Some of the areas that are improving as a result of the continuous focus on energy and revenue losses are:

  • Average feeder losses showing significant improvement (34% in March 2014 versus 47% in March 2013)
  • Tamper fees totalling R43-million recovered
  • Additional revenue of R716-million from historic and current problems found and fixed
  • A number of cases are being registered in the courts with good cooperation from the law enforcement agencies regarding the issue of ghost vending.

As a result the total distribution losses seems to be stabilising compared to the increasing trend experienced ion the past. Operation Khanyisa is realising results. The fight against electricity theft gained momentum as the campaign continued to reach new milestones in 2013/14. The success of the campaign was further underscored by an “Orchid” received from Independent Newspapers for its innovative approach to public sector advertising. Thus far, more than 10 000 tip-offs have been received through Crime Line and Eskom’s reporting lines. This shows that South Africans are heeding the call to stand up and be counted in the fight against electricity theft and to mobilise for legal, safe and efficient power use.

On the enforcement side, the campaign is also making inroads. A number of cases have been registered with the various courts country-wide where businesses and individuals are being prosecuted for crimes related to electricity theft. In the past nine months, more than 30 electricity theft related arrests were made. Significant amounts of revenue have also been recovered. To address the problem of electricity theft in South Africa’s municipalities, Operation Khanyisa has also partnered with the South African Local Government Association (SALGA) and different municipalities. One of the campaign’s successes in 2013/14 through its partnership with SALGA, was in the Nelson Mandela Bay Municipality in the Eastern Cape. The municipality partnered with Operation Khanyisa to implement a Service Delivery Roadshow aimed at educating the public about electricity theft and soliciting communities’ support in the fight against this crime. After this intervention, the municipality started receiving more tip-offs from the public about suspected incidents of electricity theft.

Operation Khanyisa received recognition at home and abroad for its efforts in combating electricity theft. These include the Star Award received for the second year running from Crime Line. In May 2013, Operation Khanyisa’s case study was chosen from over 100 submissions worldwide to be part of the World Economic Forum’s “Creative for Good” website launch at the Cannes Lions International Festival of Creativity – securing significant international recognition for the work done on a social change initiative. Operation Khanyisa rounded off the year by receiving its first Loerie in the Ubuntu category in Cape Town in September 2013.

Conclusion

Energy losses are an inherent risk in the electricity distribution business. Losses have an impact on the profitability of a utility and if not managed properly can bankrupt the business. We have identified this as one of the key focus areas in Eskom and have given it the necessary attention. We are continuously tracking losses in the business and always on the lookout for better technologies or systems to manage losses. The preliminary results of the ELP and other related activities can be demonstrated by the slowing down of the losses growth rate and other related benefits like increased revenue recoveries and awareness creation to the general public. This gives us confidence that with added focus this problem can be managed to acceptable levels. There are still areas where we need to do more, but the progress is noticeable. Eskom calls upon all South Africans (employees, contractors, customers and the general public) to do their part to ensure that Eskom and the distributing municipalities are able to manage this problem. Active citizenry is very important in this case. As they say at Operation Khanyisa, “The power is in your hands”.

Contact Nto Rikhotso, Eskom, Tel 011 800-4706, mediadesk@eskom.co.za

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