Mike Rabe: Alliance to Save Energy – South Africa

Manager: Watergy Programme

Nico Singh: Prepayment Manager - JW: NSDD

 

Creating Efficiency using Prepayment as a Demand Side Management Tool

                                                               

BECAUSE EVERY DROP MATTERS

• Money makes the world go round and market principles govern

• Municipalities cannot ignore this economic reality

• Although legislation requires municipalities to exercise good monetary policy and financial discipline, many municipalities are in dire financial straits

• The need to practice good financial management is great and municipalities should strive to achieve balanced budgets, zero deficits and streamlined operations

Introduction

The Efficiency Opportunity

Deficits = Deficiencies or inefficiencies Efficiency is a function of management capacity

(institutional, financial and technical) Inefficiencies are often rooted in inefficient

service delivery practices A key to turning municipalities around is to start

focusing on efficiency Inefficiencies = opportunity = need for

intervention Because municipal deficits are common, huge

opportunity exists to intervene in the current situation

South Africa presents unique opportunities..

Because of it’s past socio-political disparities

Because of current socio-economic conditions

Because of the layered nature of the economy (so-called 1st nd 2nd economies)

Compromised solutions need to be found that are at least partially – politically, socially and technically correct

Prepayment water offers a good compromised political, technical and financial solution to most of the problems associated with the delivery of water services in South Africa

Prepayment …

Allows for the dispensing of FBW and can accommodate legislative changes

Offers an acceptable political and social solution to the constitutional obligation of providing access to potable water

Allows for the implementation of an indigency policy

Allows water to remain affordable and sustainable

Adds value from a financial point of view

The wastage problem…

In many residential areas in South Africa on-property wastage of water is high because of failed plumbing fixtures!

This can be attributed to…

A lack of ownership of properties traced back to the socio-political history of South Africa

A lack of customer metering The use of inferior plumbing fixtures The ‘deemed’ consumption billing method which is

still widely used in many municipalities As examples the average supply per property per

month for Soweto is over 60 kℓ and for Sebokeng over 32 kℓ

These levels of wastage create the opportunity cost that can be used to justify and motivate for the implementation of prepayment

The implementation of prepayment water combined with a leak repair/plumbing retrofit type project empowers consumers to take ownership of consumption and also transfers responsibility for consumption onto same.

It goes without saying that the political and social issues inherent to this approach need to be managed!

Hence wastage is brought under control

OWNERSHIP

At the end of the day transfer of ownership of consumption should be aimed for as perhaps the main objective of any planned prepayment project.

Without transfer, the municipality by default continues to own consumption

The Water–Energy nexus

Energy often represents the single biggest input cost into wet services delivered to customers

By addressing inefficiencies and saving water, substantial energy savings can also be achieved

Quantified energy savings can be translated into carbon credits and sold in terms of the Kyoto protocol

Therefore saving water = saving the environment!!

Hence the involvement of the Alliance to Save Energy and the Watergy Programme

Efficiencies of Operation Gcin’amanzi in Soweto

Why the need for Efficiency - Why Soweto?

Average outstanding bills per month in 2003 were R 35,411,296.00 per month 

Thus total for 2003 was R 424,935,552.00 Projected total for 2003 & 2004 was R

849,871,104.00 Total for past two years at an estimated recoup rate

25%  = R 212,467,776.00  Therefore total for SOWETO’s outstanding bill in Rand value  for the past two years only................. R637 MILLION LOST WATER REVENUE 

• Post UFW for APRIL 2004 (Phiri - Block B) is 6.7%

(No) (Kl) (Kl) (Rand) (Rand) (R/month) (R/month)

I x R2.65 actual sales

C D I J N O P

1,771 55.0 614,591 R 1,631,984.04 R 299,673.80 R 21.70 R 33.61

3,108 67.0 230,368 R 611,719.19 R 167,629.30 R 24.71 R 41.97

3,377 70.0 244,960 R 650,466.78 R 162,094.92 R 23.27 R 49.82

4,295 63.0 298,304 R 792,116.44 R 190,440.63 R 22.44 R 40.99

64.7 R 23.12 R 42.57

12,551 1,388,223 R 3,686,286.45 R 819,838.65 (4.6 Kl) (7.9 Kl)

Average value of purchases made

Weighted averages

Cumulative totals to date

PHIRI & SUPERBLO CKS CO MBINED

Phiri Prototype Project

Superblock No 1

Total value of sales devided

by the total no of stands

Total value of sales devided by the no of stands purchasing

top-ups

Superblock No 2

Superblock No 3

O peration Gcin'amanzi Project

Area

Amount of water sold to date

Pre interven-

tion Volume

per stand

Monthly reduction in water

losses

Saving in water purchases from Rand Water to

date

Accumu-lative no of

stands fitted with meters

as at 16 Mar'05

Wastewater Treatment Efficiencies

Unacceptable UFW results is a direct burden on wastewater treatment plants (WWTP).

JW specializes in wastewater treatment – high OPEX as a result of high CAPEX to provide capacity.

Treatment plants are currently running at optimum.

UFW reduction will assist in ensuring efficiency of these plants as well as reduce the need for Capital Investment for Capacity Upgrade.

Challenges to the creation of efficiencies using prepayment

Political, Institutional and Community acceptance

Most difficult challenge involving internal, external and multiple level approvals

Project was strongly opposed by various groups

Mitigated through the successful implementation of a prototype project

Prototype successful with 98%+ support from beneficiary

Creation of Institutional Capacity

Institutional capacity created by JW: Dedicated division within JW to project manage

Operation Gcin’amanzi Dedicated O&M unit to manage installed meter

base External support from Engineering Consultants Training of staff and contractors Issuing of large contracts for purchase of

meters requiring support from manufacturer Issuing of large contracts for implementation

within each super-block

Local Labour Employment Opportunities- Spin Off

1 14 70 389 40 82 15 526

2 13 44 89 50 81 15 235

3 7 48 88 40 83 14 225

4, 5, 6, 7a & 12

- - - 427 - - 427

Totals 34 162 566 557 246 44 1413

Total No Employed

Local labour employed for Operation Gcin’amanzi

No of SMMEs

employed

Super-Blocks

By Consortia / SMMEs for construction

purposes

Plumbers/ skilled labour

Total, including plumbers & general

labour

Community Facilitators

(public participation programme)

Field technicians (retrofitting /

quantity audits)

Temp labour sourced from the Community utilized as follows

Roll-out and support of metering

programme

Return on Investment

Forecast saving of 32 – 35 kℓ/ property/ month Realized savings of close on 45 kℓ per property per

month Total forecast saving of R158m per/annum after

project completion Saving expected to be closer to R200m per annum

after completion

Demand Side Management represents a better investment in this instance than Supply Side Management

Prepayment Metering Technology

Scale of implementation unprecedented Industry lags ITO of common standards

Platform Technology greatly improved, although some

difficulties still experienced Improvements in design ongoing in

conjunction with manufacturers Manual reading of prepayment meters on a

monthly basis as a physical check and audit measure

Conclusion

More efficient service delivery environment is being created through the implementation of OGA Soweto.

Efficiency interventions are a viable alternative to supply-side augmentation projects and in many instances are more cost effective than same.

The opportunity for intervention should be taken in South Africa

THANK YOU FOR YOUR ATTENTION