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                 50 SAAEs MEETING
            HELD ON 26th June 2008 AT 11:00
               AT THE ESKOM MWPCC

PART A: SAAEs ONLY MEETING

A1   WELCOME
     The Chairman welcomed all members.

A2   ATTENDANCE AND APOLOGIES
     A total of 22 representatives attended and 9 apologies were recorded. The
     Attendance Register is attached.

A3   MINUTES OF THE PREVIOUS MEETING
     The minutes of the 48th and 49th Meeting were accepted without change.
     (Proposed by Ray Nixon, seconded by Peter Gerber)

A4   MATTERS ARISING PROM PREVIOUS MINUTES
     Nothing to report.

A5   ASSOCIATION CORPORATE AFFAIRS

     5.1    Membership Update
            Mr Krueger reported that to date 22 of 32 Corporate Members had paid
            as well as 7 of 11 Associate members. During the month of July the
            membership register on the website will be updated to reflect only
            paid-up members.

     5.2    Finances
            Mr Krueger reported that on the 25TH June 2008 the SAAEs credit
            balance was R44,499.78. The Income and Expenditure Statement for the
            year to date had been circulated to members with the Agenda. Since that
            date two more members had paid which brings our credit balance to just
            over R50 000. The financial statement was accepted unanimously without
            discussion.

A6   CONSTRUCTION INDUSTRY DEVELOPMENT BOARD (CIDB)

     The Chairman reported about his contact with the CIDB. If any company carries
     out any construction work, that company must be registered with the CIDB. This
     is a data base for government, and comprises various categories of membership.
     It also requires a fee.

     Ms Elsa de Beer had told SAAEs that she could use the CIDB register for issuing
     tenders to ESCOs. However, this meant that ESCOs should be registered. Ken


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     will meet with the head of CIDB to enquire whether members can be registered (if
     the DME wants to keep track of the industry) even if they do not do bricks and
     mortar construction. He will also ask to have fee reduced or eliminated. In
     principle, SAAEs supports the DME’s idea of a data base to register all energy
     projects and ESCOs.

A&   FEEDBACK FROM SAAEs BOARD MEETING

     The Chairman reported that it must be a major goal for SAAEs to move away
     from total dependency on Eskom DSM. It is counter-productive to merely
     continuing to engage with Eskom about weaknesses in their procedures.

     Reviewing the recent price rises granted to Eskom, the Chairman pointed out that
     the average of 27,5% granted across the entire revenue base, taken together
     with the limit of 14,2% for poor customers, means that for many consumers the
     increase will be far more than 27,5%. Some municipalities have already
     announced increases of up to 40%. This will increase the direct demand for
     ESCO services.

     He further reported that NERSA has not yet approved the Standard Offer. In
     addition, Eskom is not allowed to use new rates for DSM. However, the current
     programme at Eskom for a target of 153MW will continue.

     In summary, he pointed out that there were at least three categories of ESCOs.
     On the one hand there were those ESCOs that had a specific product or service
     which was financially viable without any subsidy. On the other extreme there
     were small or emerging ESCOs that could not operate independently without
     Eskom funding, and then there was a group somewhere in the middle that could
     possibly survive without Eskom, provided they made some business changes.

     The bottom line is that we need to develop this industry to be independent
     of Eskom DSM funding.

     The Energy Bill that was passed some weeks ago will be copied to members.
     However, implementation will take years.

     In the meantime, DSM will continue to exist, but with all its past flaws.

     KC reported further on SAAEs discussions with the World Bank. (WB)

     The WB lends money to governments for programmes. The WB would be willing
     to lend money to SA for the energy projects. However, the government says does
     not need any money just yet.

     The International Finance Corporation (IFC), a subsidiary of the WB, provides
     security to banks that will support energy programmes. Banks will currently lend
     you money, but you need to provide personal security, and this is an impediment
     to new projects. IFC can work with banks to make this less onerous.

     The shared savings method works but many companies are reluctant to accept
     this. KC suggested that SAAEs investigated the possibility of setting up a private


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     sector fund to finance projects. Investors would obtain a reasonable return on
     their investment, and small ESCOs could then be supported. Rental payments
     (up to 10 years) would get paid into the fund.

     It is still intended to set up a meeting with NERSA, together with BESCO. TC
     Madikane, who personally knows the Regulator and is a SAAEs Board Member,
     will set this up.

A7   DATE OF NEXT MEETING AND CLOSING

     The meeting closed at 11:45. The next meeting will be held on 31 July 2008 at
     11:00.

     The joint BESCO/SAAEs meeting on that date will be chaired by BESCO.




PART B: JOINT MEETING WITH BESCO

     Chairperson: Ken Cram

     The 12 additional members that joined the meeting are shown in the
     attached Attendance Register.


B1   Feedback from Eskom DSM

     Mr Monkwe Mpye gave a presentation which will be distributed with the
     minutes.

     In particular he intimated that there would be a streamlined DSM approval
     process. The following abbreviations were used on the slide:

     CRA = Concept Release Approval
     DRA = Design Release Approval
     ERA = Execution Release Approval.

     This meant that for CRA the proposal does not have to be very elaborate,
     merely to state the technology, the baseline and anticipated savings and
     costs. For the DRA, a more detailed application will be required. The total
     approval process is expected to be less than three months.

     As far as finances was concerned, Eskom had NOT been given approval
     for the R2,5 bn it had requested. However, the DME had been given R2
     bn out of treasury for energy projects.

     He stated that the targets for 2009 were 870 MW, broken down as follows:


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450 – 470 MW for the CFL programme
200 MW currently in the pipeline
200 MW still required from ESCOs.

He therefore urged ESCOs to still submit project proposals for the 2009
financial year. Preference would be given to EE, rather than load shift
projects.

A few of the discussion items are mentioned below:

Mr Anton Potgieter questioned the attention being given to Smart
Metering, in view of the far higher cost and lack of provenness. Mr Mpye
stated that Smart Metering had many advantages, not just for energy
efficiency.

Ms Esmé Bluff asked whether customers who had executed successful
DSM projects would now be expected to participate in PCP. Mr Mpye
stated that DSM projects will assist customers to achieve PCP. PCP
participation will NOT be on top of DSM projects.

Mr Anton Potgieter asked about the motor efficiency programme. Mr
Mpye responded that this programme had a slower uptake than what
Eskom would have liked.

Ms Tlaleng Moabi asked whether the current projects in the pipeline
would be affected by the preference for EE. Mr Mpye responded by saying
that EE will receive priority, although some load shift projects will be
approved.

Mr Ken Cram asked whether the hurdle rate would be adjusted to attract
more proposals. Mr Mpye said that there would be no hurdle rate but life
cycle costs would determine acceptance or rejection of proposals.

Mr Ray Nixon suggested that it may be better (if not more honest) for
Eskom to advise ESCOs to wait a year before submitting proposals until
the funding issue has been sorted out. Mr Mpye said that this would not be
a good idea, since it would delay the approval and execution process. He
said please give us your proposals to populate the pipeline in preparation
for full operations as soon as the funds have been released.

Mr Ken Cram agreed with Mr Nixon by saying that his company could ill
afford to keep staff busy on proposals in the hope that they may be funded
in 2009. However, Mr Mpye responded that EE projects WILL still be
funded in the current year.




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     Mr Chetty of Nationwide asked about specific projects that had been held
     up in the pipeline. Mr Mpye would investigate and respond directly to Mr
     Chetty.

     Mr Ian Robinson commented that according to existing contracts,
     municipal load management by ripple control still had two years to run. In
     contrast, smart metering is a new, unproven technology, which is far more
     expensive than ripple control. The allocation of R10 bn for smart metering
     was, in his opinion, an ill-conceived and poorly thought through decision.
     Mr Mpye responded by elaborating on the change in the demand profile,
     but did not answer Mr Robinson’s objections to smart metering.

     Mr Botany Mojapelo pointed out that there were serious problems with
     communication between Eskom DSM and the ESCOs. We must broaden
     these channels to include either a hotline for questions, or a website, or
     both. Mr Mpye took note of this request.


B2   Feedback from CTAD

     Mr Karel Steyn introduced Thoko Mvelase, a new CTAD member, to
     ESCO members. She will be replacing Vuyo Mini who will be leaving
     CTAD at the end of June.
     Mr Steyn invited members to a workshop for developing new M&V
     teams/members. Although the focus will be on the development of M&V
     capacity it will be useful to ESCO members wanting to understand the
     M&V process, methodologies and protocols. This workshop should be
     useful especially for newer ESCOs. The workshop is planned for the 15 &
     16 July 2008 – the short notice to ESCOs is due to the intervention being
     planned and focussed on M&V teams/members in particular. The
     workshop program, when finalised, will be issued to the SAAEs secretariat
     for distribution to all. Those wanting to attend need to RSVP to CTAD
     (Tasneem) ASAP.
     All M&V Guidelines have been updated and are now ready for distribution
     to and inputs from the NERSA, NEEA, etc. Once done, the guidelines will
     be published on the Energy Audits Website.
     Mr Steyn indicated that the name CTAD will cease to exist due to
     structural changes within Eskom Corporate Services Department where
     CTAD will be amalgamated with other departments. Once the new name
     for the newly formed department has been decided upon, it will be shared
     with all. It was emphasized that no changes to the Energy Audits section
     (from where the M&V function is managed) and its activities are expected
     to continue unchanged with business as usual.




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     Information on the DSM performance for 2007/8 was shared with the
     meeting. DSM achieved 583.4 MW against 256.2 MW during the previous
     reporting period – this represents a huge year-on-year growth in savings
     since 2003. The split between ESCO projects and general programmes
     (which are normally implemented by Eskom with external project
     managers) was also highlighted. This indicated that programmes have
     generally achieved substantially more savings than ESCO projects since
     the beginning of the EEDSM program. More details will be made available
     on the Energy Audit Website once the final annual report and figures have
     been shared with all M&V principals.

B3   Feedback from NEEA

     Mr Barry Bredenkamp stated that NEEA was in the same position as
     ESCOs currently – still waiting for Eskom funds!

     NEEA has waited for two years for the Eskom process to be finalised.
     Their focus has been on public lighting, with funding from foreign
     embassies. This has been motivated from an Energy in Transport and
     Security point of view, rather than merely energy savings.

     The funding from the IT industry is also very significant.

     As far as the SANPARKS contracts are concerned, these have been held
     up by QC but have now been finalised and this matter will now proceed
     rapidly.

     BB further mentioned that government buildings will be funded directly by
     the Dept of Public Works, not the fiscus, and will therefore not make up a
     part of the R2bn promised to Eskom. These projects will go out on public
     tender.

     BB referred to the discussion on CIDB and mentioned that CEF requires
     minimum costs of R400 per year for basic CIDB registration. This is for a
     special sector created specifically for EE projects and suppliers. Any EE
     tender will be sent out to this Energy Sector in the CIDB register, and
     members should be aware of this. CIDB registration can be done on line,
     with a 48 hr turnaround guaranteed. The NEEA point of view is that CIDB
     registration will streamline the process.

     The CIDB website is www.cidb.co.za

     BB also discussed the Energy Bill. It is published for comment and
     members (or SAAEs and BESCO) are free to submit suggestions. Briefly,
     the Bill give the minister wide; wide powers for minister for, e.g., appliance
     labelling. Also, it allows for the creation of five separate legislated bodies


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(including an Energy Information Agency as well as the current SANERI
and NEEA) and prescribes the National Integrated Resource Planning
process.




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     Discussion

     Concern was expressed by some members that the ESCOs (and ESCO
     Associations) were not involved in the decision making process, and that
     some ESCOs will be excluded due to inadequate experience. BB stated
     that the intention is not for registration to be a hurdle, but rather to
     facilitate involvement by all ESCOs. The category for EE was created only
     yesterday, so nobody has yet registered. However, nobody will be
     excluded from this lowest category of CIDB that has now been created.

     He pointed out that it was a requirement of the PFMA that all projects in
     Municipalities must use CIDB registered companies, this is not a NEEA
     requirement. The creation of this EE sub-section was done specifically to
     accommodate ESCOs and to make it easier for ESCOs to receive EE
     tenders. However, if it does prove to be a problem, CEF will have to
     address it.


B4   Closing and date of next meeting

     The meeting closed at 13:25. At the next joint meeting, which will be held
     on 31 JULY at 11:45, BESCO will provide the Chairperson.




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