FREQUENTLY ASKED QUESTIONS � 2008/9 TRP

FREQUENTLY ASKED QUESTIONS – 2008/9 TRP A 1 2 3 4 5 6 7 8 9 10 11 12 QUESTIONS RELATED TO THE PROPOSED STRUCTURAL CHANGES .................. 3 Do the structural changes include the Eskom price increase? ........................................ 3 What is meant by tariff, tariff structure and structural changes? ..................................... 3 Why is Eskom making these structural changes? ........................................................... 3 Why are the rates for 2008/9 so different from the 2007/8 rates? ................................... 4 Why have certain charges changed so much? ............................................................... 5 How were the rates calculated? ...................................................................................... 5 Where can supporting information be found ................................................................... 5 Why is it necessary to introduce a matrix of rates? ......................................................... 6 Isn’t including all factors applicable to the tariff components in the matrix going to complicate the bill instead of simplifying it? .................................................................... 6 Tariffs seem unstable if you look at the large swings in recent years. Why? .................. 6 Will changes take place in time to come? ....................................................................... 6 After all the tariff changes that took place over the years moving towards costreflectivity, the impact on individual customers should be minimal with new changes, yet some customers still experience major changes. Why? ............................................ 7 Why have Eskom’s tariffs gone from complicated to extremely complicated? ................ 7 Will these structural changes have an impact on me? .................................................... 7 Which customers could expect to pay more/less? .......................................................... 8 Why has Eskom changed the price differential between voltage categories? What is the impact? ..................................................................................................................... 8 What is unbundling of charges and why is it necessary? ................................................ 8 What is the cost of supply study? How often is this done? ............................................. 8 Why does Eskom have different rates for local-authorities ............................................. 8 Why only increase the local-authority rates in July? ....................................................... 9 What are time-of-use tariffs? ........................................................................................... 9 What does it mean to be revenue neutral? ..................................................................... 9 What are transmission and distribution loss factors? ...................................................... 9 What does ring fencing mean? ....................................................................................... 9 To whom must I address my concerns with Eskom’s Tariff Restructuring Plan? ............ 9 QUESTIONS RELATED TO HOMEPOWER, HOMELIGHT, BUSINESSRATE AND PUBLIC LIGHTING TARIFFS ......................................................................................... 9 What changes have been made to the residential tariffs for 2008/9? ............................. 9 Why is it necessary to remove the Public Lighting Dusk-to-Midnight tariff? .................... 9 13 14 15 16 17 18 19 20 21 22 23 24 25 B 26 27 28 29 C 30 31 D 32 33 34 35 36 37 38 39 40 E 41 42 43 44 How will these structural changes affect me if I'm a Homelight, Homepower or Businessrate customer? ................................................................................................. 9 Which of the other tariffs besides Homelight is subsidised?Error! 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QUESTIONS RELATED TO LANDRATE, RURAFLEX AND NIGHTSAVE (RURAL)... 10 Will any changes be made to the rural tariffs for 2008/9? ............................................. 10 Why is there not a network demand charge on rural tariffs? ......................................... 10 QUESTIONS RELATED TO MEGAFLEX, MINIFLEX AND NIGHTSAVE (URBAN) .... 10 What is the reason behind the unbundling of the transmission and distribution network charges?.......................................................................................................... 10 Why is it necessary to increase the price differential between high voltage and low voltage network-related charges? ................................................................................. 10 How was the 25% differential determined? ................................................................... 11 Why are loss factors applied to the energy rates? ........................................................ 11 Why is it necessary to split the current Nightsave Urban tariff into two separate tariffs? ........................................................................................................................... 11 What is a conversion surcharge? Why does Eskom propose to remove it? ................. 11 What is a rate-rebalancing Levy (RRL)? ....................................................................... 11 What are the changes that will be made to the rate rebalancing revy? ......................... 12 How do I know what Transmission zone I fall under? ................................................... 12 GENERAL QUESTIONS RELATED TO ESKOM’S CAPACITY CONSTRAINTS ......... 12 When will there be enough electricity that means we will not have power blackouts anymore? ...................................................................................................................... 12 What are capacity constraints? ..................................................................................... 12 What is load shedding? ................................................................................................. 12 What is Demand Side Management (DSM)? ................................................................ 12 A 1 QUESTIONS RELATED TO THE PROPOSED STRUCTURAL CHANGES Do the structural changes include the Eskom price increase? No. It is important to understand that there are two distinct processes in Eskom dealing with tariffs. One is a financial function that relates to factors such as inflation and the returns Eskom needs to make in order to operate as a viable business. Eskom is granted an approved revenue requirement in terms of the multi-year price determination (MYPD) by the National Energy Regulator of South Africa (NERSA) and from this a price increase is calculated and applied to all rates. The other is the retail tariff structural changes as guided by the Energy White Paper and Eskom’s strategic pricing direction that provides for more effective economic signals in the use of electricity and investments required. The structural changes also have to be approved by the NERSA and are meant to be revenue neutral for Eskom. The revenue received by Eskom due to the structural changes therefore must not recover more or less than the approved revenue requirement. It is therefore important to note that this plan does not address the price increase process and only deals with structural changes to the tariffs, based on the NERSA approved 2007/8 revenue requirement and volumes, so as to compare the current tariffs with the proposed tariffs. 2 What is the MYPD? The Eskom price adjustment is awarded by the NERSA within a multi-year price determination process. Price adjustments for 2008/9 are within the current three year price determination period which was effective from 1 April 2006 to 31 March 2009. 3 What is meant by tariff, tariff structure and structural changes? A tariff is a name for a collection of rate components for a defined market segment/customer class. The collective way in which different rate components such as R/customer/month, R/kVA and c/kWh are put together is referred to as the tariff structure. When changes to the rate components are made or additional rate components are introduced, this constitutes a structural change to a tariff. A tariff structural change could also refer to changes in levels or values of different rate components of a tariff (excluding the annual price increase). These changes do not affect the overall cost recovered from such a tariff but merely shift the way in which components are recovered. 4 Why is Eskom making these structural changes? The structural changes are guided by principles set out in the Energy White Paper. The Energy White Paper states that:    Price signals should result in economically optimal investments in electricity through costbased electricity tariffs. There should be incentives in the tariff structures to use electricity efficiently. Tariff structures should be determined by the structure of costs e.g. fixed costs ideally should be recovered through fixed charges. In addition to the above the retail tariff restructuring plan follows on the Strategic Pricing Direction1 which is an update of the 1999 Strategic Pricing Direction. The strategic pricing 1 The full document of the Eskom Strategic Pricing Direction can be downloaded from http://www.eskom.co.za/tariffs direction is aligned with Eskom’s vision of “Together building the powerbase for sustainable growth and development” and takes into account customer needs, international practices and the changing business environment. The pricing objectives for retail tariffs are:    Economic efficiency and sustainability: tariffs will contain cost-reflective signals that promote economic efficiency and sustainability. Revenue recovery: tariff structures will not expose Eskom to unacceptable revenue risk and will provide a means of recovering adequate revenue to ensure reliability of supply. Fairness and equity: tariffs will be designed to be as non-discriminatory as possible by taking into account the needs of all customers on a fair and equitable basis. In order have more cost reflective tariffs, Eskom has, over the past 11 years made progressive changes to its tariff structures, and is proposing further changes for 2008/9. The last major change to tariff structures occurred in 2005 when network charges were introduced for the larger customer tariffs. The purpose of making the last change was to separate the cost of consumption (energy) from the costs of networks. The changes proposed for 2008/9 revolve mainly around a further unbundling of the network costs, so as to reflect the distribution and transmission costs through separate charges. There are a number of reasons for proposing such a change:  The cost drivers for the Transmission and Distribution businesses are different. o o  For Transmission, distance from the generation source is a major cost driver. For Distribution, voltage and density are significant cost drivers, that is, the costs are higher per kVA at lower voltages and lower densities. In Eskom’s current tariffs, the above costs differences are recovered via transmission and voltage surcharges, but as the distribution and transmission network charges are not unbundled, this recovery method is structurally not cost-reflective Separate regulation of the Transmission and Distribution divisions and the future industry restructuring.  5 Why are the rates for 2008/9 so different from the 2007/8 rates? A cost of supply study was conducted on charges for all rates. Although no structural changes are proposed for the Homepower, Businessrate, and Landrate tariffs, due to this cost of supply study, some small changes to the tariff rates of these tariffs were realised. Note that for the subsidised residential tariff Homelight, no change is proposed. Changes are proposed to the rates of Megaflex, Miniflex, Nightsave Urban (Small), Nightsave Urban (Large), Nightsave Rural and Ruraflex. The changes are mainly related to:      The unbundling of the network charges. The changes in the price differentials between voltage categories. The application of loss factors to energy charges. The increases to the energy rates and reduction in network-related changes. The move towards the alignment of the rate rebalancing levies of Megaflex, Miniflex, Nightsave Urban (Large) and Nightsave Urban (Small). 6 Why have certain charges changed so much? The changes may impact individual customers depending on their usage profile. The following are main reasons for changes to the tariff rates:  Based on the ring-fenced revenue requirements for each Eskom division, energy costs increased and network costs reduced, causing energy rates to increase on average and network charges to reduce. Service charges for the “Key customer” category increased due to more accurate and ring-fenced allocation of costs. The Rate Rebalancing Levy (RRL) decreased due to larger consumption volumes of the subsidising tariff categories. There is no structural change proposed for the Homepower and Businessrate tariffs but due to the updated cost of supply study, there are small changes to these tariffs’ rates.    To explain further, the increase in energy is an economically efficient price signal as it will provide customers a stronger signal for energy usage. The following are the tariffs affected by changes:  Public lighting tariffs see the largest impact as a result of the rationalisation of the tariff options (i.e. removal of dusk to midnight tariff) and the cost of supply study that was done to update the tariff i.t.o. more cost-reflective rate calculations. Megaflex increases as a result of: o o     7 Alignment of the rate rebalancing levy (RRL) between Nightsave Urban (Large) and Megaflex. The removal of the conversion surcharge, which was then added back to be recovered in the Megaflex rates.  Miniflex – tariff increase due to the alignment of the RRL with Nightsave Urban and the inclusion of the conversion surcharge in all rates. Nightsave Urban (Small) – tariff reduction due to lower peak consumption than the Nightsave Urban (Large). Nightsave Urban (Large) – tariff reduction due to reduction of rate rebalancing levy and the inclusion of conversion surcharge in all rates. Nightsave Rural and Ruraflex – reduction of the network charges due to the unbundling of the network charges and changes in the voltage price differentials. How were the rates calculated? All the rates were calculated to reflect the most recent costs using the latest cost of supply study to recover the approved revenue requirement for 2007/8 in 2007/8 rand values and through a tariff design methodology (to be found at www.eskom.co.za/tariffs). Therefore, the published rates are all in 2007/8 rand values and thus exclude the 2008/9 price increase. These rates will be adjusted at a later stage to recover the approved requirement in terms of the 2008/9 price determination. 8 Where can supporting information be found Visit the Eskom web site at www.eskom.co.za/tariffs where the following information is available:  The 2008/9 retail tariffs restructuring plan     9 The tariff design methodology Eskom’s strategic pricing direction Eskom’s tariff book CompCon – a model that can be used to evaluate the impact of the tariff changes Why is it necessary to introduce a matrix of rates? Following the retail tariffs’ unbundling, the number of components per tariff will increase. It is proposed to set the rates in a matrix per rate type, per rate component, per transmission zone, per distribution voltage category for each tariff. For the customer there will be no additional surcharges to be applied to the rates as shown on the bill. The customer will be able to determine the rate payable by selecting, where applicable, the voltage of the supply or the transmission zone in which the supply falls. 10 Isn’t including all factors applicable to the tariff components in the matrix going to complicate the bill instead of simplifying it? The bill is going to be much simpler to read because the transmission surcharge and the voltage losses will be built into the tariff rates shown on the bill. 11 Tariffs seem unstable if you look at the large swings in recent years. Why? Or put differently, some tariff components go up and others go down and it becomes difficult for me to plan what my electricity will cost. Why such variation in prices over recent years? It is important (as stipulated in the Energy White Paper) for the utility to reflect the costs as accurately as possible and this would mean that tariffs will change in time based on cost differences. Structural changes do, however, impact customers both negatively and positively. In order have more cost reflective tariffs while minimizing the impact on customers, Eskom has, over the past 11 years made progressive changes to its tariff structures, and is proposing further changes for 2008/9. The last major change to tariff structures occurred in 2005 when network charges were introduced for the larger customer tariffs. The purpose of making the last change was to separate the cost of consumption (energy) from the costs of networks. The changes proposed for 2008/9 revolve mainly around a further unbundling of the network costs, so as to reflect the distribution and transmission costs through separate charges. 12 Will changes take place in time to come? The proposed changes for 2008/9 are the last major changes related to the unbundling of tariffs. However, other minor changes to tariff structures could still take place. The changes should support Eskom’s strategic direction of achieving economic efficiency and sustainability through tariff structures that reflect costs more accurately and therefore provide the correct economic signals given for voltage, location and usage. These changes could be driven by, amongst others:       Changes in the cost to supply different categories of customers, Changes in load profile and customer mix, The electricity supply industry requirements, Regulatory requirements. An indication of what these changes may entail after 2008/9 are: Changes to the time-of-use (TOU) periods and seasons due to: Changes in the Eskom average profile.        Capacity constraints. Changes to the voltage categories. Further increases in the voltage price differentiation. Alignment of the supply sizes of Nightsave Urban (Small) and Miniflex. Further alignment of the rate rebalancing levies between the TOU and non TOU tariffs. Changes to transmission network charges structures. Updating the rates with future COS studies. o o Energy charges should increase relative to other charges. The updated cost allocation could impact other components depending on costs and volumes. Except for the alignment of the RRL between the TOU and non-TOU tariffs as contained in this plan, Eskom does not intend to make any deliberate changes to tariffs to reduce subsidies. Such decisions should be made only once guided by national policy. 13 After all the tariff changes that took place over the years moving towards costreflectivity, the impact on individual customers should be minimal with new changes, yet some customers still experience major changes. Why? Whenever a cost of supply study is done to update tariffs, some change will be experienced because the study assists in isolating what each costs are for. However, cost-reflective rates were only applied to large customers due to their sophisticated tariffs and because they can thus respond to the TOU tariff structures. The following tariffs experience minimal changes due to the cost of supply study:   Homepower, Businessrate and Landrate. The following tariffs experience significant changes due to proposed structural changes: Megaflex, Miniflex, Nightsave Urban (Small), Nightsave urban (Large), Nightsave Rural and Ruraflex. Small residential customers will experience no changes to their tariffs. Each customer will need to evaluate the actual impact based on their load pattern and capacity requirements. A comparison tool (CompCon) is available on the Eskom internet website www.eskom.co.za/tariffs for customers to calculate their actual impacts. 14 Why have Eskom’s tariffs gone from complicated to extremely complicated? The bulk of the restructuring effort has been to unbundle previous cost components in the tariffs and to make visible the services and products customers receive. In order to move towards more cost-reflective tariffs, one has to sacrifice simplicity. However, the more complex tariffs are generally applicable to larger customers who have a better grasp of the underlying issues. Tariffs applicable to domestic customers are still simpler in structure. 15 Will these structural changes have an impact on me? The most significant changes include the unbundling of the transmission and distribution charges and changes to the voltage differentials. The most affected tariffs are Miniflex, Megaflex and Nightsave Urban (large & small), Nightsave Rural, Ruraflex and Public lighting tariffs. For the other tariffs (except for Homelight customers where no changes are proposed) only minor structural changes have been proposed and/or experienced due to the latest cost of supply study. Some customers could benefit as a result of the changes, because their usage profile is more suited to the new tariff structures, while others would pay more, largely due to the higher energy charges. To determine the impact that the changes would have, each customer will need to evaluate the actual impact based on their load pattern and capacity requirements. A comparison tool (CompCon) is available on the Eskom internet website www.eskom.co.za/tariffs for customers to calculate their actual impacts. 16 Which customers could expect to pay more/less? The impact on individual customers is dependent on the customers’ actual load profile. On average customers will pay more:      If they have a higher load factor If they have higher peak energy usage Where energy costs make a larger portion of their bill. Customers > 132 see the biggest increase in energy costs (due to the Transmission loss factors applied to energy), but also the biggest decrease in network costs. Customer < 500 V see the biggest reduction in energy costs (the loss factors are lower than the current voltage surcharges), and see the smallest reduction in network costs. 17 Why has Eskom changed the price differential between voltage categories? What is the impact? The move to change the price differential between voltage categories was aimed at being more cost-reflective, because the current voltage differentiation between categories does not reflect the true network cost within these categories or the true cost of losses on the Distribution network. The overall impact is that the lower-voltage customers will pay relatively higher network charges but the changes will apply only to the distribution portion of the network charge, which is a move to reduce the inherent cross-subsidies. However, this change cannot be viewed in isolation from other proposed changes, in particular, the overall reduction in network charges. 18 What is unbundling of charges and why is it necessary? Unbundling of tariff charges is the separation of unique cost components contained in the tariff that are necessary to reflect the respective costs of generation, transmission and distribution more accurately, thereby removing the current distortions caused by the voltage and transmission surcharges. 19 What is the cost of supply study? How often is this done? A cost of supply (COS) study apportions ring-fenced costs of the Generation, Transmission and Distribution divisions by customer categories, voltage and services into an unbundled cost matrix per category and is revenue neutral from an Eskom perspective. 20 Why does Eskom have different rates for local-authorities The municipal finance management act (MFMA) requires Eskom to implement changes to tariffs (price increases and structural changes) to local authorities only on 1 July of each year. For this reason, Eskom has two sets of rates for most tariffs - one for local authorities and one for customers that are not local-authorities. The local-authority tariffs are different as tariff changes are implemented three months later than non-local-authority tariffs. 21 Why only increase the local-authority tariffs in July? The Municipal Finance Management Act (MFMA) stipulates that Eskom may only increase the rates of local authorities on 1 July of each year. 22 What are time-of-use tariffs? A time of use tariff has different energy rates for the same tariff component during different time periods and seasons in order to reflect the shape of the utility’s long run marginal energy cost of supply at different times more accurately. 23 What does it mean to be revenue neutral? This means that there is no overall increase or decrease in Eskom’s revenue due to changes made to the structure of the tariffs. 24 What are transmission and distribution loss factors? Electrical (technical) losses vary according to the voltage of the supply and the distance from the source. These technical losses on the transmission system as well as the distribution system must be recovered through the tariff. With the unbundling of the transmission and distribution network charges, the losses previously recovered through the surcharges will now be recovered through transmission and distribution loss factors. 25 What does ring fencing mean? It refers to the separation of costs for the Generation, Transmission and Distribution business entities. 26 To whom must I address my concerns with Eskom’s Tariff Restructuring Plan? All comments, concerns or objections should be forwarded, containing appropriate reasons, to the Chairman, National Energy Regulator of South Africa, P. O. Box 40343, Arcadia, 0007, to reach NERSA not later than 20 July 2007. A copy of the submission should also be addressed to the Senior Manager (Electricity Pricing), Eskom, P. O. Box 1091, Johannesburg, 2000, or faxed to number 011-800-5384 or email to edwina.pietersen@eskom.co.za. B QUESTIONS RELATED TO HOMEPOWER, HOMELIGHT, BUSINESSRATE AND PUBLIC LIGHTING TARIFFS 27 What changes have been made to the residential tariffs for 2008/9? Small changes are proposed to the Homepower/Homepower Bulk tariff rates. No changes are proposed for Homelight. 28 Why is it necessary to remove the Public Lighting Dusk-to-Midnight tariff? The number of accounts on this tariff is very small and the tariff has proved to be not practical. Existing accounts on this tariff will be converted to the All Night tariff. 29 How will these structural changes affect me if I'm a Homelight, Homepower or Businessrate customer? No structural changes are proposed to the Homelight, Homepower and Businessrate tariffs. However, due to the updated cost of supply study, small changes have been made to the rates of the individual tariff components for the Businessrate and Homepower Bulk tariffs. Note that there are no changes to the Homelight tariffs C QUESTIONS RELATED TO LANDRATE, RURAFLEX AND NIGHTSAVE (RURAL) 30 Will any changes be made to the rural tariffs for 2008/9? The following is a summary of the proposed changes that will apply to the rural tariffs:  The network charges for the rural tariffs will be based on unbundled transmission and distribution network charges for Nightsave (Rural) and Ruraflex tariffs. The network charges will, however, be re-bundled into a single network charge. The Transmission portion of the network charges will be differentiated as per the approved transmission zones and the Distribution portion of the network charges will be differentiated according to the approved voltage and between rural and urban supplies. The energy charges reflect technical losses based on the NERSA-approved distribution and transmission loss factors. In order to make the voltage differentials more cost-reflective, Eskom will increase the price differential of distribution portion of the network charges between high-voltage and low-voltage customers from 0% and 17% to 0% and 25%. The time-of-use (TOU) conversion surcharge will be removed for existing and new supplies. The bill will be simplified by introducing a rate matrix for Nightsave (Rural) and Ruraflex tariffs.     31 Why is there not a network demand charge on rural tariffs? In actual fact the network demand charge for rural tariffs also exists. It is, however, not unbundled from the other rate components. For Nightsave Rural it is included in the energy demand charge and for Ruraflex it is charged as a c/kWh re-bundled with the other energy rates. D QUESTIONS RELATED TO MEGAFLEX, MINIFLEX AND NIGHTSAVE (URBAN) 32 What is the reason behind the unbundling of the transmission and distribution network charges? Eskom’s network costs are made up of both distribution network costs and transmission network costs. It is important to unbundle these costs as the cost drivers of the Transmission and Distribution businesses are different. For Distribution the voltage of the supply and the density of customers are important cost drivers, whereas the cost drivers for Transmission are mainly the distance from generators and the capacity constraints on the transmission network. In Eskom’s current tariffs, the above costs differences are recovered via transmission and voltage surcharges, but as the distribution and transmission network charges are not unbundled, this recovery method is structurally not cost-reflective. 33 Why have the energy rates increased so significantly – why are high load factor customers being penalised? Based on the ring-fenced revenue requirements for each Eskom division, energy costs increased and network costs reduced, causing energy rates to increase on average and network charges to reduce. This is the correct pricing signal in the light of current capacity constraints. This also reflects the fact that energy costs will increase at a higher rate than network costs, due to the cost of primary energy (fuel) to meet increasing demand for energy and the significant cost of building power stations. High load factor customers that use significantly more energy than other customers will therefore see an increase in their overall bill. 34 Why is it necessary to increase the price differential between high-voltage an-low voltage network-related charges? Currently the same percentage differentiation is applied to network costs and energy costs. This percentage differentiation does not reflect the true network costs and losses on the distribution network. No change is proposed to the voltage categories themselves but it is proposed to change the price differentiation between the categories. Eskom will increase the price differential of network charges between high-voltage and low-voltage customers from 0% and 17% to 0% and 25%. 35 How was the 25% differential determined? When the network charges were unbundled, it was possible to move to more reflective price differentials between the higher and lower voltage network charges. Modelling was done to find the level of differential that would still be in the right pricing direction, but not impact the lower voltage customer negatively. This level was at the 0 to 25% differential. 36 Why are loss factors applied to the energy rates? Electrical losses vary according to the voltage of the supply and the distance of the supply from the source. Currently these losses are recovered through the voltage surcharge and the transmission zonal charge. With the unbundling of the distribution and transmission network charges, the losses previously recovered through the surcharges will now be recovered through transmission and distribution loss factors. 37 Why is it necessary to split the current Nightsave Urban tariff into two separate tariffs? The Nightsave Urban tariff caters for customers with a large differentiation in supply sizes. Analysis has shown that there is a clear difference in cost and metering capability between the larger and smaller customers on this tariff. The categorisation is too broad and therefore it is proposed to split the tariff into a Nightsave Urban (Large) for customers > 1MVA and Nightsave Urban (Small) for customers < 1MVA. This proposed change will allow for future simplicity in the tariff for smaller Nightsave Urban customers. 38 What is a conversion surcharge? Why does Eskom propose to remove it? This is a charge levied to protect Eskom against a loss of revenue due to customers converting from a non-TOU tariff to a TOU tariff and obtaining a windfall benefit without changing their load profile. Eskom proposes to remove the conversion surcharge for existing and new tariff conversions and to reduce, as far as possible, the misalignment or difference between the TOU and non-TOU tariffs. 39 What is a rate-rebalancing Levy (RRL)? The rate-rebalancing levy (RRL) is a transparent charge reflecting the contribution made to inter-tariff cross-subsidies for rural and electrification connections by large customers. 40 What are the changes that will be made to the rate rebalancing levy? Eskom proposes to remove the conversion surcharge and to reduce the misalignment between the TOU and non-TOU tariffs. This will be achieved through the alignment of the raterebalancing levy. To ensure that the alignment does not create a revenue risk to Eskom, it is proposed that the equalisation of the rate-rebalancing levy should not be done in one step. 41 How do I know what Transmission zone I fall under? The transmission zones are determined according to distance measured from a central point in Johannesburg as follows: <300km >300km and <600km >600km and <900km >900km E Zone 1 Zone 2 Zone 3 Zone 4 GENERAL QUESTIONS RELATED TO ESKOM’S CAPACITY CONSTRAINTS 42 When will there be enough electricity that means we will not have power blackouts anymore? Eskom has a programme in place to increase the capacity to supply electricity. In February 2007, the Eskom Board approved a revised 5-year capital expenditure plan of R150 billion. Therefore, while it is expected that Eskom will have generation constraints over the next 5year period, by 2012 the generation capacity available should be sufficient to provide supply to all of Eskom’s customers. 43 What are capacity constraints? When there is not enough electricity available to meet the demand from all of Eskom’s customers. 44 What is load shedding? Load shedding occurs when there are capacity constraints and there is a need to interrupt supply. Load shedding only occurs: As a last resort. Only when all other options at its disposal have been exhausted, such as running its power stations at maximum capacity and interrupting supply to industrial customers with special contracts, will Eskom cut supply to other customers. As a controlled way of rotating the available electricity between all customers. Load shedding schedules are drawn up to ensure that a few areas do not bear the brunt of the shortages. By spreading the impact, affected areas are not interrupted for more than two hours at a time, and in most cases customers can be informed of interruptions in advance. As an effective way to avoid blackouts. Shortages on the electricity system unbalance the network, which can cause it to collapse. By rotating the load in a planned and controlled manner, the system remains stable. 45 What is Demand Side Management (DSM)? Demand side management is a programme that encourages customers to modify patterns of electricity usage. This includes conservation; interruptability and load shedding. For more info on DSM refer to website http://loadshedding.eskom.co.za.