NTLs and the Supply ChallengeProving the Yelland Thesis

William C. Erasmus CEM (FSAIEE)

Introduction

• In South Africa we have adequate energy (kWhs) but we do not have the power capacity (MW or GW) to meet the demand for energy

• This status unequivocally creates an opportunity to unlock power capacity by reducing energy demand through DR and reducing NTLs thereby deferring new investment into generation, transmission and distribution

What are Non-Technical Losses – NTL’s ?

Commercial AdministrativeReceivables

• Fraud may be:– Energy theft (illegal connections to the network)

– Meter fraud or by-passes

• Meter errors

• Fraud may be implemented by the customer or by professionals

NTL’s :

Commercial

• High cost of managing aging accounts– Default Customers – Delayed Payments and

no payment• Defaulter consumer (*) some will delay, some will not

pay

• Volume and aging of receivable accounts has HIGH CO$T IMPACT consumer used energy but did not pay on time, which increase company’s financial expenses

* Usually not accounted as NTL.

AdministrativeReceivables

NTL’s :Commercial

• Internal process flaws and database inconsistencies (Average 20% of all problems identified by C&I Audits in SA)– Human and system errors (*)

– Incorrect tariff (*)

– Internal fraud (*)* Usually not accounted.

AdministrativeReceivables

Non-Technical Loss

NTLs and the Supply Challenge

NTLdetection

Revenue Increase

Energy Consumption Reduction

Time

Energy

Energy paid

Energy consumption

32%*

68%*

* Figures from recent studies in Brazil

Cost-free DSM

Advantages of NTL Reduction

• NTLs decrease double benefit– Significant energy consumption reduction - unlocked significant additional power capacity

– Revenue increase• Energy consumption reduction

– Diminishes total supply – Reduces the demand-peak

• Therefore, reducing NTLs has a huge benefit in demand management without additional investments– Cost-free DSM benefits

Brazilian Case StudiesNortheast BrasilNortheast Brasil

Southeast BrasilSoutheast Brasil

BrazilBrazil

SAELPASAELPA Area: 54.595 Km2

Consumers : 837 thousand NTLs : 9%

Area: 1.789 Km2

Consumers : 131 thousand NTLs: 4%

Area: 17.419 Km2

Consumers : 436 thousandNTLs: 4%

Area: 17.331 Km2

Consumers : 378 thousand NTLs: 2% Date: April / 04

Energisa (SAELPA)• Energisa implemented solutions to reduce NTLs

from Feb-03 to Nov-04 at their following distribution companies: ENERGIPE – Feb/04 SAELPA/CELB – May/04

CFLCL/ CENF – Nov/04

• RESULTS AFTER 1-Year– SAELPA has 850 thousand customers in one of

poorest states of Brazil– Productivity increase = 90.25%– Energy consumption reduction = 40 GWh– Additional net revenue in 1 year = US$ 2,9 million

• CEMAR implemented a solution in 2006 and results for 2007 are:– Cemar has 1,35 million customers– Productivity increase = 118.89%– Energy consumption reduction = 227 GWh– Additional net revenue in 1 year = US$ 16,9 million

Cemar

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_________________________________________________

[ i

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Measurement of Productivity

Non-Technical Loss

NTLDetection

Revenue Increase

Energy Consumption Reduction

Time

Energy

Energy Paid

Energy Consumption

Opportunity Cost/Benefit Differentiator

• Cost to implement a solution to identify sources of NTLs for, say, Jhb Metro (1.4 million consumers) = 20 million USD and deliver result in 1-year with a ROI in excess of 400%

• New thermal plant of equivalent unlocked capacity would cost in the region of between 10 to 20 billion USD and take nearly 9-years to complete

• The opportunity for the economy is a no-brainer

The Important ?• Business/Economy needs to ask

Government/Eskom why the economy is been held to ransom a situation which is critically effecting employment, job creation and the countries ability to remain globally competitive

Thank You

Optimization Problem• There are several activities to reduce NTLs such as

inspections, anti-theft cable-box-seal, AMR, “SMART” meters etc.

• Activities can’t be applied to all customers because of economic restrictions hence, distribution companies only have budget for a portion of consumer base

• The consequential questions are:– What is the most-effective (ROI) activity for each

customer ?– Who are the top customers to apply each activity ?

• As a result we are confronted with an optimization problem