9.1 Bulk Infrastructure

City Power has approximately 1500 MVA spare capacity available. The development of new commercial areas (including urban sprawl) and low-cost subsidised housing (mostly on the outskirts to the South, West and North) continue to put pressure on new bulk services while existing bulk services are under-utilised. Reduced availability of capital funds, limits resources for requirements of bulk infrastructure. New development will be encouraged and managed to develop in a contiguous manner (i.e., not in a scattered development pattern) and priority should be given to developments closer to bulk supply points rather than further away. This will facilitate optimal planning and asset utilisation.

9.2 Current Subsidised Funding for Electrification

Affordable housing developments rely on funding from the electrification fund (administered) through either NER (City Power supply area) or Eskom (Eskom supply area). Both GJMC (City Power) and Eskom have policies that no electrical services will be provided to informal settlements (i.e., where the general plan for the township has not been proclaimed).

9.3 Future Electrification Funding

A new National Electrification Fund is being established which will replace both the NER and Eskom electrification funds. This fund will be managed by the Department of Minerals and Energy Affairs, which will determine project eligibility. This new centralised National Electrification Fund may not provide the same amount of funding for electrification projects as in the past. The rural areas have fallen behind in electrical service delivery (mainly due to the higher cost per connection for rural electrification that caused the "easy" and cheaper installations in urban areas to be targeted first). The Government has indicated that rural electrification would be its main focus and target over the next few years. This may place a larger burden on those Local Authorities with a more urban character, such as the GJMC itself.

9.4 Densification Trends

Commercial and social changes that allow greater densification of the urban areas (particularly the residential areas, including backyard shacks) are putting increasing pressure on bulk supply and distribution networks.

9.5 Revenue Management

City Power's non-technical losses are approximately 18%. This is higher than South African benchmarks. Taking over the customer base form Council and rendering revenue management service will be a major challenge for City Power.

9.6 Low Load Factor

Load factor is an indication of effective utilisation of network assets as well as low average energy consumption in low-income households. A low load factor reduces financial viability of networks (capital investment and operational costs. It is City Power's intent to manage demand better. This will reduce the overall energy consumed by reducing the peak demand. It will require less infrastructure to support the demand and therefore will bring down the overall cost of supplying electricity.

9.7 Theft and Vandalism of Network Elements and Illegal Connections

Theft (particularly of copper) and vandalism of network equipment is rife and puts significant pressure on maintenance personnel. Illegal connections usually bypass protection equipment, which causes permanent damage to networks. The maintenance costs for theft and vandalism incidents limit the funds available for the real required maintenance.

9.8 Competitive Tariffs for Commerce and Industry

The current tariff discrepancy for bulk customers (both Eskom and City Power) encourages customers to locate to areas where Eskom is the supply authority; GJMC does not derive the benefit of electricity-related income from those customers. Competitive tariffs are one of the main drivers for decisions on location, particularly for energy-intensive industries. Energy costs could account for up to 40% of input costs to commerce and industry.

9.9 Tariffs for Domestic Customers

There is a high cross-subsidisation of domestic customers by the commerce and industry sector. Only 14% to 15% of Eskom income is derived from domestic customers, while those customers utilise approximately 80% of the operating costs. (These figures are slightly skewed as the domestic customers that are supplied by local authorities are not reflected, i.e., they are collectively treated as bulk customers.) City Power analysis indicates that they derive approximately 60% to 70% of their income from about 2% to 3% of the total number of customers who utilise about 45% of the system demand. DME restructuring workshops suggest that the domestic tariff will need to be increased by approximately 40% if the cross-subsidisation were to cease.

9.10 Quality of Supply

Quality of supply is a major indicator for measuring the standard of electricity supply to customers. National specifications (NRS 048) for quality of supply are in place, enforced by the NER. This standard has been developed in conjunction with international standards, best practices and local inputs. Electricity distributors are required to maintain records of all outages and report to the NER on an annual basis. Commerce and industry are particularly concerned about quality of supply; reliability (forced interruptions, voltage dips) is the major issue. Reliability of supply is one of the main drivers for decisions on location for industry and commerce

9.11 People

9.11.1 Culture
City Power does not reflect a competitive culture. The current culture can be described as:

• Technical orientation
• Non decision making
• Slow response
• No risk taking
• Not service orientated

The prevailing company culture is a threat to the performance of the business. Significant changes will be made to people behaviours to ensure that a competitive performance culture is cultivated. A performance management system will be implemented as a priority to manage people's performance.

9.11.2 People Profile
City Power's people profile does not reflect the demographics of the region. Quantum changes will need to be made in order to align the people profile with legislation requirements.

9.11.3 People Comptencies
The people competencies have been established around the wires-part of the business. In general the company lacks:

• Business management competencies
• Customer service competencies
• Financial management competencies
• Logistical management competencies
• Information management competencies

The maintenance of technical competencies will also be a priority.

9.11.4 Organisation Structure
City Power's organisation structure has not yet been designed and implemented to the lowest level. During the course of 2001 this design will be completed and implemented. A process will be pursued whereby the most suitable candidate for the position will be appointed.

9.11.5 Renumeration
City Power has not yet developed a remuneration strategy. This will be done as a priority during 2001. The strategy will:

• Support the business strategy
• Cultivate a performance culture
• Enable people to reach their highest potential
• Make provision for market related remuneration structures
• Reward of individual and team superior performance

9.12 Business Processes

9.12.1 Corporate Value Chains
The corporate value chains have not yet been mapped and therefore there is:

• No performance standards
• No measure of value chain performance
• No value chain ownership
• No value chain integration

Implementing value chain management is a key strategic objective of the Company. It is intended to implement the following vale chains:

• Develop and market product and services
• Acquire new customers
• Create network assets
• Manage the revenue cycle
• Manage supply availability

9.12.2 Processes
Departmental business processes have not been developed. In particular there are no current processes to support the desired customer service outcomes.

9.13 Information Systems

9.13.1 Architecture
The performance of the IS architecture is below standard.

• A number of operational sites do not have access to the IS architecture
• The up-time of the architecture is below industry standards
• Response time is slow

This above has resulted in inefficient and ineffective paper systems being employed and people frustrations and lost-time

9.13.2 Applications
City Power does not have an ERP system and it does not pursue an approved IS strategy. Because of this the current information systems do not enable the Company's business processes. It has entrenched functional behaviour and does not provide the right information at the right time to the right person to empower people to execute their tasks or to take informed decisions.

9.13.3 Data Purification
The data is unreliable and it will require significant company effort to purify it.

9.13.4 Business Intelligence
City Power does not have a business intelligence system nor to review its performance regularly. A key strategic objective is to implement as soon as possible an executive information system.

9.14 Infrastructure

9.14.1 Properties
The valuation of City Power owned properties has not yet been done but this will be addressed in the next planning cycle

9.14.2 Fleet
City Power has outsourced its fleet operations to Superfleet.