The proposed Low Power Factor LPF charge v23072010 LPF charge... · Please send your inputs on the proposed Low Power Factor (LPF) charge to ... The Proposed Low Power Factor (LPF)

THE LOW POWER FACTOR (LPF) CHARGE

A price signal for energy efficient consumption

JULY 2009

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1.1.1.1. EXECUTIVE SUMMARYEXECUTIVE SUMMARYEXECUTIVE SUMMARYEXECUTIVE SUMMARY

Eskom tariff objectives are aligned to policy, regulation and the Eskom strategic business objectives. To promote economic efficiency, sustainability and support reliability of supply, Eskom aims to provide tariffs that contain cost-reflective signals, are non-discriminatory as possible considering all customers’ needs and recover adequate revenues.

This paper discusses the proposed Low Power Factor (LPF) charge intended to strengthen the price signal for the efficient use of energy through an increase in the customers’ power factor (PF) levels. The targeted supplies are those on the Large Power User tariffs (LPU) i.e. Megaflex, Ruraflex, Miniflex, Nightsave and Transflex tariffs. The proposed charge would replace the existing reactive energy charge for Megaflex, Miniflex and Ruraflex; customers can avoid the proposed monthly charge if they consume electricity at a power factor of 0.96PF.

Power Factor (PF) is the ratio of the kilowatt (kW) and apparent power / kilovolt-ampere (kVA) i.e. PF = kW/kVA. The highest power factor is 100% or 1PF i.e. kW = kVA. In the electrical current flow when the voltage and current are in-phase and the ratio of kVA and kW is closer to 1PF.

In the event of increased consumption at low power factors, there is higher than required demand from supplies and the negative consequences include more demand for the same level of kWh consumption, less available capacity and increases in future generation and network infrastructure investments. To consume electricity with the optimal amount of demand (efficiently) or at power factors closer to 100%, customers can install equipment that operates at 1PF (e.g. synchronous motors, unity factor capacitor motors, resistance heaters) or install compensation equipment.

The Proposed Low Power Factor (LPF) Charge_V23072010.Doc Page Page Page Page 3333 of of of of 34343434

Analyses of customer monthly average power factors indicate that there is an opportunity to introduce the LPF charge due to customers’ response to the higher winter prices and the potential savings of 481MW. Notably is that although supplies with <0.85PF only consume 5% of the kWh, 40% of reactive energy is attributable to them.

The indicative rates for the proposed LPF charge have a >0% to 5% impact on the annual average price (in 2008/9 rand value). In order to retain the level of the LPF price signal, the LPF charge is to be increased with the Eskom annual average increase at the time of tariff adjustments i.e. 1 April for Non-Local Authority tariffs and 1 July for Local Authority tariffs.

The proposed LPF charge structure is one where a customer may pay more or less in a given month depending on the level of their average power factor in a given month. For example, a customer’s premise with an average power factor of 0.96PF in month 1 and 0.79PF in month 2:

� Will pay not pay anything in month 1 but will pay the charge in month 2.

� The kVarh for all customers will be based on the total excess reactive energy accumulated during the month.

� The excess reactive energy is that related to the power factor calculated for every 30-minute integrating measure of kW and kVA.

The implementation of this charge is planned for 1 July 2011 and is subject to a NERSA public consultation and decision. From early 2010, until the implementation date, customers’ bills will reflect the average power factor and potential Low Power Factor (LPF) charge due.

TABLE OF CONTENTSTABLE OF CONTENTSTABLE OF CONTENTSTABLE OF CONTENTS

1.1.1.1. EXECUTIVE SUMMARYEXECUTIVE SUMMARYEXECUTIVE SUMMARYEXECUTIVE SUMMARY ............................................................................................................................................................................................................................................................................................................................ 2222

2.2.2.2. DEFINITIONS AND ABBRDEFINITIONS AND ABBRDEFINITIONS AND ABBRDEFINITIONS AND ABBREVIATIONSEVIATIONSEVIATIONSEVIATIONS ............................................................................................................................................................................................................................................ 6666

2.1. Definitions .............................................................................................. 6

2.2. Abbreviations ......................................................................................... 8

3.3.3.3. INTRODUCTIONINTRODUCTIONINTRODUCTIONINTRODUCTION............................................................................................................................................................................................................................................................................................................................................................................ 9999

4.4.4.4. IMPACT OF LOWER POWEIMPACT OF LOWER POWEIMPACT OF LOWER POWEIMPACT OF LOWER POWER FACTOR ON CONSUMPTR FACTOR ON CONSUMPTR FACTOR ON CONSUMPTR FACTOR ON CONSUMPTIONIONIONION........................................................................................ 10101010

5.5.5.5. MOTIVATION FOR THE PMOTIVATION FOR THE PMOTIVATION FOR THE PMOTIVATION FOR THE PROPOSED LPF CHARGEROPOSED LPF CHARGEROPOSED LPF CHARGEROPOSED LPF CHARGE ............................................................................................................................................ 11111111

5.1. Large power (LPU) users average power factors (PF) per month......... 12

5.2. Opportunity to optimise demand........................................................... 12

5.3. Mitigating negative impacts of low power factors.................................. 14

5.4. Benefits of power factors closer to 1PF ................................................ 14

5.5. Stronger price signal for power factor levels......................................... 15

6.6.6.6. THE PROPOSED LOW POWTHE PROPOSED LOW POWTHE PROPOSED LOW POWTHE PROPOSED LOW POWER FACTOR (LPF) CHARER FACTOR (LPF) CHARER FACTOR (LPF) CHARER FACTOR (LPF) CHARGEGEGEGE........................................................................................................ 16161616

6.1. Objectives of the LPF Charge .............................................................. 16

6.2. International power factor signals ......................................................... 17

6.3. Structure and price level of the LPF charge.......................................... 18

6.4. Applicable power factors ...................................................................... 19

6.5. Application of the LPF charge .............................................................. 19

6.6. Example of the LPF charge dynamic.................................................... 19

7.7.7.7. POTENTIAL IMPACTS ONPOTENTIAL IMPACTS ONPOTENTIAL IMPACTS ONPOTENTIAL IMPACTS ON CUSTOMERS’ ELECTRIC CUSTOMERS’ ELECTRIC CUSTOMERS’ ELECTRIC CUSTOMERS’ ELECTRICITY BILLSITY BILLSITY BILLSITY BILLS .................................................................... 20202020

8.8.8.8. AVOIDING THE PROPOSEAVOIDING THE PROPOSEAVOIDING THE PROPOSEAVOIDING THE PROPOSED LPF CHARGED LPF CHARGED LPF CHARGED LPF CHARGE................................................................................................................................................................................................ 22222222

8.1. Reasons for low power factors ............................................................. 22

8.2. Considerations to be employed to avoid the LPF charge...................... 22

8.3. Estimated pay-back period for investment in compensation ................. 23

9.9.9.9. ESKOM TREATMENT OF RESKOM TREATMENT OF RESKOM TREATMENT OF RESKOM TREATMENT OF REVENUES FROM THE LPFEVENUES FROM THE LPFEVENUES FROM THE LPFEVENUES FROM THE LPF CHARGE CHARGE CHARGE CHARGE ........................................................ 24242424


APPENDIXESAPPENDIXESAPPENDIXESAPPENDIXES

Appendix 1: Additional Power factor details ........................................................................... 25

Appendix 2: Assumptions used to calculate the MW and kWh savings................................. 27

Appendix 3: Analyses of the LPU tariffs’ monthly average power factors (pf) ...................... 28

Appendix 4: An example of the LPF charge application and impactsAppendix 4: An example of the LPF charge application and impactsAppendix 4: An example of the LPF charge application and impactsAppendix 4: An example of the LPF charge application and impacts .................................... 31

Appendix 5: PoweAppendix 5: PoweAppendix 5: PoweAppendix 5: Power factor in the standard conditions of supplyr factor in the standard conditions of supplyr factor in the standard conditions of supplyr factor in the standard conditions of supply.............................................. 33

LIST OF TABLESLIST OF TABLESLIST OF TABLESLIST OF TABLES

Table 1: Exisitng demand signals in the tariffs ....................................................................... 13

Table 2: Exisitng power factor signal – reactive energy charge ............................................. 15

Table 3: Indicative rates per average power factor and capacity size ................................... 18

Table 4: Indicative rates per average power factor and capacity size ................................... 23

LIST OF FIGURESLIST OF FIGURESLIST OF FIGURESLIST OF FIGURES

Figure 1: Figure 1: Figure 1: Figure 1: The inductive load in an AC circuit .......................................................................... 10

Figure 2: Figure 2: Figure 2: Figure 2: The annual average increase due to the LPF charge ............................................. 20

Figure 3: Figure 3: Figure 3: Figure 3: The annual average increase due to the LPF charge per tariff .............................. 21

Figure 4: Figure 4: Figure 4: Figure 4: % of supplies per increase and size due to the LPF charge................................... 21

Figure 5: Figure 5: Figure 5: Figure 5: % of supplies per increase and size due to the LPF charge................................... 24

Figure 6: Figure 6: Figure 6: Figure 6: Example of price change impact due to varying average PF.................................. 31


2.2.2.2. DEFINITIONS AND ABBRDEFINITIONS AND ABBRDEFINITIONS AND ABBRDEFINITIONS AND ABBREVIATIONSEVIATIONSEVIATIONSEVIATIONS

2.1. DefinitionsDefinitionsDefinitionsDefinitions

TERMTERMTERMTERM DEFINITIONDEFINITIONDEFINITIONDEFINITION

Average Average Average Average Power factorPower factorPower factorPower factor This is the power factor calculated the total kilovolt-ampere reactive (kvarh) and total kilowatt (kWh).

Pricing signalsPricing signalsPricing signalsPricing signals Signals designed into the tariff structures and levels which aim to make end-use customers and intermediaries aware of the cost of generating, transmitting, distributing or retailing electricity so that they will use electricity efficiently, correctly, and responsibly, and respond to the signals

appropriately through demand-side management (DSM).

NoteNoteNoteNote: The behaviour of customers is thus incentivised so as to achieve outcomes which benefit both the customers and the suppliers, by keeping electricity prices as low as possible and by ensuring economic efficiency.

Chargeable demand Chargeable demand Chargeable demand Chargeable demand The highest average demand, in kVA, measured over any demand-integrating period of thirty consecutive minutes (30-minute integrating periods) recorded during the chargeable time periods in a billing month.

ConsumptionConsumptionConsumptionConsumption The energy used by a customer during a specific period, measured in kWh.

Demand chargeDemand chargeDemand chargeDemand charge Total amount billed for the demand in accordance with the relevant conditions of the tariff or supply agreement.

Reactive energy Reactive energy Reactive energy Reactive energy chargechargechargecharge

A charge based on the reactive energy (kvarh)used and measured in terms of very specific definitions for different tariffs.

Load/demandLoad/demandLoad/demandLoad/demand The average value of power over a specified interval of time.

LossesLossesLossesLosses Refers to energy for which the Distributor does not recover revenue as a

separate identifiable charge. Losses include Technical losses, non-technical losses and administrative losses.

Note:Note:Note:Note: This is a general term applied to energy (kWh) and capacity (kW) lost in the operation of an electric system. The power expended without accomplishing useful work occurs primarily on the transmission and distribution systems. Losses occur principally as energy transformations from kWh to waste-heat in electrical conductors and apparatus.


TERMTERMTERMTERM DEFINITIONDEFINITIONDEFINITIONDEFINITION

Maximum demandMaximum demandMaximum demandMaximum demand The highest averaged demand measured in kVA during any integrating period (normally 30 minutes) within a designated billing period (usually one

month) i.e. The highest registered electrical demand integrated for a specified period.

Excess demand Excess demand Excess demand Excess demand This is the additional demand required for not maintaining the required (or contractual) power factor. It is the (kW/actual Pf ) – (kW/contracted PF).

NetworkNetworkNetworkNetwork The electrical infrastructure over which energy is transported from source to point of consumption.

Network chargesNetwork chargesNetwork chargesNetwork charges Recovers network costs (including capital, operations, maintenance and refurbishment) associated with the provision of network capacity required and reserved by the customer.

NoteNoteNoteNote: The network charge in the retail or in the DUoS charges may or may not be the same in structure and value.

Network access Network access Network access Network access charges (NAC) charges (NAC) charges (NAC) charges (NAC)

The network access charge (NAC) is a tariff component that may be applicable in both the structure of retail tariffs and in DUOS. It is a charge that is fixed on an annual basis and is charged as a R/kVA on the annual utilised (reserved) capacity.

NetworkNetworkNetworkNetwork demand demand demand demand charges (NDC)charges (NDC)charges (NDC)charges (NDC)

The network demand charge is a tariff component that may be applicable in both the structure of retail tariffs and in DUOS. It is a charge that is

variable on a monthly basis and is charged on the actual demand measured in peak and standard periods.

Notified maximum Notified maximum Notified maximum Notified maximum demand (NMD)demand (NMD)demand (NMD)demand (NMD)

The maximum demand notified in writing by the customer and accepted by the utility.

Power factorPower factorPower factorPower factor Ratio of kW to kVA measured over the same integrating period.

TimeTimeTimeTime----ofofofof----use (TOU) use (TOU) use (TOU) use (TOU) tarifftarifftarifftariff

Tariff that has different active 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.

Technical lossesTechnical lossesTechnical lossesTechnical losses Losses incurred over electrical networks due to the characteristics of the physical equipment usually associated with the dissipation of enery

resulting in the heating of equipment


2.2. AbbreviationsAbbreviationsAbbreviationsAbbreviations

EDCEDCEDCEDC Energy Demand Charge

LPFLPFLPFLPF Low Power Factor : a term used to refer to poor power factors

NACNACNACNAC Network Access Charge

NDCNDCNDCNDC Network Demand Charge

NERSANERSANERSANERSA National Electricity Regulator of South Africa

PFPFPFPF Power Factor

TOUTOUTOUTOU Time-of-use


3.3.3.3. INTRODUCTIONINTRODUCTIONINTRODUCTIONINTRODUCTION

This document discusses the proposed Low Power Factor (LPF) for use in consultation with various stakeholders.

The document first provides background on power factor (PF) and electricity consumption. This is followed by the motivation for proposing the Low Power Factor (LPF) charge that includes observations of customer points of supply average power factors from November 2008 through to December 2009. Thereafter, a description of the LPF charge structure and the way it is to be raised on customers’ monthly bills is covered. In closing, an analysis of the electricity price impacts and implementation to facilitate customers’ avoidance of the proposed charge are provided.

Please send your inputs on the proposed Low Power Factor (LPF) charge to Eskom via email Please send your inputs on the proposed Low Power Factor (LPF) charge to Eskom via email Please send your inputs on the proposed Low Power Factor (LPF) charge to Eskom via email Please send your inputs on the proposed Low Power Factor (LPF) charge to Eskom via email to to to to [email protected]@[email protected]@eskom.co.za


4.4.4.4. IMPACT OF LOWER POWEIMPACT OF LOWER POWEIMPACT OF LOWER POWEIMPACT OF LOWER POWER FACTOR ON CONSUMPTR FACTOR ON CONSUMPTR FACTOR ON CONSUMPTR FACTOR ON CONSUMPTION ION ION ION

The alternating current (AC) has a flow in the form of a sine wave and the complete cycle of the AC waveform results in the net transfer of energy in one direction i.e. real power/ kilowatt (kW). The current flow that results in kilowatts reflects that the voltage and current are in-phase; when the current and voltage / volt-ampere (VA) are at their maximums and minimums at the same instance, the current is said to be in-phase. The portion of stored power that returns to source after the complete cycle of the AC waveform, is known as reactive power or volt-ampere reactive (VAr); also see Figure Figure Figure Figure 1111.

Figure Figure Figure Figure 1111: : : : The inductive load in an AC circuit

Eskom customers’ electricity off-take points or supply points are a mix of either mainly-resistive or mainly-inductive loads; loads are the circuits connected to the Eskom network through customer terminals / supply points:

• Mainly-resistive loads will serve equipment like electrical resistance heating and incandescent lighting. The levels of kW and kVA are closer therefore have power factors closer to 1PF.

• Mainly-inductive loads e.g. inductive motors, welding machines, and induction furnaces will have equipment that operates through the use of wire coils that need reactive energy to create a magnetic filed so that they can convert the electrical energy into work.

PF 0.96 Lagging

-300

-200

-100

0

100

200

300

0

11

22

33

44

55

66

77

88

99

110

121

132

143

154

165

176

187

198

209

220

231

242

253

264

275

286

297

308

319

330

341

352

degrees

Voltage (volt) & Current (Amps)

Voltage

Current

Power (kW)

Power kVA)

16O


In resistive loads, the voltage and current are in-phase and the ratio of kVA and kW is closer to 1PF. Inductive loads require reactive energy and their power factors are therefore further away from 1PF.

The impact on electricity consumption is that for the same amount of kilowatt-hours (kWh), loads that consume electricity with a lower Power Factor (PF) draw more electrical current than loads with a higher PF. The result is that lower PF have a higher kVA than kW for the same amount of kilowatt-hour (kWh) consumption. Power Factor (PF) can therefore be referred to as an indicator of efficient electricity demand during consumption. For additional details of power factor (PF), see Appendix 1.

5.5.5.5. MOTIVATION FOR THE PMOTIVATION FOR THE PMOTIVATION FOR THE PMOTIVATION FOR THE PROPOSED ROPOSED ROPOSED ROPOSED LPF LPF LPF LPF CHARGECHARGECHARGECHARGE

The motivation to propose the Low Power Factor (LPF) is to create a power factor price signal to encourage higher power factor levels at Eskom supply points at all times and throughout the year so as to optimise demand (kVA) i.e. demand reduction at the same level of kilowatt-hours. The proposed LPF charge is intended to:

• Complement the existing demand price signals in network and energy demand charges.

• Support increased mitigation of negative impacts from low power factors.

• Access customers’ with electricity cost-savings and operational benefits from higher power factors.

Analyses of the average power factors amongst the large power user tariffs demonstrate an opportunity for customers to manage their PF levels upwards. Notably, there is a conservatively estimated 481MW savings due to average power factors below 0.96PF. In the long-run, benefits from improved power factors accruing to customers and Eskom translate into economic efficiencies for South Africa.


5.1. Large power Large power Large power Large power (LPU) (LPU) (LPU) (LPU) users average power factors (PF) per monthusers average power factors (PF) per monthusers average power factors (PF) per monthusers average power factors (PF) per month

86% of the total LPU points of supply consumption were analysed from November 2008 through to October 2009. The monthly average power factors for each supply point were calculated using the total kWh and kVArh for each month over the period i.e. the monthly average power factor.

The findings from the analysis support the pursuit of a stronger power factor price signal given that:

• There is 1% potential additional annual electricity sales based on 481MW savings.

• There is an increase in higher power factors during winter / high-demand period.

• 67% of the total points of supply are on the Rural tariffs and 29% have <0.85PF.

• Although supplies with <0.85PF have a low contribution to total electricity sales, they contribute to the majority of the excess reactive energy.

See APPENDIXAPPENDIXAPPENDIXAPPENDIX 3333 for the summary of the analysis of the LPU tariffs’ points of supply.

Further, a quick dip-stick study was conducted amongst 27 of the customers with >1MVA demand. From the study it was identified that customers would like to reduce their electricity costs but half of them do not consider improvement of power factor levels as an intervention. Most efficiency initiatives applied by customers were conversion to CFL and Hot-water control; only one customer changed their motors.

5.2. Opportunity Opportunity Opportunity Opportunity to to to to optimise demandoptimise demandoptimise demandoptimise demand

Demand levels during the most of the year (excluding winter) are proportionately lower than in winter. In a system with overall increased consumer demand and low reserve margins, higher power factors offer an opportunity to optimise demand throughout the year. This can be achieved from customers’ compensation for most of their reactive energy requirements.


The existing demand price signals in the tariffs are the energy demand charge (EDC) and the network demand (NDC) charges. Also see Table 1 for a description of the charging parameters. These demand signals are geared to encourage lower demand and concurrent kWh reductions and not decreased demand for the same level of consumption:

• The energy demand charge present only in the Nightsave tariffs, supports demand management during winter.

• The signal to manage maximum demand levels is contained in the network demand charge applicable throughout the year is in the Megaflex tariff (during peak and standard time-of-use periods) and in the Nightsave tariffs (during the peak time-of-use period).

Table Table Table Table 1111: Exisitng demand signals: Exisitng demand signals: Exisitng demand signals: Exisitng demand signals in the tariffs in the tariffs in the tariffs in the tariffs

•Chargeable demand i.e. the highest average

demand, in kVA, measured over any demand-

integrating period of thirty consecutive minutes (30-

minute integrating periods).

•N/ADifferent for some tariffs

• Peak (All)• Peak and

Standard in Megaflex:

Throughout the year•Megaflex

•Nightsave Urban

(Large and Small)

•Nightsave rural





•N/AOne period•Peak

Throughout the year•Nightsave Urban

(Large and Small)

•Nightsave Rural

NETWORK DEMAND CHARGE

ENERGY DEMAND CHARGE

CHARGING PARAMETERS

Applicable volumesApplicable Power Factor (PF)

Time-of-use periodMonth





•N/ADifferent for some tariffs

• Peak (All)• Peak and

Standard in Megaflex:

Throughout the year•Megaflex

•Nightsave Urban

(Large and Small)

•Nightsave rural





•N/AOne period•Peak

Throughout the year•Nightsave Urban

(Large and Small)

•Nightsave Rural

NETWORK DEMAND CHARGE

ENERGY DEMAND CHARGE

CHARGING PARAMETERS

Applicable volumesApplicable Power Factor (PF)



5.3. Mitigating negative impacts of low pMitigating negative impacts of low pMitigating negative impacts of low pMitigating negative impacts of low power factorsower factorsower factorsower factors

The improvement in power factor levels mitigates the negative impacts of low power factor levels that include:

• More volumes of distribution networks technical losses (kWh) thereof creating need for more electricity generation.

• Increase in the potential for voltage instability that consequently negates reliable electricity supply and adds to the costs of electrical-flow system monitoring and management.

• Less available capacity to add new supplies on the network that limits access to electricity and opportunities for business growth.

• Higher costs of electricity due to shorter life-cycles of network assets, the need for larger sized distribution infrastructure and undue additional investments in network compensation.

• Customer inequity from cross-subsidies is created when the cost recovery due to low power factors is shared with customers that have high power factors.

5.4. Benefits of power factors closer to 1PFBenefits of power factors closer to 1PFBenefits of power factors closer to 1PFBenefits of power factors closer to 1PF

The operational and cost benefits from improved power factor levels mostly accrue to customers and include the immediate lower electricity costs from reduced amounts of metered chargeable demand that are the basis for network demand charges. When combined with a reduction in the reserved capacity or notified maximum demand (NMD), customers can enjoy further electricity cost reductions through lower network access charges (NAC) and energy charges. In the long-run, the relative Eskom costs of networks are lowered and this would translate to lower network charges used to recover the network costs.

Customers that compensate to improve their power factor levels at their Eskom off-take points and within their sites minimise the potential for own-site voltage drops to enjoy lower per unit production costs from improved voltage regulation and the


REACTIVE ENERGY CHARGE

•Miniflex

•Ruraflex

CHARGING PARAMETERS

•Reactive energy calculated from the average monthly PF.

•Accumulated reactive energy in a

billing month for power factors below

0.96PF

Applicable volumes

•Average monthly PF:calculated on the total

kW and total kVA

measured during the

billing month.

•Raise on power factor <0.96PF

•Per 30-minute measure PF:

calculated on the kW

and kVA measured during

the same 30-minutes.

•Raised for power factor

<0.96PF

Applicable Power Factor

(PF)

All •Peak

•Standard

•Off-peak

High-demand season

(June, July and

August)

Two periods

•Peak

•Standard

High-demand

season

(June, July and

August) •Megaflex

•Transflex


REACTIVE ENERGY CHARGE

•Miniflex

•Ruraflex

CHARGING PARAMETERS

•Reactive energy calculated from the average monthly PF.

•Accumulated reactive energy in a

billing month for power factors below

0.96PF

Applicable volumes

•Average monthly PF:calculated on the total

kW and total kVA

measured during the

billing month.

•Raise on power factor <0.96PF

•Per 30-minute measure PF:

calculated on the kW

and kVA measured during

the same 30-minutes.

•Raised for power factor

<0.96PF

Applicable Power Factor

(PF)

All •Peak

•Standard

•Off-peak

High-demand season

(June, July and

August)

Two periods

•Peak

•Standard

High-demand

season

(June, July and

August) •Megaflex

•Transflex


concomitant quality of supply within the customers’ sites. There is also the increased KWh consumption with low power factors for the same amount of heating. This is because heating equipment draws less current with higher power factors. For induction motors voltage drops slow-down motors requiring more current to produce a fixed torque for the loads. The demand for more current (voltage) increases the line losses at the customers’ site. With higher power factors there is the minimized potential for circuit and machinery over-heating that provides for longer equipment life-time.

For South Africa, consumption with power factors closer to 1PF can contribute to lower Eskom costs to generate and supply electricity that accordingly reduce the relative long-term electricity prices.

5.5. Stronger price signal for power factorStronger price signal for power factorStronger price signal for power factorStronger price signal for power factor levels levels levels levels

The reactive energy charge is a flat cent per kilo volt-ampere reactive (c/kVarh) applied to the reactive energy (kVarh) and is applicable to power factors below 0.96PF; also see Table 2 for the charge parameters.

Table Table Table Table 2222: Exisitng power factor signal : Exisitng power factor signal : Exisitng power factor signal : Exisitng power factor signal –––– reactive energy charge reactive energy charge reactive energy charge reactive energy charge


The reactive energy charge is raised differently amongst the applicable tariffs. The stronger power factor signal limitations in this charge are:

• It is only applicable during the winter period (July to August) and only for supplies on the Megaflex, Miniflex and Ruraflex tariffs.

• Irrespective of a customer’s power factor level, there is a single applicable c/kVarh rate negating the higher impacts on Eskom compensation costs and voltage stability from lower power factors.

6.6.6.6. THE THE THE THE PROPOSED PROPOSED PROPOSED PROPOSED LOW LOW LOW LOW POWER FACTOR (POWER FACTOR (POWER FACTOR (POWER FACTOR (LPFLPFLPFLPF) ) ) ) CHARGECHARGECHARGECHARGE

6.1. Objectives of the LPF ChargeObjectives of the LPF ChargeObjectives of the LPF ChargeObjectives of the LPF Charge

The objective of the LPF charge is consumption of electricity at higher power factors to provide for lower electrical current demand for the same level of kilowatt-hour (kWh) consumption. The intended end-results are:

1. Optimised network demand from loads

2. Minimal and equitable impacts on customers’ electricity costs.

The standard conditions of supply stipulate the levels of power factors for each integrating measure (30-minutes), see Appendix Appendix Appendix Appendix 5555 for an excerpt from the supply conditions. At present, the Eskom recourse for low power factors is to either install power factor correction equipment at the customers’ cost or alternatively consult with customers on improvements; and the latter has not yielded redress. The implication of this situation is the continued inefficient use of electricity during a period of tight-capacity.

Adjusting the existing tariff charges to cater for a stronger power factor signal would result in higher price increases for customers. In this regard, the LPF charge is designed so that customers can avoid increased costs from the LPF charge through higher power factors. Customers can also gain electricity cost savings from lower energy demand or network demand charges as well as network access charges through re-notification of lower a network maximum demand (NMD). Reactive energy


compensation combined with more energy efficient equipment, will also provide customers with added operational cost efficiencies.

6.2. International power factor signalsInternational power factor signalsInternational power factor signalsInternational power factor signals

To adapt the best practices for the proposed power factor charge, a study of international power factor signals was conducted. The study’s overall findings are that charging for power factors is a common practice albeit different approaches amongst utilities and distributors within the same country or in different regions. Key findings from the study were:

• The approaches used to derive the customers’ power factors are consumption over certain integration periods and the use of an average monthly power factor.

• The customer size and voltage level are used to set the allowable ranges of power factor and / or reactive energy charges.

• In some of the utilities there were set standardised power factors for different customer classes i.e. the allowable levels of power factors were differentiated by sector.

• To raise the power factor charges, there were different methods employed that included:

− Increasing the monthly bill by a percentage for power factors below the accepted levels.

− Raising a reactive energy charge if the consumed reactive energy exceeded the allowed amount.

− Charging a reactive energy charge on the maximum kVArh for the month.

− Using the total reactive energy consumed to calculate the due amounts from the reactive energy charge.

• Most utilities completely prohibited leading power factors and where allowed it was only within a very narrow band. Consequences to discourage leading power factors included disconnecting the customer supply until the power factor is brought to the acceptable level.


6.3. Structure and price level of the LPF chargeStructure and price level of the LPF chargeStructure and price level of the LPF chargeStructure and price level of the LPF charge

The considerations included in the design the proposed LPF charge are the analyses of the LPU tariffs average power factors, the key findings from the international research, the customer dip-stick study as well as initial inputs from different stakeholders and Eskom staff. The structure of the LPF charge is as follows:

• Applicable to all LPU tariffs and is a per supply point c/kVArh charge.

• Charged throughout the year and at all time-of-use periods (peak, standard and off-peak).

• Differentiation of the rates per customer size (notified maximum demand).

• A different rate level depending on the average power factor in a given month.

• The rate level is higher for smaller sized supplies than larger supplies to provide a stronger signal given that these smaller sized supplies have lower levels of average power factors. Further, this rate differentiation allows for a range of a <10% increase to the average price for most supplies.

• See

•

• Table 3 for the indicative rates per average power factor and capacity size.

Table Table Table Table 3333: : : : Indicative rates per average power factor and capacity size


6.4. Applicable power factors Applicable power factors Applicable power factors Applicable power factors

There are two power factors that are applicable to the Low Power Factor (LPF) charge:

• Per integPer integPer integPer integrating measure PFrating measure PFrating measure PFrating measure PF that is the ratio of kW to kVA measured over the same 30-minute integrating period; this is used to determine the volume of excess reactive energy that is accumulated during the billing month.

• Average power factor for the monthAverage power factor for the monthAverage power factor for the monthAverage power factor for the month that is calculated from the total kWh and kVArh for the billing month. This PF determines the rate to be applied on the accumulated excess reactive energy for the billing month.

6.5. Application of the LPF chargeApplication of the LPF chargeApplication of the LPF chargeApplication of the LPF charge

The applicable LPF charge rate is multiplied with the total excess reactive energy accumulated for a billing month. The revenues due for the LPF charge are to be shown separately on the customer bill. Although >=0.96PF may increase the potential for leading power factors, the prevailing embargo on leading power factors is applicable. As per current practice, the exception are high-voltage and large customers who may go leading after having obtained a written agreement from the network system operator to go leading, no LPF charge will apply.

6.6. Example of the LPF Example of the LPF Example of the LPF Example of the LPF charge dynamic charge dynamic charge dynamic charge dynamic

The dynamic of the LPF charge is one where:

• The lower the average power factor for a given month per point of supply, the higher the LPF rate. This is to cater for the higher contribution of lower power factors to the total excess reactive energy.

• The larger the size of supply, the lower rate. This is to cater for the incremental costs from the charge so that the overall increase in electricity costs is equitable in terms of average price increases across supply sizes.

• See Appendix Appendix Appendix Appendix 4444 for an example of the application and impact of the LPF charge.


Most customers will see a <=5%

increase

7.7.7.7. POTENTIAL IMPACTS ONPOTENTIAL IMPACTS ONPOTENTIAL IMPACTS ONPOTENTIAL IMPACTS ON CUSTOMERS CUSTOMERS CUSTOMERS CUSTOMERS’’’’ ELECTRICITY BILLS ELECTRICITY BILLS ELECTRICITY BILLS ELECTRICITY BILLS

The potential impacts on customer bills are modelled on the indicative rates using the LPF charge for the 12 month period, November 2008 through December 2009:

• The indicative price level of the LPF charge modelled has an annual average impact of <=5% for the majority of supplies (54%). This price level change is applicable to 55% of the points of delivery excess reactive energy.

• Only 4% of the supplies see an average increase greater than 20% and most are on the rural tariffs.

• Also see Figure Figure Figure Figure 2222, Figure Figure Figure Figure 3333 and Figure Figure Figure Figure 4444.

Figure Figure Figure Figure 2222: : : : The annual average increase due to the LPF charge


Figure Figure Figure Figure 3333: : : : The annual average increase due to the LPF charge per tariff

Figure Figure Figure Figure 4444: : : : % of supplies per increase and size due to the LPF charge

Most customers will see a <=5%

increase

High increases on the rural tariffs

Most customers will see a <5% increase

Most customers will see a <5% increase

The <=5% increase is across all customer sizes


8.8.8.8. AVOIDAVOIDAVOIDAVOIDINGINGINGING THE THE THE THE PROPOSED PROPOSED PROPOSED PROPOSED LPF CHARGELPF CHARGELPF CHARGELPF CHARGE

8.1. Reasons for low power factorsReasons for low power factorsReasons for low power factorsReasons for low power factors

Customers’ understanding of the reasons for low average power factors at their supply points will support the appropriate redress of low power factors and or direct the type of compensation to be installed. Reason for low power factors at customer sites with mainly-inductive loads can be attributed to:

• The absence of reactive energy compensation equipment at the customer supply point.

• When customers do not use equipment operating at unity power factor (1PF).

• Compensation for reactive energy only during peak time-of-use periods and/or the high-demand season.

• Due to the lack of automatic switching of capacitors (used for reactive energy compensation) for heavily fluctuating loads.

• Due to harmonics that require expert and Eskom involvement in the correction of power factors.

8.2. Considerations to be employed to avoid the LPF charge Considerations to be employed to avoid the LPF charge Considerations to be employed to avoid the LPF charge Considerations to be employed to avoid the LPF charge

Customers can avoid the LPF charge by:

• Ensuring a consumption average power factor of >0.96PF.

• For larger sized supplies, there would be need for automatic compensation to cover all time-of-use periods as the level of kVArh would attract a higher total electricity cost. This is because the LPF charge is applicable on the accumulated excess kVArh calculated at every 30-minute.

The customer implications from the implementation of the proposed LPF charge are financial and operational. Due to the introduction of the LPF charge, customers would need initial capital outlay to invest in corrective equipment and adequate lead time for the installation project as well as for the customers’ own internal approval


processes for the investment. Further, for customers with no compensation at present, they would need time to adjust for production processes and other related activities.

These aforementioned implications are addressed by planning that the implementation of the LPF charge provides a delay to allow customers to redress low power factors in order to avoid the LPF charge costs. The estimated delay is estimated at 12 months e.g. if starting in August 2010 the charge would be implemented on 1 July 2011.

8.3. Estimated payEstimated payEstimated payEstimated pay----back period for investment in compensationback period for investment in compensationback period for investment in compensationback period for investment in compensation

The modelled additional costs from the LPF charge and indicative compensation project and maintenance costs (<3% of project costs) were used to model the investment decision for the customers in the base (see Table 4 ). The discount rate applied was 8.5% and the cash-flows were over 25 years. A tax benefit of 30% was allowed for the first 5 years. The kVArh compensation was based on the maximum demand for average power factors below 0.96PF.

Table Table Table Table 4444: : : : Indicative compensation rates per voltage and VAr compensation

The modelled average discounted pay-back period for most supplies was not more than 1 year for most points of supply. Also see Figure Figure Figure Figure 5555.


Most compensation per supply is not more than 1 year

Figure Figure Figure Figure 5555: : : : % of supplies per increase and size due to the LPF charge

9.9.9.9. ESKOM TREATMENT OF RESKOM TREATMENT OF RESKOM TREATMENT OF RESKOM TREATMENT OF REVENUES FROM THE EVENUES FROM THE EVENUES FROM THE EVENUES FROM THE LPF CHARGE LPF CHARGE LPF CHARGE LPF CHARGE

The LPF charge is not intended to generate additional revenues for Eskom. Any additional revenues from LPF charge will be identifiable based on the separate charge in the billing data. As any additional revenues are subject to the existing and future NERSA revenue requirement over/ under recovery mechanisms, the LPF charge revenues will be subject to the same regulatory oversight.


Appendix Appendix Appendix Appendix 1111: : : : AAAAdditional dditional dditional dditional Power factor details Power factor details Power factor details Power factor details

For the same amount of kilowatt-hours (kWh), loads that consume electricity with a lower Power Factor (PF) draw more electrical current than loads with a higher PF. The need for more current in the inductive load follows:

• The dynamic occurring to create the reactive power is one where the alternating current (AC) changes direction every 180 degrees (many times in a second).

• During the instance when the wave is rising to the maximum value, energy is stored in the inductor in the form of a magnetic field.

• As the AC wave changes direction, the magnetic field energised in the previous 180 degrees cycle is still present with a current flowing through it. This stored energy is in the opposite direction of the new 180 degrees current and thereof causes resistance and the current therefore follows the voltage. In this case, the current and voltage are not in-phase and the power factor is not equal to 1PF lagging (current following / lagging behind the voltage). Also see Figure 1.

Figure Figure Figure Figure 1111: The inductive load in an AC circuit with a lagging power factor. : The inductive load in an AC circuit with a lagging power factor. : The inductive load in an AC circuit with a lagging power factor. : The inductive load in an AC circuit with a lagging power factor.

In the resistive load, unlike the inductive load, power is not returned to source and therefore there is no creation of reactive power (VAr). If the current leads the voltage, this is a leading power factor and this is typical when power factor correction in a load i.e. supply of kVAr is higher than required by the current.

Capacitive loads e.g. capacitor banks provide VArs or reactive energy to inductive loads i.e. they have capacitance and this dynamic is also one where the capacitor

PF 0.96 Lagging

-300

-200

-100

0

100

200

300

0

11

22

33

44

55

66

77

88

99

110

121

132

143

154

165

176

187

198

209

220

231

242

253

264

275

286

297

308

319

330

341

352

degrees

Voltage (volt) & Current (Amps)

Voltage

Current

Power (kW)

Power kVA)

16O


stores voltage. During the capacitor bank’s provision of kVAr to an inductive load with a lagging power factor, when the inductive loads demand declines, in the absence of switching off the capacitor bank, the voltage in the capacitor bank starts opposing the network supply voltage. This situation then leads to a power flow where the current leads the voltage and as such there is a leading power factor from the load, also see Figure 2.

Figure Figure Figure Figure 2222: The inductive load in an AC circuit with a leading power factor. : The inductive load in an AC circuit with a leading power factor. : The inductive load in an AC circuit with a leading power factor. : The inductive load in an AC circuit with a leading power factor.

The relationship in an AC current when the current and voltage are not in-phase for an inductive load can be illustrated by the power triangle. In the power triangle, if the real power is equal to the apparent power, there is no magnetising kVAr and the power factor (PF) =1PF. If there is kVAr there is more apparent power required for the same amount of real power and the power factor (PF) <1PF (positive or negative); also see Figure 3.

Figure Figure Figure Figure 3333: The power triangle illustrating lagging and leading power factors: The power triangle illustrating lagging and leading power factors: The power triangle illustrating lagging and leading power factors: The power triangle illustrating lagging and leading power factors

PF 0.96 Leading

-300

-200

-100

0

100

200

300

0 7

14

21

28

35

42

49

56

63

70

77

84

91

98

105

112

119

126

133

140

147

154

161

168

175

182

189

196

203

210

217

224

231

238

245

252

259

266

273

280

287

294

301

308

315

322

329

336

343

350

357

degrees

Voltage (volt) & C

urrent (A

mps)

Voltage

Current

Power (kW)

Power kVA)

16O


Appendix Appendix Appendix Appendix 2222: A: A: A: Assumptions used to calculate the MW and kWh savingsssumptions used to calculate the MW and kWh savingsssumptions used to calculate the MW and kWh savingsssumptions used to calculate the MW and kWh savings

The basis used to derive the savings is actual consumption detail for LPU tariffs from November 2008 through to December 2009 with average power factors below 0.96PF.

The following conservative assumptions were applied uniformly to all supply points with the <0.96PF average power factor for the month:

• 30% diversity

• Correction to achieve average of 0.96PF per month throughout the year.

• 8760 hours in the year

• Average 31.3c/kWh to determine associated revenues from the kWh

• The associated technical losses savings from the networks are NOT included.


Appendix Appendix Appendix Appendix 3333: A: A: A: Analyses of the LPU tariffsnalyses of the LPU tariffsnalyses of the LPU tariffsnalyses of the LPU tariffs’’’’ monthly average power factors (pf) monthly average power factors (pf) monthly average power factors (pf) monthly average power factors (pf)

There is a potential 481MW savings if all customers improved their average power factors every month throughout the year to 0.96PF; this is equivalent to 1,265GWh (1% of the total electricity sales) and R396million of tariff revenues (at 31.3c/kWh).

Table Table Table Table 1111: Potential savings from improved power factors: Potential savings from improved power factors: Potential savings from improved power factors: Potential savings from improved power factors

The winter price signal is evident in winter for a few of the points of supply. There is more consumption at higher average power factors during winter (high-demand season). Customer supply points are at higher average power factor levels during the high-demand season when the more expensive active energy charges and the energy demand charge (EDC) are applicable. Also see Figure 1.

Figure Figure Figure Figure 1111: : : : Number of customer points of supply per power factor category

High-demand season(Winter)


There is no reactive energy charge for rural tariffs and rural supply points make up 29% of those supplies with <0.85PF, see Figure 2

Figure 2Figure 2Figure 2Figure 2 % of total supplies per tariff and power factor category

Lower consumption by <0.85PF supplies generate most reactive energy. Supplies with <0.85PF consume 5% of total kWh and account for 40% of the excess reactive energy; see Figure 3.

Figure 3Figure 3Figure 3Figure 3: : : : % of total consumption and reactive energy per PF category

53%

0%

34% 34%

7%

25%

5%

40%

0%

10%

20%

30%

40%

50%

60%

Total kWh Excess kVarh

>=0.96PF <0.96PF - 0.90PF <0.90PF - 0.85PF <0.85PF

% of total points of supply by power factor

Highest number

of supplies with

<0.85PF are rural

Highest number

of supplies with

<0.85PF are rural


Most of the excess reactive energy from >2MVA supplies with >0.85PF and <0.96PF. See Figure 5.

22%

32%

29%

0%

10%

20%

30%

40%

50%

60%

70%

80%

<=100kVA >100kVA - <=500kVA >500kVA - >=1MVA >1MVA - 2MVA >2MVA

>=0.96PF <0.96PF - 0.90PF <0.90PF - 0.85PF <0.85PF

0.8%

7%

4% 5%

83%

FFFFigure 5igure 5igure 5igure 5: : : : % of total reactive energy per customer size and PF category


Appendix Appendix Appendix Appendix 4444: An example of the LPF charge application and impacts: An example of the LPF charge application and impacts: An example of the LPF charge application and impacts: An example of the LPF charge application and impacts In this example, two points of delivery are modelled; customer A is a >2MVA supply and customer B is a 500kVA supply; see Table 1 Both the customers in this example have different average power factors for each month. As shown in Table 2, due to different average power factors during each month, the applicable LPF charge rate is different and highest when the average power factor for the month is the lowest. The trend of the average increase due to the LPF charge is dependent on the average power factor for a given month. The result is an additional R1.5million for customer A and R370,978 for customer A and customer B respectively. The average impact is however around the same ranging from 2% to 12% as shown in Table 1.

Table Table Table Table 1111: Customer A and B : Customer A and B : Customer A and B : Customer A and B increase in electricity costs due to LPF chargeincrease in electricity costs due to LPF chargeincrease in electricity costs due to LPF chargeincrease in electricity costs due to LPF charge

Figure Figure Figure Figure 6666: : : : Example of price change impact due to varying average PF

Highest due to lowest PF

Lowest due to Highest PF


TTTTable 1able 1able 1able 1: Customer A and B consumption details: Customer A and B consumption details: Customer A and B consumption details: Customer A and B consumption details

Table 2: Table 2: Table 2: Table 2: Customer A and B LPF rate and increaseCustomer A and B LPF rate and increaseCustomer A and B LPF rate and increaseCustomer A and B LPF rate and increase


Appendix Appendix Appendix Appendix 5555: Power factor in the standard conditions of supply: Power factor in the standard conditions of supply: Power factor in the standard conditions of supply: Power factor in the standard conditions of supply

EXCERPT APPLICABLE TO STANDARD CONDITIONS OF SUPPLY FOR LARGE SUPPEXCERPT APPLICABLE TO STANDARD CONDITIONS OF SUPPLY FOR LARGE SUPPEXCERPT APPLICABLE TO STANDARD CONDITIONS OF SUPPLY FOR LARGE SUPPEXCERPT APPLICABLE TO STANDARD CONDITIONS OF SUPPLY FOR LARGE SUPPLIES AND LIES AND LIES AND LIES AND

DISTRIBUTORS DISTRIBUTORS DISTRIBUTORS DISTRIBUTORS

(REV 21 Nov.’07)

4.4.4.4. LOADING REQUIREMENTSLOADING REQUIREMENTSLOADING REQUIREMENTSLOADING REQUIREMENTS The power factor at each point of supply shall under all loading conditions not be leading, unless otherwise agreed to by ESKOM. The power factor of the load at each point of supply shall not be less than 0,9 (naught comma nine) lagging. Should the power factor be less than 0,9(naught comma nine) the CUSTOMER shall be required to install at his/its own expense suitable apparatus to ensure that this requirement is complied with. For purposes hereof 'power factor' is defined as the kWh divided by the kVAh (where the kVAh equals the square root of the sum of the kWh squared and the kvarh squared) measured over the same demand integrating period. ----------------------------------------------------------------------------------------------------------------------- STANDARD CONDITIONS OF SUPPLY FOR SMALL SUPPLIES WITH STANDARD CONDITIONS OF SUPPLY FOR SMALL SUPPLIES WITH STANDARD CONDITIONS OF SUPPLY FOR SMALL SUPPLIES WITH STANDARD CONDITIONS OF SUPPLY FOR SMALL SUPPLIES WITH

CONVENTIONAL METERINGCONVENTIONAL METERINGCONVENTIONAL METERINGCONVENTIONAL METERING

(Rev. 18 Aug. ‘08)

17171717 POWER FACTOR, PHASE BALANCE AND INTERFERENCE WITH POWER FACTOR, PHASE BALANCE AND INTERFERENCE WITH POWER FACTOR, PHASE BALANCE AND INTERFERENCE WITH POWER FACTOR, PHASE BALANCE AND INTERFERENCE WITH

OTHER SUPPLIESOTHER SUPPLIESOTHER SUPPLIESOTHER SUPPLIES

17.1 The power factor of the supply consumed by the CUSTOMER for small power purposes shall

at all times be to the approval of ESKOM.


17.2 Where the CUSTOMER is provided with a three-phase supply, it shall balance the

requirements of its load between the phases to the reasonable approval of ESKOM.

17.3 The CUSTOMER shall so use the supply as not to interfere with an efficient and economical

supply to other customers, and shall at all times ensure that any voltage distortions caused

by the CUSTOMER's load shall not exceed the values specified by ESKOM from time to time.

When supplied from an 11 or 22kV network, the CUSTOMER shall ensure before connecting to its

electrical installation any motor that may be started direct-on-line or with a star-delta starter, that such

motor does not exceed such maximum permissible size as laid down by ESKOM in respect of the

network in question.

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