In South Africa, a city municipality has terminated its 900,000 smart meter rollout due to allegations of an invalid contract with its service provider and a suggested lack of preparation for a large-scale deployment.
In what will be seen as a warning to other municipalities that are slowly adopting smart metering, the city of Tshwane in Pretoria announced last week it will exit from a ZAR1.2 billion (US$101 million) contract with investment company PEU Capital Partners.
In March 2013, the city of Tshwane launched a 900,000 smart meter rollout in a bid to improve revenue collection and reduce non-technical losses.
The project, named ‘Securities of Revenue’ by the municipality, planned to install prepaid smart electricity meters to large and small power users.
The contract came under attack from Pretoria-based business rights watchdog AfriBusiness, which launched an application in the North Gauteng High Court declaring the contract invalid.
PEU ran into financial difficulties as a result of the legal challenge, according to local media.
An industry insider, who asked not to be named, attributed the failure of the rollout due to lack of preparation. Tshwane allegedly did not carry out a pilot before launching the wide scale deployment.
Cost of prepaid smart meter rollout
The city had already paid PEU R830 million (US$70 million) since October 2013 when the contract was terminated and only have 12,930 meters installed.
DA councillor in the City of Tshwane Lex Middleberg said the city had spent an average of ZAR166,000 (US$14,000) each to install and service, according to a report by Moneyweb.co.za.
Under the terms of the contract, the city would not have paid for the system, but PEU got an ongoing 19.5% of electricity revenue generated through these meters, which critics said was untenable.
PEU is now claiming fees of ZAR600 million (US$50,000) a year to service the installed meters, however the City of Tshwane rejected the proposal late last week.
Selby Bokaba, spokesperson at the City of Tshwane, said: “We rejected that proposal. We have already met the company and are meeting again next week. Hopefully, we will be able to finalise the terms of the termination, which we will take to council for approval.”