Smart meters: US$80 million thus far for failed smart metering project

The City of Tshwane will host a briefing on 8th July to discuss the future of the City's controversial ‘Security of Revenue Programme’
The City of Tshwane will host a briefing on 8th July to discuss the future of the City’s controversial ‘Security of Revenue Programme’

In South Africa, the City of Tshwane will hold a briefing on the 8th July on the future of its smart metering project. The so called ‘Security of Revenue Programme’ has cost ratepayers almost US$80 million since its inception in October 2013.

Last week, it was announced that the agreement with PEU Capital Partners, the current contractor, had been cancelled and that a new service provider would be appointed. The new service provider (for whom tenders will be called) will have to take over the existing infrastructure, along with the 14,000 smart prepaid meters currently installed.

In addition, the new contractor is expected to complete the conversion of the remaining 800,000 meters to smart prepaid meters.

Termination repercussions

According to Moneyweb, “the termination agreement, drafted by PEU, includes an irrevocable instruction to Standard Bank in terms of which PEU will be paid 9.5% of the electricity revenue vended through its system from July 1 until December 31. This is a reduction from the earlier 19.5%.

“The difference (10% of revenue) will be paid into an escrow account pending the city’s compliance with the terms of the termination.”

Moneyweb further reports that business advocacy AfriSake, has challenged the contact between the City and PEU on the basis of it being procedurally flawed.

The case is still pending and AfriSake has indicated that it will amend its papers to include a review of the cancellation agreement.

AfriSake attorney, Willie Spies, told Moneyweb the organisation had no objection to a new tender process, as long as it legally compliant. AfriSake was concerned that the terms of cancellation placed hurdles in the path of other prospective bidders and might set the table for PEU to win the new tender.

It has been alleged by AfriSake, that the amount paid for the whole system was much higher than the R4,500 ($370) estimated, as a ‘realistic cost for the whole system’.

In a surprising turn of event, Kgosientso Ramokgopa, Mayor of Tshwane, said the PEU Capitel would be welcome to tender for the contact in the new tender process.

An industry insider indicated that he was afraid the current process was nothing more than a smoke screen to allow PEU to re-tender for the contract. It has also been alleged that because the infrastructure put in place ‘does not work’, the likelihood is that any new contractor would have to start over with the installation of infrastructure to support the programme.