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And you thought your prepaid electricity was prepaid…

Small business slammed by R1.2m bill for ‘under-recovery’.

A small Centurion business that buys on average R17 000 of electricity every month, got a nasty shock when notified last week that they have five days to pay R1.2 million to the City of Tshwane for under-recovery of electricity costs since 2015.

The city’s service provider Total Utilities Management Services (Tums) stated in its email to the company Productive Systems, that this was due to a technical fault detected during a “field site investigation”. It informed Productive Systems that it would do a “debit adjustment” to its prepaid electricity meter and gave the company five days to pay the R1.2 million.

The fault that caused the alleged under-recovery was outside of Productive Systems’s control and there is no suggestion that they tampered with the metering system.

According to Productive Systems MD Albert Birmingham the company has a turnover of about R20 million per year. It designs and builds machinery for local and international clients in the packaging industry.

He says to expect a small company like this to cough up about 6% of annual turnover at the drop of a hat is unrealistic and could kill the company, which employs about 50 people.

“We have been paying an average of R17 000 per month for electricity over the past few months. We did the costing and billed our clients on the basis of that. The city now claims an additional R42 000 per month for the past 30 months. I cannot go back to my clients in Panama, China and Australia and tell them I have undercharged them,” Birmingham says.

The problem on the Productive Systems account seems to be the same as the one the City of Tshwane identified on that of the Agricultural Research Council (ARC), which was notified of under-billing of R30 million at the Onderstepoort Veterinary Institute in the north of Tshwane.

Moneyweb in November last year reported that Tums, which is the implementation vehicle for the city’s smart metering contract with PEU Capital Partners, admitted to over- and under-billing some of the 13 000 Tshwane customers it supplied with electricity since October 2013.

The North Gauteng High Court earlier declared the contract unlawful and invalid, and suspended the order or invalidity until a just and equitable remedy has been found. The court will hear arguments in this regard in October.

Tums earlier stated in court papers that there were only a handful of incidents of under-billing “but in almost all instances the revenue has either been collected or is in the process of being collected”.

This contradicted statements by a senior Tshwane official that about 600 intensive users were affected.

The root cause of the issue is apparently that Tums used incorrect Current Transformer (CT) and Voltage Transformer (VT) ratios which resulted in the wrong scaling factor.

These ratios are crucial to converting the reading of electricity usage into billing – using an incorrect ratio could result in material billing variances.

Tums earlier indicated that the ratios were provided by the City of Tshwane and they merely applied what was provided.

Eric Bott, director of Energy Measurement Consulting and another independent expert Moneyweb consulted, however, said any professional person who installs an electricity meter should know which ratios to use.

Bott and his lawyers will on Tuesday meet with representatives of the City of Tshwane to discuss the adjustment to Productive Systems’s account. They have in the meantime assisted the company to declare a formal dispute in terms of the Municipal Systems Act, which protects the company from having its power supply disconnected, provided it keeps on paying the current account.

Bott says the city should claim the amounts under-recovered from PEU or Tums, which should have professional insurance to cover.

According to Bott the ARC has paid a small portion of the R30 million the city claimed in relation to Onderstepoort and negotiations between the parties are ongoing.

Birmingham told Moneyweb that he is very concerned about the accuracy of the City of Tshwane’s electricity metering. “If they made such a mistake earlier, how do I know they will be accurate in future?”

Bott says changing the system to have metering done by an independent party that gives both the consumer and the council access to the data, would safeguard both parties. He will install a parallel meter at Productive Systems to determine the accuracy of the city’s meter.

Moneyweb is also aware of a private individual who was informed in February that Tums would make a debit adjustment to the prepaid meter at his house for more than R61 000 due to “low consumption that was detected on your smart meter”. This relates to the period August 9 2016 to January 25 2018.

The City of Tshwane did not respond to Moneyweb’s questions by the time of publication.

After publication of the article, the City of Tshwane responded to questions Moneyweb sent to it earlier this week. It confirmed that the City “determines the scale factor in line with the measurement/technical standard”. It said the following in relation to the Productive Systems issue: “The electricity usage/consumption through the monitoring system was identified with lower than normal consumption pattern on the account and went to site to investigate. On investigation the Revenue Protection team became aware that work had taken place on the CT/VTs and that they appeared to have been changed. The same was confirmed by the Electricity Metering section that the CT/VTs had been changed for it was plausible that the ration had to be adjusted to reflect information on the CT/VT plate. The conclusion on the adjustment is still pending, the client was informed of the same.”

The City said there “are a number of reasons why CTs and VTs are changed for operational reasons. As well as CTs or VTs failing as part of their operational end-of- life, CTs and VTs can be (and are) tampered with or be exposed to external influences such as lightning strikes. In such instances, these devices fail and have to be replaced. Adjustments can only be made once the devices are replaced and the account normalised, in line with the approved Electricity by-law of 2013, outlines how and when these adjustments are calculated.”

Asked how much money is involved in these adjustments, the City responded: “We do not categorise the adjustments at this level of detail and so any figure would be misleading.”

It said the issue of Onderstepoort is still pending and the matter of the debit adjustment to the private individual’s prepaid meter relates to meter tampering.

The City said the debit adjustments were done in accordance with its 2013 electricity by-laws.

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COMMENTS   21

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Pay now, argue later

Tshwane is eager to claim any short recoveries from unsuspected paying clients, but ignore the huge shortfall created by illegal electricity connections throughout the metro and also the losses from non-paying users in out-of-town disadvantaged areas.
Just another gross-subsidization scheme.

Correct. It is the nature and race of the non-payer that seems to dictate whether action is taken or not. Time for business to make illegal connections but only those within the right race group within the company!

Most prepaid metering have a built profits factor of around 20% and tahts huge if you are a large electricity consumer. If your monthly consumption is 100 000.00 than you could likely be paying 18 000 extra every month.

It is embarrassing when financial publications like Moneyweb do elementary mathematical mistakes. If the monthly turnover is 20 million then the 1.2 million is 6% of the MONTHLY not ANNUAL turnover.

I see the monthly 20 million has been changed to yearly 20 million.

It seems that you have a reading problem because it clearly states an annual turnover of 20 million and not monthly. Its easy to try and find faults in others.

No, I do not have reading problem. In the original article the turnover was MONTHLY 20 mil. I sent the comment which was held for moderation. When it was published the article was corrected. That is why my second comment acknowledged the change.

Put solar on the roof. Screw them.

I did that, but unfortunately the basic charge remains high thus the remaining units is very expensive. I have a small business. Somehow they still want to screw you

This is actually quite common in a lot of municipalities but more on the side of water meters which tend to go faulty through normal use. City of Cape Town has billed some of our clients retrospectively for faulty meter readings. Some companies who know the metering is incorrect accrue for 3 years worth of under charging knowing the council cannot go further back. Not great but if they notify council and nothing is done what do they do? Tshwane not in great shape though..a large concern paying millions a year for their electricity are on pre paid because of the threat to cut their account due to discrepancies on their monthly bills..

All the more reason not to use prepaid meters!

Just to let you know our local Municipality did exact same thing with pre paid meters. Customer had to cough up R30 000 extra to get rates clearance. Plain corruption and intimidation.

They used the wrong ratios, they don’t know their Math. They should pay for their own mistakes. What is there to stop them applying the same “logic” and messing with other clients. Get rich “ponzi” scheme
and take the loot as performance management.

With two out of 3 TUMS’ exec management team as CA’s, not surprised the numbers are a mystery. The third is an engineer –

“…a recognised and trusted industry advisor in the field of Smart Metering, Smart Grids and Energy Management solutions.”

Experts in money and metering.

Only in South Africa.

What now SAICA with your never ending boasts about the high number of CAs in director / CEO positions.

Please respond Thought Leaders in SAICA………….

This is another tragedy but hopefully one with a good ending, albeit not for a long time. CAs will eventually be correctly positioned in a company and paid accordingly.

I don’t for a minute believe this is peculiar to Pretoria – I had a running battle for a year with City Power here in J’burg and that was merely on their metering system and not on their smart meters

This doesn’t make any sense, how can a supplier back-charge for a service supplied? They can increase the costs now, but surely have no prospect of claiming for previous usage – especially when it has nothing to do with the customer??

Agree where is the accountability and risk management.

Risk cannot always sit with the consumer.

W/off the debt.

Well if they use the meter for measuring the units consumed then they must go on what the meter reads – until they install another meter. Even if they say the meter was wrong, can they absolutely prove WHEN it went wrong? Also this seems like Tums fault. Common law would say you go on what the meter reads unless tampering took place.

TUMS should be liable due to its own ineptitude. What’s concerning is that it appears that a ‘unit’ is not exactly that, and can be ‘leveraged’ to the disadvantage of the client. I would think about getting in an independent surveyor to accurately assess how much electricity is consumed and then compare that to the City’s claim. Good luck!

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