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Expert questions legality of Tshwane/PEU electricity tariffs

City might face huge claims from businesses.

The City of Tshwane and its smart metering contractor PEU Capital Partners, might face claims that run into billions if they charged large commercial and industrial customers unlawful electricity tariffs.

Eric Bott, director of Energy Measurement Consulting, has met with energy regulator Nersa about his concerns that some commercial and industrial customers fitted with the PEU system have been and still are being charged tariffs that were not approved by Nersa for that purpose.

During recent court proceedings, it was disclosed that up to R500 million of electricity revenue is vended through the PEU system from business every month.

While Nersa told Moneyweb no formal investigation has been launched into the legality of the tariffs charged, Moneyweb has seen email correspondence between Bott and Nersa in which Nersa tells Bott it has requested a response from Tshwane.

In an email to Nersa dated September 13 Bott says: “ I take it that  you (Nersa) have informed TUMS to immediately stop charging out on this tariff as it Is an Unapproved tariff as nowhere has NERSA approved this tariff.” (TUMS is the PEU special purpose vehicle executing the contract).

Nersa responded, saying it has referred the matter to its legal department.

Moneyweb has investigated the matter and found on the face of it that the tariffs applied were approved by Nersa and are included in the list of approved tariffs published on the Nersa website.

Bott however points out that the relevant tariff was approved for conventional (post-paid) meters and Nersa in fact approved no pre-paid tariff for commercial and industrial consumers with installations above 80A.

These users are subjected to time of use and maximum demand charges as well as a fixed charge.

Bott argues that it is unlawful to apply a tariff that was approved for conventional meters to prepaid meters. He says tariffs are based on the cost of the service and the cost basis of conventional systems differs from that of prepaid systems. He further states that the City of Tshwane never disclosed the 19.5% commission paid to PEU in its tariff application, which he says resulted in a flawed application.

Bott further argues that the methodology used by PEU/Tshwane to calculate the maximum demand is incorrect and inconsistent with the national standard (NRS-051 and NRS-057).

Willie Spies, legal representative of AfriSake – the business chamber that is in a legal battle to have the PEU contract declared null and void on the grounds of a flawed procurement process – says on the face of it Bott’s argument sounds credible.

He says the PEU matter is extensive and AfriSake’s approach is to have the seemingly non-compliant contract set aside. He says the closer one looks at the matter, the more problems there are.

Spies says if Bott’s argument is upheld, it can lead to an avalanche of substantial claims from businesses against the city, which the city could recover from PEU.

PEU told Moneyweb: “The city (in conjunction with Nersa) determines the electricity tariffs that are charged for the supply of electricity. The tariffs applied through the TUMS system, and which form the basis for billing by the city of its electricity consumers, are provided by the city.”

Stefan Pieterse, spokesperson of AfriSake, told Moneyweb it won’t hesitate to go to court if its members have been prejudiced. He said AfriSake recently supported a member who obtained a court order against the Phokwane municipality in Hartswater about unapproved electricity tariffs.

The High Court in Kimberley declared the unapproved tariffs unlawful and ordered Phokwane to credit Theo Joubert’s electricity bill for his ‘Country Kitchen’ business, with the amount it charged that it was not entitled to over a period of two and a half years.

Joubert told Moneyweb, before approaching court he repeatedly approached Nersa for assistance, but without success.

In the meantime the City of Tshwane, which has since the local government election been under DA management, is reconsidering its position with regard to the court challenge. Spies told Moneyweb a meeting scheduled with the deputy judge president for this week has been postponed by three weeks for the DA to assess the situation.

It is expected that the party will abandon it opposition to the AfriSake application.

Tshwane mayoral spokesperson Matthew Gerstner told Moneyweb the city is actively reviewing its position with regard to the PEU contract in order to determine the way forward.

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Yes, businesses WILL and SHOULD insist on refunds of any power costs that were illegally calculated and charged! The following example was 2003/04, Rosslyn and the metering company was PE Metering (that took over from Pretoria Metering.) The business was Pioneer Electroplating, Rosslyn, and it was being overcharged for electricity to the tune of R4 000/m, simply by the metering company knowingly, deliberately and illegally deviating from a PRESCRIBED mathematical FORMULA – set out in municipal regulations – that governs how power charges to customers must be calculated. Applying this formula once the monthly usage was known, was the ONLY legal way of working out what industrial customers owed the metering company for electricity (which in most Rosslyn businesses was 3-phase, not 2-phase.)

BUT, here’s the loophole….
1. The municipality that does the outsourcing to the metering company knows about the existence of the formula, and what the formula is.
(In the case of Pioneer Electroplating the helpful municipal Head of Electricity at Rosslyn municipal offices revealed both the existence of the formula AND the formula itself to the owner of the businesses who complained to PE Metering about unexplained increased power costs the minute he received his 1st bill from them. No luck, they denied all – so eventually he went to the Rosslyn municipality to complain.)
2. Business Owners (who are expected to sign ridiculous contracts with metering companies leaving the metering company with UNDUE powers over the businesses) generally have never heard of the existence of a formula that needs to be used to calculate power costs – let alone what that fairly complicated formula is, and how it must be applied legally.
3. The metering company obviously knows the formula that they need to apply (it’s probably set out in the outsource contract between the municipality and the metering company) but who is going to be any the wiser if they deviate and change the prescribed formula? The customer doesn’t know that the formula exists – the municipality doesn’t check how the metering company does its calculations and electricity billing!

Pioneer Electroplating confronted PE Metering in 2004 at their offices in Watermeyer St with his accurate and legal calculations and costs. They very suddenly and quickly agreed to a full refund but Pioneer (which may have shut down by now) first had to sign a Confidential Agreement with the metering company not to disclose details of the R24 000 refund. The overcharging took place over a six-month period and I was the unofficial clerk in the Pioneer office in Rosslyn.

Go take a look who is on the board of PEU.

You won’t be surprised when you see it.

End of comments.

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