The urgent court application by business grouping AfriBusiness to stop the City of Tshwane from paying a further R950 million to its smart metering service provider PEU Capital Partners, is placing the appointment of a new service provider to replace PEU at risk.
This is the argument put forward by PEU in papers in preparation for the hearing of the application in the North Gauteng High Court on Tuesday.
The absence of a new service provider to replace PEU could either lead to the continuation of the status quo that still sees the city paying PEU about R70 million per month, or lead to serious disruption of services and a loss to the city of up to R550 million in electricity revenue per month.
PEU argues that the R950 million payment at issue is for the acquisition of the PEU smart metering system. If the city is precluded from paying the purchase price and the new service provider isn’t prepared to make the payment directly to PEU, PEU cannot be compelled to hand it over.
Accenture, which is earmarked to replace PEU, has not been joined as a respondent and the court could therefore hardly make an order binding the company to buy the infrastructure, PEU argues.
This statement is made against the background that the city and PEU envisaged the on-sale of the infrastructure to the new service provider. Provision has been made for such a transaction in the relevant tender invitation.
PEU director Busi Tshili says in an affidavit filed at court that PEU installed about 6 500 smart electricity meters for large power users (business and industry) and about the same number to small power users (households).
If PEU stopped providing its service and absent an orderly hand-over to a new service provider, the vending of electricity to large power users would stop.
“Power would continue to flow to the 6 500 large power users, but vending would cease. The city would thus collect zero revenue from these customers. The 6 500 residential and small business users would also be unable to buy further electricity. When their account balance reaches R0.00, their electricity supply would automatically disconnect.”
She said this situation would continue for the months it would take the city to replace the PEU meters.
“Switching-off the system would thus have the result that the city is likely to lose, irrevocably, some 55% of its total electricity revenue for several months (representing some R550 million per month). These are losses on a scale that would completely cripple the city’s finances and lead to, among other things, the city defaulting on its financial obligations.
“The dire prospect of mass disconnections of power to thousands of homes and businesses is self-evidently directly contrary to the public interest,” Tshili states.
According to Tshili’s statement, agreements with the city provides that 10c of every rand vended through the PEU system would be paid into a dedicated account during the transitional period after the cancellation of the original agreement and until the hand-over to the new service provider.
This would be subtracted from the original service fee of 19.5c per rand vended. The city would continue to pay the balance of 9.5c per rand to PEU until its service is terminated.
Tshili said the payment of money into the dedicated account was aimed at building up reserves for the city to be able to accumulate the purchase price. The agreement with the city provided that if the purchase price had not been paid by March 31 2016, the money would be used for that purpose.
If the money in the account was less than the purchase price, PEU would continue to provide the smart metering services for a further six months until the end of September.
As matters stand, PEU had not at the end of March invoked the provisions that entitle it to the money in the dedicated account. Tshwane made an undertaking to pay PEU the R950 million by July 15 as it will get the amount or guarantees covering the amount from Accenture that is ready to take over the service.
It is this payment that AfriBusiness wants suspended pending a ruling on the validity of the city’s original agreement with PEU.
Tshili says the interim service agreement with the city expires on September 30 and it could only provide services after that date if Tshwane agrees to it and it is properly compensated.
AfriBusiness in its reply to the PEU documents say there is no reason for the city to proceed with the payment of the R950 million to PEU if, as PEU states, Accenture is ready to make the payment and take over the smart metering system.
It says there is no factual basis for PEU’s allegation that the order sought will put the city’s contract with Accenture at risk.