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Tshwane moves to reduce irregular PEU payments

R630m cost per annum ‘adds to bankruptcy threat’.

The DA-led City of Tshwane has appointed an independent audit firm to assess the rate ANC predecessors agreed to pay its controversial smart metering contractor PEU Capital partners through the implementation vehicle Total Untility Management Services (TUMS).

This is the first step in a plan to approach the court for permission to reduce the rate until the court application to have the Masters Service Agreement (MSA) and subsequent Interim Service and Termination Agreement (ISTA) reviewed and set aside, has been finalised.

Tshwane mayor Solly Msimanga said in his budget speech last week that the PEU contract, together with the city’s broadband contract, threaten to bankrupt the administration. “The PEU smart meter commission alone costs the city more than R630 million annually,” he said.

In terms of an earlier interim court order the city has to continue paying PEU 9.5c per kWh, vended through its system that services less than 13 000 electricity meters in the city until the validity of the agreements has been determined.

The commission was reduced in terms of the ISTA from the 19.5c/kWh to 9.5c, and the previous administration agreed with PEU that the balance would be paid into a dedicated account to be used to purchase PEU’s infrastructure at the end of the contract – if the city doesn’t have the necessary funds.

The interim order was given in July last year. It was aimed at maintaining the status quo and preventing a situation where electricity supply to Tshwane customers, supplied through the PEU system, would be disrupted. The court envisaged an expedited hearing of the main application, but this has stalled due to an objection by PEU to the applicant, business grouping AfriSake, amending its Notice of Motion.

The parties reached a settlement  in March and will meet soon with deputy judge president Aubrey Ledwaba to get an early court date.

The DA administration has been criticised publicly for continuing to pay PEU since it took office in August last year. The PEU contract was one of five the party promised to stop during its election campaign.

Member of the Mayoral Committee for corporate services Cilliers Brink, told Moneyweb earlier that the city is bound by the court’s interim order.

Recently he told Moneyweb that the city was certain the contract “is irregular and unlawful and that the service provider is profiting unnecessarily from it”.

He said in its 2014 ruling on Cash Paymaster Systems the Constitutional Court ruled that no company should profit from irregular or unlawful contracts.

“The interim order issued by the North Gauteng High Court states that pending the review application, the city should continue paying for the smart meters. However, we believe that we are in fact paying too much for the service.

“To this end, we have engaged the services of an independent auditing firm to assess PEU/TUMS’ records, and establish whether the service provider’s rate of 9.5 cents per rand is reasonable and if not, to provide us with a reasonable amount.

“It is our intention to request the court to amend its order and reduce the amount per rand the city pays to PEU, until such time that this matter is finalised,” Brink said.

PEU/TUMS told Moneyweb it has no knowledge of the moves by the city. “TUMS has not had sight of any scope in relation to the appointment by the City of Tshwane (CoT) of an independent auditing firm. To the extent that the CoT has appointed an independent firm to assist it, this is an arrangement that does not involve TUMS nor has TUMS been notified of any intention relating to that appointment,” it said in a written reply to Moneyweb’s questions.

AfriSake attorney Willie Spies has accused PEU of deliberately delaying the litigation. He said the earlier withdrawal of PEU’s opposition to AfriSake’s amendment of its Notice of Motion that led to the settlement in March, is a clear sign that the opposition was merely a delaying tactic aimed at maintaining the daily payments the CoT makes in terms of the disputed contract.

PEU has denied this and says it is committed to the resolution of the matter. The company said the dispute was settled by all the parties because AfriSake conceded that TUMS was entitled (and the city agreed) to a provision of the record of the city’s decisions taken in 2015 when the contract was concluded.  “Against this undertaking and the concession by AfriSake, a settlement agreement was reached,” PEU said.

“That record has not yet been furnished and the matter cannot proceed until it is. PEU is not delaying the matter.  Furthermore, the record clearly shows that AfriSake, in fact, delayed this matter by approximately 11 months; its replying affidavit was due on 11 May 2015, however, it was only delivered on 21 March 2016. Alleging fault on the part of TUMS is disingenuous,” PEU stated.

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