The City of Tshwane could have taken over the ‘smart’ metering service from its controversial contractor PEU Capital Partners last year, for a capital outlay of R15 million and annual cost thereafter of R11 million – less than R1 million per month.
Instead, it is still paying PEU about R70 million per month, 70 times the estimated real cost, and bound itself to pay PEU R950 million on July 1 to take over its infrastructure.
The city even paid 19.5% commission on the electricity it consumed internally. In other words it bought bulk electricity from Eskom, handed it to PEU and then bought it through the PEU system, paying PEU 19.5% commission. By March last year this amounted to R102 million.
This became clear from court documents.
The City of Tshwane’s acting CFO Umar Banda disclosed what it would cost the city to tell PEU to take a hike and do the job itself in a report to the mayoral committee early last year. This report was attached to court documents filed by business grouping AfriBusiness in support of its application to have the R950 million payment suspended, until the whole contract has been subjected to judicial review.
The report given to AfriBusiness by councillor Lex Middelberg, DA shadow member of the mayoral committee for finance, for the first time gives a glimpse of the extent to which Tshwane residents might have been ripped off.
Banda further stated several instances of possible contractual breach by PEU. He stated that the city agreed to a drastically-reduced meter rollout plan without reducing PEU’s commission and argued that the city was entitled to a 71.3% refund. That would see PEU repay R855 million of the R1.2 billion it was paid up to March 2015.
It seems no effort was made to try to recover the money.
Banda’s report also discloses:
- The city sold electricity at a loss with R1.145 expenditure for every R1 of electricity revenue generated;
- The structure of the electricity tariff allowed for a maximum 7% commission. Anything more would mean it sold electricity at a loss;
- The PEU meters could not block sales to consumers with unsettled debts;
- There were numerous instances where the meters allowed large power users to continue consuming electricity after their credit was exhausted. This amounted to more than R100 million per month and at March 30 the outstanding amount in this regard amounted to R265 million on 4 126 meters.
The City of Tshwane and PEU will file their response later this week. The matter will be back in court on July 5.