On Wednesday, the City of Tshwane and the Total Utilities Management Services (TUMS), announced a decision to terminate the smart meter roll out programme in which they were involved as of 30 June 2015.
This decision was driven by a lawsuit actioned by Afrisake and Afriforum against the City of Tshwane. The ensuing legal action resulted in a lack of funding from project financier Peu Capital Partners and highlighted issues around the procurement process under the Security of Revenue Project.
Parting ways amicably
In a company statement, TUMS said that they have been in discussions with the City of Tshwane to explore various options including early mutual termination of the contract in a way that delivers a satisfactory resolution for all parties.
According to the City of Tshwane, TUMS has met its obligations under the Master Services Agreement (MSA) however the continuation of the MSA under the current legal circumstances is sub-optimal for both parties.
Smart meter systems
The City of Tshwane has decided to acquire the installed smart meter system together with all installed meters in order for it to continue benefiting from the prepaid smart metering project, TUMS said.
This includes all smart meter hardware and software including the vending and collections systems.
The City of Tshwane will obtain a valuation from an independent source to supply a valuation of the system in order to reach a fair market price for the systems and assist in the termination of the contract with TUMS.
TUMS COO, Paul Renshall said: “Whilst both prepaid metering and smart metering are not new concepts in themselves, the combination of the two to create a prepaid smart metering platform in conjunction with an innovative off balance sheet funded solution was a world first.
“The TUMS system […] [has] vended almost ZAR5 billion ($412 million) of electricity during the City of Tshwane’s current financial year.”
Renshall added: “The City of Tshwane has benefited from receiving this money upfront. Supported by the TUMS smart meter system the City of Tshwane electricity debtors’ book has reduced significantly.”
Commenting on the TUMS solution and the mutually agreed termination, TUMS’ CEO Busi Tshili said: “We believe that the funding solution pioneered by TUMS will significantly change how infrastructure projects will be financed and rolled out in South Africa and on the African continent.
“It is therefore extremely unfortunate that this innovative manner of funding public infrastructure by the private sector has been sabotaged by the Afrisake and Afriforum legal action. Consequently, this has served to stifle an innovation that ultimately benefits the citizens of Tshwane. The legislated procurement framework in South Africa needs to be more supportive of funding innovation.”
Due to the technicalities of the smart meter project, the City of Tshwane has asked TUMS to continue providing support in city employee training for a transitional period of six months running from 1 July 2015 to 31 December 2015.
Once this period is over, the City of Tshwane will acquire the smart meter system.
During this time, TUMS has also agreed that it will reduce its management fee from ZAR0.19 cents to ZAR0.9 cents for every ZARR1 vended through the system in view of the City of Tshwane’s intention to purchase the system.
TUMS added in a company statement: “The difference between the original service fee and it is envisaged that the reduced service fee will be held in some escrow account for the benefit of the City of Tshwane and subject to fulfilment of the terms and conditions of the termination agreement.”