Smart meter contract raises eyebrows as residents fork out more for electricity

2018-04-30 13:33

Residents of Thaba Chweu municipality in Mpumalanga will pay 7% more for their electricity after politicians approved the installation of 15 000 smart meters by a Chinese company.

The company, Hexing Electrical South Africa, came via China Sinogy Electric Engineering Company (Cseec) South Africa, which was appointed by the Thaba Chweu municipality in 2013 to build the R380 million 40 megavolt amp Duma electricity substation.

Cseec then signed a contract with Hexing for the supply of the smart meters in the area.

The Duma substation is a turnkey project, which means that Cseec undertook to fully design, construct and equip the facility and turn the project over to the municipality when it is ready for operation to recoup its costs from the proceeds.

However, Thaba Chweu owes Eskom about R400 million due to its failure to collect revenue.

Opposition parties in the municipality are concerned that there is a hidden cost, citing the eDumbe municipality arrangement as an example, where Hexing takes 30% of the electricity revenue the municipality collects.

Hexing has a five-year contract with eDumbe local municipality in Paulpietersburg, KwaZulu-Natal. The new eDumbe municipality manager Madoda Khathide has launched an investigation into Hexing’s contract.

“We’ve been running electricity at a loss and fail to pay Eskom. This is a five-year contract, and we’re only allowed to appoint a contractor for three years unless approval is sought from Treasury. I’m still investigating the bid process.”

Cseec legal adviser Guillermo Fuentes said: “Cseec pays Hexing directly on delivery and installation. There is no financing, no meters for free in exchange for a percentage of the electricity, such as in eDumbe. It is a simple purchase and installation agreement, payable according to milestones of the delivery and the installation.”

Fuentes said Cseec was aware of allegations that the meters were not SA Bureau of Standards (SABS) approved, saying Hexing had provided the SABS certificate and the super vending certificate which they cannot show to City Press because that would “likely” be a breach of contract.

A copy of a purchase contract between Cseec and Hexing, which was signed on March 10 2016, indicated that Hexing would be paid R44.1 million for the first phase of the project. It would then be paid a further R10.7 million at a later stage.

The contract further stated that a monthly system management fee of “3% of the total municipality electricity and 4% of the electricity sales collected via a third-party vendor” would be charged. This is where Cseec would probably recoup its money for the smart meters, among other costs.

SABS spokesperson Bjorn Buyst said: “There’s nothing on our system to be found about that company.”

Hexing SA did not respond to written questions that were emailed to its Johannesburg office and legal department.

Thaba Chweu municipal spokesperson Puleng Mapheto’s written response was similar to Cseec’s response, saying: “We sat down with the service provider and sought answers. That’s why our response is similar to theirs.”

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January 26 2020