City Power defies Vivian Reddy tender probe

Johannesburg utility City Power has procured nearly half a billion rand of "smart" electricity technology from a company owned by President Jacob Zuma's friend and benefactor Vivian Reddy – even as auditors and advocates it appointed to probe the tender went about their work.

The tender is one of Johannesburg's biggest to date and is meant to address the city's long-running electricity billing problems.

Smart meters give remote, real-time electricity consumption readings to a computerised "back end" system, which allows the city to manage its supply and users to monitor their consumption – and their bills.

In August last year, City Power handed the contract to a consortium comprising Reddy's Edison Power and Itron, a multinational ­technology company listed in the United States.

In January this year, the Mail & Guardian raised concerns about several alleged discrepancies in the tender evaluation and award process that appeared to favour Edison over rival bidders. There is no evidence suggesting Reddy, Edison or Itron had a hand in the discrepancies, however, and City Power has denied wrongdoing.

But the utility quickly moved to quell public scepticism by appointing a legal team to review the tender process, led by advocate Vuyani Ngalwana, and it commissioned a forensic audit by KPMG.

Ngalwana's report, which incorporated the forensic audit, was supposed to be completed by the end of July, but has not yet been finalised.

Largest power consumers
Despite this, several insiders at City Power claim that the utility has stockpiled hundreds of Itron meters in a warehouse at its Booysens headquarters and that Edison is already installing them at energy-intensive business users' premises across the city. The rationale, one source explained, was that the City of Johannesburg was desperate for revenue and wanted to get its largest power consumers on to the new system as quickly as possible.

Evidence seen by the M&G shows that City Power has committed itself to more than R450-million worth of orders from Edison, approaching half the total contract's value.

An insider, who believes that City Power has acted in bad faith, said: "Do you really think [it] cares about what the internal inquiry comes back with? No! [It is] going ahead with it and spending big-time."

The R450-million worth City Power is understood to have procured already is not what City Power has paid Edison so far – that figure is believed to be about R110-million – but the utility would normally be obliged to honour its order book.

"That R450-million is as good as spent," said a source, who expressed concern that City Power had "reached the point of no return" on the contract, even if the internal inquiry uncovers wrongdoing.

City Power said it "reserved comment" on all questions the M&G sent to it last week.

Reddy expressed "dissatisfaction at the biased and unethical reporting" by the M&G, saying that it was being "used by certain employees of City Power aiding a competitor to further their own agenda".

"We have a contract for R1.25-billion and we are performing in terms of the contract and receiving payment. Your understanding and all quoted figures are totally incorrect."

Itron referred questions to City Power.

Discrepancies in the tender process previously identified by the M&G include:

  • Detailed allegations that an initial technical evaluation score sheet was amended to improve the result for Edison Power;
  • The revised scoring pushed another bidder below the cut-off 70% technical score. When price was factored in, the other bidder – whose bid was half that of Edison's – would have scored better than Edison;
  • A letter informing Edison that it had won the bid was dated before City Power's supply chain management had even received the bid recommendation or the chair of the adjudication committee had signed off on the decision; and
  • Edison's share of the contract was pushed up from an initial recommendation of a R600-million share of an R800-million contract to an exclusive contract for R1.25-billion.

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The M&G Centre for Investigative Journalism (amaBhungane) produced this story. All views are ours. See for our stories, activities and funding sources.


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