via Row erupts over dodgy US$450m Zesa deal March 21, 2014 By Faith Zaba Zimbabwe Independent
ENERGY and Power Development minister Dzikamai Mavhaire and his deputy, Engineer Munacho Mutezo, are reportedly trying to force through a dodgy US$450 million deal at Zesa to install a costly electricity smart-metering system that will see the already high utility bills sky-rocketing to the detriment of business and individual consumers.
Zimbabwe is currently using a prepaid metering system introduced in 2012.
However, Mavhaire and Mutezo apparently want a smart-metering system, which works with electronic devices that record consumption of electricity in intervals of an hour or less and communicates that information at least daily back to the utility for monitoring and billing purposes.
If the ministers succeed in bulldozing through the shady deal, currently fuelling a row within the ministry and Zesa, most poor Zimbabweans could end up practically living in the dark as they will not afford the bills, while companies might come under further viability pressure due to high power charges.
As outlined in ZimAsset, government’s economic policy blueprint, Zimbabwe has a target to install 800 000 meters by the end of this year. To date 377 552 have already been installed by Solahart, ZTE (a Chinese company), Finmark and Nyamazela of South Africa.
An additional 300 000 meters are supposed to be installed by end of this year.
In separate briefings over the past two weeks, well-placed sources in the ministry told the Zimbabwe Independent Mavhaire and Mutezo, who is a civil engineer by profession, are insisting on a smart-metering system despite advice to the contrary from Zesa and audit firm Deloitte & Touche.
According to Zesa, a pilot project carried out between 2009 and 2011 with several firms, including SPASA, Connect The World and ZTE through an unsolicited bid, during which close to 10 000 meters were installed, also showed there were technical problems with smart-metering.
However, Connect The World has disputed this, saying their pilot project was successful and had no technical hitches — something which allows the smart-metering project wanted by the ministers.
Documents seen by the Independent show Zesa managers are protesting the project is unnecessary as it is costly and also needs special infrastructural upgrades for it to work. In 2010, the Zimbabwe Electricity Transmission and Distribution Company (ZETDC) engaged Deloitte & Touche to carry out a study to evaluate the proposal to go smart. The study cost Zesa US$2 million.
In recent meetings with ministry officials, ZETDC engineers said the country was not ready for smart meters as the system had technical risks in addition to being expensive. They recommended that Zesa — which is saddled with a US$400 million debt — “continues with standard pre-paid metering for now”, warning “it’s too risky to introduce smart-metering at the moment”.
Despite the advice, Mavhaire’s ministry is planning to carry out another pilot project on smart meters, which experts say might take a year, that way missing the ZimAsset target.
One senior ministry official said: “Minister Mavhaire and deputy minister Mutezo are still insisting on smart meters despite being warned such a system would be very expensive, not only for Zesa, but also for ordinary Zimbabweans who will have to pick up the tab through increased charges. They are refusing to take advice from Zesa which raises the question who their advisers are and their motives.”
Ministry sources said Mavhaire and Mutezo have held several meetings with Zesa executives and Connect The World, which is promoting the project.
This has raised concerns over how fair the tender process will be if Connect The World, an interested party, is already attending the meetings with the ministers.
Connect The World managing director Benson Mavedzenge confirmed meeting with the ministers, but dismissed concerns this would give them a competitive advantage.
He said there was nothing sinister in meeting with the ministers as his company was conducting a pilot project, claiming it automatically qualifies as one of the firms that should roll-out the project which needs to go to tender first.
“The purpose of a pilot project is to choose a successful company. What it means is that the successful company should be able to roll out the project,” Mavedzenge said.
“We are not saying Connect The World should be the only company that does smart-metering, but that we need a published finding showing that your gadgets work. We don’t want garbage to be put in our systems.
“It should be a published open IT standard; it should have a life-testing certificate. Each gadget should have a lifespan of 20 years and it should pass a pilot project of six to 12 months.”
Mavhaire and Mutezo refused to comment on the issue. Mutezo referred questions to Mavhaire, who directed the Independent to Zesa CEO Engineer Josh Chifamba.
Chifamba said the best person to comment was Zesa managing director Engineer Julian Chinembiri, whose phone went unanswered and did not respond to several voice and text messages sent to his mobile last week and on Wednesday.
At the time Deloitte & Touche did the assessment on the project cost, smart-metering was estimated at US$450 million compared to the pre-paid option whose cost is US$75 million to install the same number of meters.
However, Connect The World says the cost could be US$80 million.
According to documents, Zesa would need an extra US$2 million to make the pre-paid metering system already installed compatible with new smart meters.
Documents say Zesa, already struggling to implement a collective bargaining agreement of 2012 with its workers citing lack of funds, is being forced to implement a smart-metering system which has been mainly rolled out in developed countries such as Canada, Italy, Japan, Netherlands, New Zealand, Nordic countries, Spain, United Kingdom, United States and France.
In Africa, only Botswana has rolled out smart-metering. South Africa — which is more advanced technologically and economically than Zimbabwe — has only installed the meters in low-density areas and businesses that are major consumers of electricity.
It currently costs US$110 to install the pre-paid meter, but a smart meter will cost three or four times more, that is between US$350 and US$400 per household.
An electrical engineer said: “Smart meters are very expensive. The cost is prohibitive. If Zesa is failing to honour the 2012 collective bargaining agreement saying it has no money, where is the funding going to come from to implement the smart-metering system?
“Is it necessary at this point to go smart-metering when Zesa has other priorities like rehabilitation and upgrading of infrastructure to improve supply? Why is there such a push to do a project which is a luxury in a country where the economy is badly struggling?”
Smart-metering will require, among other things, the acquisition of a meter data management (MDM) system which costs up to US$10 million.
Documents say Zesa engineers have pointed out the company does not have sufficient resources to implement and sustain a smart-metering system as the required initial capital outlay is “significant and unaffordable”.
“Smart-metering projects have been rolled out mainly in the First World countries,” one engineer said. “Direct comparisons cannot always be drawn due to the differing nature of socio-economic conditions and the varying policy and commercial drivers.”
The other problem, the engineers say, is that there is no open standard for smart meters as with pre-paid meters, meaning the country will be stuck with the supplier it chooses.
The ministry insists on the smart meters, arguing pre-paid meters being installed by the power utility are defective, resulting in consumers using power for free.
This claim is supported by Engineer Leo Chisina, who is close to Mutezo, and has since last Thursday taken over the metering department, documents say.
A top official in the ministry said: “Zesa engineers recently made a presentation to the ministry which was also attended by the permanent secretary and the director of power in the ministry during which they advised against smart-metering.
“The people from the ministry who attended the meeting seemed to agree that the country is not ready for smart meters, but their worry was that the minister and his deputy want that.”
This is not the first time there has been debate on the issue. Former Energy minister Elton Mangoma was the first to suggest the country must install smart meters, but after the study by Deloitte & Touche, he abandoned the idea.
Mangoma said yesterday: “If you are a minister and don’t take advice from Zesa, then you are going to have problems. In terms of corporate governance, the ministers are supposed to deal with the board in relation to policy issues and not management on operational issues. No wonder parastatals and public enterprises are in such a mess.”