SA consumers face extra electricity charges

South African consumers are paying through the nose for electricity because of extra charges that are added when buying prepaid electricity, on top of the already high electricity tariffs and, worst of all, some of these charges are not regulated.

In some instances, this fee is determined by a body corporate in a residential estate or complex and there are no clear guidelines on how it should be constituted.

Vendors are not allowed to charge a tariff above what is set by the municipality, but they are allowed to charge a service or vendor fee, and this can go up to 15% of the amount of electricity a consumer buys.

While the National Energy Regulator of SA (Nersa) determines the annual tariff increase, this fee is not regulated, only approved.

Nhlanhla Gumede, the full-time regulator member primarily responsible for electricity regulation at Nersa, explained: "Resellers are not licensed. The person who is licensed is a distributor, so they resell on the back of a licence of a distributor – a municipality or Eskom – so it’s really just those bilateral arrangements between them. So, if there was an agreement between a reseller and a distributor on a basis of a particular tariff which they started many years ago, it’s just been increasing at a particular rate every year."

Rene Kilner, the CEO of Trusted Utilities – a company that does energy and utility management – said the problem with this fee is that there is no transparency on how the amounts are arrived at, which presents an opportunity for vendors to be a law unto themselves.

"One needs to make sure that whoever sells the tariff on to the end user does not mark it higher than it should be. What the regulation says is that you can charge an administration fee, but that needs to be transparent," said Kilner.

Transparency

One of the things that happened in the past was that there was no transparency and, as end users, you and I don’t have any control over the money that we spend.

Johan Hopley, president of the Electricity Resellers Association of SA, said that, by law, the fee should be transparent.

"There has to be a method where they can show you detailed transaction costs. From the banks, you only get an SMS that shows the amount of electricity you paid for and you get a token.

"The company issuing the token must be able to send you a detailed breakdown of how you have been charged."

Hopley said his association was trying to get this fee fixed, because the way it’s currently determined is not sustainable.

"With municipalities, they have worked that fee into the tariff structure, but when reselling to complexes, that structure has never been changed.

We are trying to get the bulk tariffs changed to accommodate the vending fees so that we can absorb those fees through buying in bulk because, currently, you can’t, as the margin is too little.

Kilner said conventional electricity supply was a better option because such fees were not included and there was more transparency regarding how one consumes electricity

"The other thing is that we cannot see how we're using that electricity. If you ask municipalities such as Tshwane for a meter download to show how you used electricity and when you used it, and you say you want a profile of how you used the electricity, they say, ‘no, we can’t give it to you, we can only say when you bought electricity'."

She said, even though the law provides that municipalities keep this information for prepaid consumers on their back-end systems, most don't.

Vendors

Vendor fee charges are not the only costs that lead to consumers paying more for less electricity.

In the 2022/23 financial year, Nersa granted Eskom a tariff hike of 3.46% per kilowatt hour (kWh), as well as a more than 6% increase to cater for the regulatory clearing account (RCA), which brought the total increase for Eskom to 9.61%. The RCA is an amount that usually accrues as an under-recovery or money that is paid back to the power utility if it overspent above the set tariffs for a particular financial year.

Nersa then granted municipalities an increase of 7.47%, which came into effect last month.

Following the increase by Nersa, Eskom in turn charged municipalities a tariff hike of 8.61%. But the tariffs consumers pay per unit not only differ depending on which municipality you live in, but also depending on whether you, as a consumer, are perceived to be rich or poor. Poverty levels are determined by the amount of electricity a household consumes monthly.

Frank Hinda, a pricing and tariffs manager at Johannesburg’s City Power, said: “We’ve got what we call inclining block tariffs at City Power, meaning that, for the first 300kWh of every month, there is a different price; for the next 150kWh, there is a different price; and anything over 500kWh is at the same price. It’s not that when you use more you pay more, but the idea was that the indigent customer, who consumes only 350kWh, would be afforded a lower tariff, provided they keep within that consumption bracket.”-Fin24