prepaid electricity

Prepaid electricity resellers are ‘cashing in’ on a loophole in regulations governing what they can charge in respect of service or vendor fees. Image Adobe Stock

Pay more for less: Prepaid electricity – Vendors’ cut sparks uproar

Did you know there is no law stipulating how electricity resellers charge prepaid users…and when is the best time to buy your units?

prepaid electricity

Prepaid electricity resellers are ‘cashing in’ on a loophole in regulations governing what they can charge in respect of service or vendor fees. Image Adobe Stock

Think it is only the incline block tariffs and the Taxman taking a chunk out of your prepaid electricity units, dimming your mood? Think again… According to Cape Talk, there are no regulations governing what resellers can charge in respect of service or vendor fees and they are seemingly cashing in on this loophole.

In some cases, the “hidden” service fee can be as much as a whopping 15%. This has prompted the Electricity Resellers Association of SA (Erasa) to urge vendors to be more transparent about how they bill users.

Here’s what we know so far… Stay calm and light a candle! And thank Eskom of course if your candle is already burning bright due to load shedding!

ALSO READ: Stage 2 load shedding might be implemented TODAY- find your schedule here

How prepaid electricity resellers are making a quick buck

Resellers of prepaid electricity 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.

City Press reports that while the National Energy Regulator of SA (Nersa) determines the annual tariff increase, this fee is not regulated, only approved.

Resellers of prepaid electricity are allowed to charge a service or vendor fee which can be as much as 15%. Image: Adobe Stock

Former Eskom executive manager and former City Power Johannesburg executive Vally Padayachee told Cape Talk that while licensees or power utilities may offer resellers discounts on the cost of electricity, those discounts aren’t being passed on to the customer.

“The level of discount is the prerogative of the licensee… but that 10% or 15% is not an advantage that the customer would see.”

Prepaid electricity resellers not licenced

Nersa full-time regulator member primarily responsible for electricity regulation Nhlanhla Gumede explained to City Press:

“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.”

– Nhlanhla Gumede

Incline block tariff system: Rich subsidising the poor

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

According to City Press, Nersa granted municipalities an increase of 7.47% which came into effect last month. In addition to this, Eskom is charging municipalities a tariff hike of 8.61%.

Now here’s the interesting part: The amount of electricity a household consumes monthly, determines poverty levels.

So, not only do tariffs consumers pay per unit differ depending on which municipality you live in, it is also determined by whether you, as a consumer, are perceived to be rich or poor.

Nersa’s Gumede explained that this was introduced to subsidise poor households.

“The original idea around the incline block tariff was that the rich or the more affluent, where you basically measure by how much electricity they use, would then subsidise the poor.

“If somebody used less than 350kWh per month, that means they don’t have many appliances around the house. By that definition, they are poor. And somebody who uses 500kWh and above, they say that person has a number of appliances and so on. So you charge them more to subsidise the poor. That was the thinking,” Gumede told City Press.

ALSO READ: Scam alert: Cape Town City residents warned about prepaid electricity trick

System backfiring…

Gumede said the incline block idea had backfired though due to the following reasons:

“If you come from Soweto, for instance, in some places you’ve got many backroom dwellers, so you find that a poor household has two or three backroom dwellers and the complete yard consumes 500kWh of electricity, which is split among everyone. Because there’s only one meter in the house, they would end up in a different incline block tariff [that is not meant for the poor].

“You also find that an affluent household in Sandton has rooftop solar panels and only uses the grid as backup, and maybe buys no more than a 100kWh for instance, so they then pay at the lowest rate.”

In its application for tariff increases for next year, Eskom said it wanted to do away with incline block tariffs, according to Nersa.

ALSO READ: Lucky draw: TikTok user ‘hacks’ electricity meter for more units [watch]

Incline block tariff: When is the best time to buy prepaid electricity?

Until that time comes, however, let’s take a look at what energy expert Ted Blom has to say about how to navigate your way around the incline block tariff.

According to Blom, the best time to top up your prepaid electricity account is on the first of the month.

Under the incline block tariff system, units are split into two different blocks. The more you use, the more you pay per block, Blom explained to BusinessTech.

So if you pay as you go through the month, or pay for more power than you need, you will end up paying more — but not getting more units on average.

Blom further explained that these blocks are split by the power supply (20 amp or 60 amp) which is determined by the prepaid supplier.

For Eskom’s Homelight products, the cheapest block is for the first 350kWh or 600kWh, for the 20 and 60 amp supplies, respectively.

Here’s Eskom‘s breakdown of how the tariff structure works:

  • If you purchase up to 350kWh of electricity a month, you will pay the rate of block 1.
  • If you purchase more than 350kWh you will pay a higher rate as indicated in block 2.
  • If your first purchase in the month exceeds 350kWh, then the 350kWh is charged at the rate of block 1 and the additional units are charged at the rate of block 2.
  • Further purchases in the same month will be charged at the rate of block 2 only.
  • The tariff resets on the first of every month and all purchases up to 350kWh will be charged at the rate of block 1.

Take a look at Eskom’s prepaid tariff structure on its website HERE.