Finance – Electricity Billing

The 15.63% electricity price increase implemented in July for municipalities means we’re digging deeper into our pockets for power. But, what exactly are we paying for?

The price of Eskom electricity is based on approved costs and a return on investment that is determined and regulated by the National Energy Regulator of South Africa (NERSA). CEO of energy management company, All Power Systems, Jay Naidoo, explains, “The amount that makes up a tariff is based on a business model, and it ensures that Eskom is funded. It pays for salaries, bills, coal, distribution, maintenance of the generation of electricity and power stations, and the infrastructure. Tariffs are how Eskom and local municipalities bill you for the supply of electricity.”

The key to figuring out electricity pricing is understanding how tariffs work. “They’re determined by your geographical location, the amount of electricity you consume and your type of property - whether it’s a residential, business or industrial entity,” Naidoo says. There are a number of applicable fees, which differ from one municipality to the next, but the two main components are: (1) the cost of energy usage (measured in kWh – for kilowatt hour) and (2) the cost to distribute the demand required (measured in kVa - for kilo-volt-ampere).

These two components normally form the foundation of the tariff and the cost will vary according to other factors like the voltage at which supply is provided; distance from the electrical source; customer energy demand; cost of connecting supply; your geographical location and the quantity of electricity used; and the time and season that electricity is used.

The National Cleaner Production Centre (NCPC-SA)’s guidebook on how to read your electricity bill reveals that there

are different rates for different energy service providers. So the bill you get from one utility provider could be very different from the one you get from another company.

If you don’t know what your rate is, the guidebook suggests looking at your latest electricity bill for something that may be listed as a ‘blended rate’. Otherwise, you can divide your electricity charges (cost) by your total kWh to get a close approximation, NCPC-SA advises. There are also different rates for different times, so when you use electricity is just as important as how much you use. What tends to be confusing for some, is how their electricity bill stays relatively the same during load shedding.

“Some municipalities around the country have applied a fixed charge to your tariff. Regardless of how much electricity you’ve consumed, you’ll be charged a flat fee which ranges from R250 to R400 per day, per connection, depending on the size of your property, where you’re located and how the municipality rate the value of your property. In the event of a blackout, your consumption will drop, but your tariff will remain the same,” Naidoo explains.

Another explanation from electrical field manager, Chris Netshisaulu, is that, “When load shedding happens, you find that most customers’ water inside geysers gets cold and when the power returns, more energy is consumed to heat the water. When there is no load shedding, the geysers consume less because the water stays warm.”

PRE vs POST PAID

Is it cheaper to be on a pre-paid or postpaid tariff ? The answer is not as clear-cut as you’d expect. Naidoo says, “It all depends on your tariff structure, which municipality you fall under, and what type of property you have. In Bloemfontein, for example, you’re charged more during winter on a pre-paid system. What a lot of people like doing then is buy electricity in bulk in summer because it’s cheaper, and store it to be used in winter.”

Richard House from Powerstar, a company offering energy-intelligence products and services, says, “Generally, pre-paid tariffs are more expensive than post-paid tariffs.” However, the spokesperson for City Power, Isaac Mangena, says the average tariff to the total pre-paid customer is currently cheaper. “The pre-paid tariff does not attract any fixed monthly charge and City Power will, therefore, in the near future have to introduce mixed monthly charges for prepaid customers as well,” he says.

What the experts agree on however, is that because pre-paid users are generally more aware of their electricity consumption, they can manage their usage and consequently pay less for the electricity they use.

UNDERSTANDING YOUR BILL

“Your electricity bill is focused on your consumption for a month and if you don’t pay for that month, it gets added to the following month’s bill,” Netshisaulu explains.

“Municipalities look at your previous consumption and average it. That’s how they estimate how much electricity you consume monthly,” he adds.

Here are some guidelines from the NCPC-SA:

Your electricity bill will always include: payments you made since your last bill; any amount outstanding and new charges for the current period; the billing period for the current account; your average daily usage in Rands and units; and your meter number and the previous and current readings taken from the meter.

Check if you receive concessions and

if they have been applied. Look for any amounts outstanding from previous bills and if there are any messages from your utility service provider relating to changes in your bill like rate increases or offers of monthly billing.

Look out for surcharges. These extra fees can be tied to your energy use, or can be a flat fee that everybody uses regardless of how much energy they use. Still confused? They cover anything from energy efficiency incentives to electrical grid maintenance. Although they make up a very minimal portion of your bill, they’re worth understanding.

“City Power charges customers a network surcharge of 6c/kWh for all electricity consumed. Residential customers are, however, exempt from paying for the surcharge for the first 500kWh/month. The purpose of the network surcharge is to provide for City Power energy efficiency programmes, as well as to contribute to the company’s refurbishment and recapitalisation of our aging infrastructure,” Mangena explains.