Pre Paid Meters
Tuesday, 01 June 2010 |   |  0 comment

It has been made public and final that Eskom has been approved a 31.3% increase in electricity tariffs from the 1st of July 2009. This is less than the 34% which Eskom asked for but still quite a heavy increase for the public consumer.

Eskom asked for an interim increase of 34% in tariffs until it finalizes its’ financing plans. However, the National Energy Regulator of South Africa (NERSA) approved only 31.3% at this time and also reduced the time to 9 months for this interim increase.

The decision for 31.3% constituted 25% increase that was projected by NERSA in 2008 and 6.3% on inflationary count. The 6.3% inflationary count is lower than Eskom expected. When Eskom submitted the request it calculated an inflationary count at 9%. The increase itself is really 4 times higher than the current inflation rate; hence it stands to reason that both consumers and businesses are very unhappy about such a large increase.
That said it is to be remembered that some municipalities will put an additional markup on these increases, which in effect makes the increase in tariffs even greater than the 31.3% which is only the increase that Eskom was approved.

The 31.3% also included 2 cents per kw/h environmental levy on non-renewable energy sources.

In summary Eskom had been approved a 31.3% increase from the 1st of July, which is less than the 34% requested and also only for 9 months rather than the 12 months requested. That said if one is to add municipalities markup this 31.3% will be higher.

So what happens after the 9 months?

First of all Eskom has to finalize its’ funding model in its’ second year price determination. This means they will have to submit this to NERSA, media says probably by September. This will determine the price increases from April 2010 until April 2012.

Generally speaking, it stands to reason that there will be more increases maybe not as high as the previous ones, but certainly not lower than the inflation rate. Though there are no projections or assumption into future increases, the media says NERSA expects the increases to be higher than inflation rate.

For property landlords, both in residential and commercial, this means that tenants will take more strain on cash flow and risk or arrears will become even greater than before. Cash strapped tenants both in residential and commercial properties need to carefully plan and manage their expenses. With these increases no one can afford surprise bills on post paid electricity.

It has become essential for landlords to help both residential and commercial tenants to plan their electricity usage. The best way to do this is really to have a monitoring system that enables the tenants to check their usage and maybe change or reduce use of appliances that consume too much electricity.

While being able to monitor usage on electricity with devices such as prepaid meters, tenants can actually pay less electricity if they start investing in long term electricity efficient appliances (e.g. swap electricity heaters to gas heaters).

Just to give a small example; an old geyser consumes far more electricity to heat up the water than a new one. On that same note, adding a timer to the geyser will even further reduce the usage of electricity.

By reducing the usage with both cost effective devices and better consumption habits, some will actually manage to keep their electricity bills as low as prior to the increases in tariffs. Others will mange to use less as to their budget and make sure such increases are not effecting their cash flow as harshly as currently predicted. Commercial and residential landlords have to be very weary of arrears because any arrears that they used to experience will increase from July 2009 by 31.3% or more on defaulting tenants that do not or cannot pay their electricity bills.

For landlords, using prepaid metering systems is a simple solution to avoiding arrears which they will be liable to pay in any case to the municipality. Implementation of Prepaid Metering systems eliminates late or non-payment of electricity bills and improves cashflow. While also enabling tenants to monitor and manage their electricity consumption.