Energy expert Ted Blom says that prepaid electricity users in South Africa are getting ‘ripped off’ by noncompetitive and opaque prepaid power suppliers – while most are still not aware of how to get the most out of their power at the best price.
Blom told Jacaranda FM that users who are frustrated and confused by prepaid electricity prices increasing throughout any given month are not alone, as many users are not aware of the Incline Block Tariff system, which hikes prices as users consumer more electricity.
The system is deliberately opaque, he said, as suppliers monopolise specific areas and developments.
“You can’t shop around – the supplier owns the lines that go to your house, and that’s not open to others. This will only change with a review of the industry. Whoever you have a supplier is who you are stuck with,” he said.
The energy expert also pointed out that most prepaid users don’t know that the best time to top up their electricity is on the first of the month.
This is due to Eskom’s Incline Block Tariff system.
Under this system, units are split into different blocks. The more you use, the more you pay per block. 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 said.
Eskom’s Incline Block Tariffs divide the electricity price into several steps or blocks. The first block of electricity is at the lowest price. As customers purchases more electricity during the month, the electricity bought will eventually fall in block two, which is more expensive.
This process repeats automatically as the customer purchases further electricity to move into block 2. At the end of the month, the history is reset and the customer will again start the next month from block 1.
Eskom says the process to move from the one block to the next is automatic and depends only on the amount of electricity that is acquired by the customer. The movement to the next block is not affected whether the purchases are spread over many transactions or if all the electricity is part of one transaction.
Because the blocks increase in the price, customers can save money by not buying more electricity than what they will use during the month. It is much better to wait until the next month and start to buy again at the low price.
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.
The power utility currently charges R1.40 per kWh for block 1 for 20 amp supplies, moving up to R1.59 per khW thereafter. For 60 am supplies it is R1.58 and R2.69 per kWh, respectively.
According to Blom, the average family of 2 adults 2 children, living in a moderately sized home will use about 1000kwh per month. Under the current Nersa price structure, this shouldn’t be more than R1,100 a month.
However, because of the block supplies and the opaque nature of the prepaid business, this could be as high as R2,500 per month. Under Eskom’s 20 and 60 amp supplies, this would be R1,500 and R2,000, respectively.
“Either way, you’re still getting ripped off. Elsewhere in the world, you wouldn’t pay more than R500,” he said.
Blom said to get the most out of your prepaid electricity, average users should pay for their 1,000 units on the first of the month.
“If you pay for more than you need – such as a year’s supply in a month – you will get ripped off second-to-none, as you will end up buying the most expensive blocks,” he said.
“Buy what you need in a month, at the start of the month, that will get you the best deal.”
Eskom said in a social media post on Friday (28 August), that prepaid pricing is based on usage/consumption rate. “The more you use in a month, the higher your cost,” it said.
Prepaid pricing is based on usage/consumption rate. The more you use in a month, the higher your cost. For information about how “Prepaid electricity” works, and “Inclining block tariffs”, https://t.co/bzlBPjVNHe pic.twitter.com/RF4d27OpaM
— Eskom Hld SOC Ltd (@Eskom_SA) August 28, 2020