Government wants to get a grip on rogue electricity vendors.
While electricity tariffs charged by Eskom and municipalities are continuously scrutinised, vendors of prepaid tokens – who form part of the supply chain – fly completely under the radar.
Consumers are not told which parties are involved in the delivery channel, nor what each of them charges. Some of these vendors, however, unlawfully add as much as 25% to the electricity tariffs, according to two experts in the field.
The draft revised Electricity Pricing Policy (EPP) points out that such vendors are unregulated and the commissions they charge vary, “creating the potential for excessive fees and unfair margins”.
It proposes a standardised pricing framework and monitoring mechanism “to ensure that vending fees are transparent, fair and consistent”.
Chris Bosch, CEO of Rural Maintenance, which manages several electricity distribution services on behalf of licensees, points out that by law nobody is allowed to sell electricity at a tariff other than one approved by energy regulator Nersa.
“In the municipalities where we work, we pay the vendor and the customer is charged the Nersa-approved tariffs.”
That is not always the case, however, he says. “Sometimes a consumer is charged R10 or R20 extra just to do the transaction.”
Imagine a poor consumer who wants to buy R50 worth of electricity at a time having to pay such a fee.
“Some charge whatever they want. I have seen commissions of up to 20%. In one shopping centre, we came across a landlord charging a meter-reading fee of R500, while that is already provided for in the approved tariff. If a shop owner questions it, they try to kick his business out.”
Bosch says every distributor should offer customers a no-cost option, allowing them to pay only the Nersa-approved tariffs, for example through a municipal app.
If a consumer opts for a more convenient option for whatever reason, like buying electricity with a credit card or through their banking app, they should be prepared to pay a premium for the convenience.
Ayal Rosenberg, managing director of WeBill, agrees that it is the rule in the industry, rather than the exception, to add commission onto the approved tariffs, although it is unlawful.
There can be many role players in the chain and “everybody wants to get in on it, because it is so easy to make money”.
He cites two examples:
A listed company charges a 9% additional commission, including value-added-tax (Vat), to the 120 000 middle- and working-class customers who use its vending platform. Of this, the metering company receives four percentage points, three of which cover real costs. The retailer – for example, a supermarket or bank – gets about three percentage points, while the company itself retains two.
Another example is a metering company in the Free State with 25 000 meters in sectional-title units and electricity sales of about R25 million a month. It retains about R2 million a month (12% excluding Vat) as commission, of which R500 000 a month is paid to the retailer.
According to Rosenberg, vending commissions range from 13% to 25%, excluding Vat, and are added to the Nersa-approved tariffs.
The draft revised policy proposes that Nersa:
It states that implementing these measures “will ensure that prepaid electricity vending services operate in a regulated, transparent, and consumer-protective manner, while standardising vendor practices across the sector”.
Deon Conradie, an expert in electricity pricing, says the policy objective of bringing vendors into the regulatory framework and tightening the regime for resellers is particularly relevant to estates, landlords, body corporates, student accommodation and informal resale arrangements, where the effective price paid by the end user can materially exceed the underlying regulated electricity tariff.
He says this may be especially problematic in informal resale arrangements between landlords and tenants and with vendors in townships.
Conradie is, however, concerned about the implementation of the policy, once adopted.
“Implementation, rather than policy wording, will determine whether it succeeds,” he says.
Conradie points out that the policy calls on Nersa to develop several frameworks, including one to regulate electricity vendors. This, he says, is where the risk lies.
“The [current] 2008 EPP already contained many sound economic principles that were simply never implemented fully after almost eighteen years.”
He adds that the revised EPP is intended to modernise the 2008 policy and align electricity pricing with the structural reforms currently under way in the sector.
The fundamental change from the current EPP, which was adopted in 2008, reflects a move from an industry that revolved around Eskom, to a market-based industry with multiple participants.
“The 2026 EPP explicitly says that South Africa is moving from a vertically integrated, monopoly-based system to an unbundled and increasingly competitive electricity market.
“It recognises separate generation, transmission, distribution, retailers, traders, generators, aggregators, wheeling customers and market participants.
“That is the conceptual foundation on which a functioning competitive electricity market has to be built.”
This article was republished from Moneyweb. Read the original here.
