Using prepaid electricity: safe from scammers
Some recent media reports really have the public talking about prepaid electricity, and wondering if they've been ripped off. A 2014 incident where a company calling themselves “Sustainable Energy” scammed an Umhlanga resident with a fraudulent meter sale became national news. Carte Blanche was approached by consumers who had been exploited with inflated charges, as well consumers who had been taken for a ride by unscrupulous companies and had their power shut off. These unfortunate incidents have illustrated that, for the average person, the contents of their electricity expense is a bit of a mystery until something obvious goes wrong.
Although these incidents are isolated, they do not say much about the wider context of the prepaid electricity industry and the positive contribution made to consumers, landlords and municipalities making use of these services. A comprehensive background, understanding of the workings of the business and some education for consumers will illustrate the positive contribution that Ideal Prepaid and similar companies provide. A better understanding of these factors will also allow consumers to make the best choices for themselves.
Does the average consumer understand their current electricity bill and charges on it? How does a consumer protect against scams and exploitation? Most importantly, has the consumer made sure that they are doing everything possible to reduce costs? For landlords, the question of keeping abreast with latest technology is important. The right technology can save time and money.
Power in South Africa: To understand the prepaid electricity industry and how it works, we have to look at the larger context. There are currently more than 4 million prepaid meters installed in South Africa. Eskom meters account for over 3.2 million of these. Even though Eskom is the only electricity generator, many cities and municipalities act as intermediaries in supplying their residents. Hence, it's not always possible to deal directly with Eskom. Residents that deal directly with municipalities or Eskom already know that there are other charges embedded into their bills.
Many municipalities are in arrears with Eskom with debts over R10bn owing to Eskom. Municipalities are struggling to settle their debts with Eskom with consequential charges ultimately relayed to ‘good paying customers’. A Landlord or Body Corporate receives a single bill from Eskom or the Municipality, and is liable for its settlement. Landlords have to recover their expenses from tenants. This creates all kinds of admin complications for landlords, unless they make use of a prepaid electricity service, a process known as sub-metering. Landlords need to combine all the items on their bill into a single rate, as well as fairly distribute such charges – taking into account each tenant’s actual usage and other related costs.
Landlords also need to be able to pass on reimbursements or other savings in a fair way. Most importantly, all arrears and levies need to be settled without any disruption to services. This is where prepaid meters and other technologies add significant value. Metering technology streamlines administrative processes such as meter readings, converting such readings to charges, accounts processing, payments, statement issuance and debt management. Generally these services may include a premium to existing charges. Landlords and many tenants welcome this technology and services. For landlords, administrative hassles are a thing of the past. For tenants, there is greater monitoring and certainty that they aren't inadvertently paying for their neighbours’ “home baking business”.
Knowledge is power: understanding a prepaid electricity tariff Probably the most surprising thing is that it isn't necessarily actual energy consumption that makes up the majority of a prepaid meter tariff.
An electricity bill for a building consists of items such as:
- energy consumption
- reactive power
- demand side management
- maximum demand charge
- service charges and surcharges
In many cases there are still more items like business services, refuse removal, property rates, water and sanitation as well as any arrears or interest. As most consumers have probably experienced, these can be based on estimates or on actual meter readings.
All the above items must be settled by the property owner with Eskom or the Municipality. On the other hand, the Landlord in prescribing a tariff to tenants must recover all those fees as part of a 'single prepaid meter tariff'.
Residents need to be aware that their prepaid meter tariff cannot be the same as the Municipal consumption tariff because their prepaid meter tariff needs to recover numerous other costs that are incurred for their landlords. Settlement of electricity bills involves using a payment processor like EasyPay, the Post office, Credit Cards, Unipin, Flexipin and others. All payment processors involve extra charges.
How can consumers save money? Whether you are a landlord or a resident, some tweaks can save money on electricity costs.
- Go direct: Check if it’s possible to get a meter account directly with Eskom or the Municipality.
- Negotiate with the landlord: If the landlord agrees, it might be possible to settle with them directly in advance, thereby avoiding a number of extra charges. Not all landlords are keen on the extra administration of this approach. - Question the landlord: Ask about sub-metering charges and any other charges specific to the building.
- Find the cheapest payment method: Usually an EFT is the cheapest or paying your landlord directly.
- Make sure the meter is set up correctly: There might be further savings available such as step tariffs.
- Understand the receipt: Consumers might be paying arrears or levies related to their accounts.
Protecting against scammers:
- Know who the intermediaries are: One incident in the Carte Blanche episode illustrated an incident where a couple settled their account with an intermediary who was supposed to settle their bill with the Tshwane municipality. Not only did they lose their money, but also their power was shut off because the account was never settled with the municipality. If consumers make use of an intermediary, they must check that they are officially sanctioned by their landlord or municipality. In addition, checking the balance of their account with their landlord or municipality is important. The balance should be updated daily or weekly, with no more than a 4-week delay between payment and the latest balance.
- Avoid meter installers promising to save vast amounts of money: No prepaid meter will save consumers a fortune; and anyone making those kinds of promises is being dishonest. Prepaid meter installations can only be initiated by a landlord, managing agent or municipality.
- It's all about service: The device is useless without the related service and payment collections. There are many companies offering prepaid electricity services, consumers need to compare and research. It's easy to check up on a company with a few clicks. Are consumers able to find contact details and a physical address easily? Do they provide reliable support?
- Municipal meters cannot be substituted: A prepaid meter doesn't substitute a municipal meter.
- Beware of expensive meters and hefty installation fees: Crooks are more likely to try get a large upfront fee, as they have no intention of delivering later. Good service providers absorb upfront costs in the hopes of a long-term relationship. It’s easy enough to check, just search online for the meter model and check its retail price.
- Voice concerns: There are channels for consumers to take action in the event of fraud. Consumers who have been victim to a scam can request action through their landlord, municipality or service provider. They can also go to Hello Peter or Consumer Watch. In any industry, there will always be ‘bad apples’. One of the companies featured in the Carte Blanche programme has since gone bankrupt. Don’t let a few unfortunate incidents cloud judgement about an entire industry that provides value to consumers, both residents and landlords.