Is your business electricity account being loaded?

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The electricity accounts of businesses with space in office blocks or shopping centres are often loaded by electricity resellers.

Resellers have been unregulated till now, but the National Energy Regulator of South Africa (NERSA) has recently introduced guidelines as a first step towards regulating the industry. These guidelines clearly state that consumers may recover unfair over-collections by means of civil legal action.

According to the guidelines, consumers may not be worse off as those who purchase electricity from the local licence holder, namely a municipality or Eskom.

  • Resellers may not add any fee to the local NERSA approved body’s electricity tariffs. These tariffs, as well as the complete guidelines are available on the NERSA website.
  • Resellers may collect some costs, such as the maintenance of the property and administration of their contracts, by means of end consumer accounts, but it should be done through sectional title levies and not through electricity tariffs.
  • NERSA however determine that resellers may not add any extra costs for meter readings, the selling of prepaid electricity (‘vending’), provision of account statements, and compliance to regulatory requirements.

According to Stefan Pieterse, spokesperson for AfriBusiness, there are thousands of companies in SA (especially small and medium companies) who are exposed to over-collection without being able to do something about it. “These companies often have only two options: Pay, or the electricity is cut,” Pieterse is said.

  • The regulator provides clear prescriptions with regard to the information that should appear on end consumers’ accounts, or in the case of prepaid electricity, what should appear on the receipts, in order for the consumers to understand their transactions and to be able to question them if necessary.
  • The above prescriptions include an explanation of costs pertaining to communal areas, such as parking areas at a complex. The reseller must stipulate how many electricity units are used at the communal areas and how they have been divided among the individual units.
  • Furthermore, an obligation is placed on resellers to provide contact details to each end consumer where power outages can be reported. Resellers must react within a reasonable period of time and effectively to such situations, according to NERSA.
  • Resellers must in future register at their licenced local electricity provider, the municipality or Eskom and a service level agreement with the provider must be in place.
  • Resellers must also comply with the same safety standards as the local electricity provider.
  • Resellers must have the capability to test electricity meters on request of the end consumer.
  • Electricity provision may not be terminated for any other reason than non-payment of accounts.

The role of resellers

There is no doubt that resellers play an important role in the supply chain.

  • The role has developed as municipalities mainly provided power only up to the fence of property developments. They provide electricity at one point on a piece of land and the developer installs the internal distribution network to individual units, whether they are offices, shops or residential units.
  • After the development phase the property is usually transferred to one new owner, or several owners of units and a body corporate consisting of all the owners take responsibility for the management of the communal area.
  • The owner of the complex or body corporate often outsources the management of the electricity system and the accounts, or just the accounts to a third party who specialises in this field, namely the reseller.
  • The reseller obtains the wholesale reading from the municipality and must see to it that it is divided correctly according to the correct meter readings of each unit plus each unit’s proportional part of the electricity account of the communal area.
  • The account at the municipalities is sometimes in the name of the reseller and sometimes in the name of the complex or its owner.
  • Several large property groups, property management companies and resellers have obtained a lot of expertise to do this task professionally. However, there are also smaller players who are opportunistic and gain a lot of unlawful profits from the reselling of electricity.

“The public must make sure that they know their rights and that they are implemented – the onus is in the end on the consumer to make sure he is not disadvantaged,” Pieterse said.

Sometimes resellers collect the electricity costs from the different units and do not pay it over to the municipalities. The residents only realise it when the municipality cuts the electricity of the whole complex and then end up with outstanding accounts for a number of months and if they cannot recover it from the reseller, they have to pay it themselves to restore electricity provision.

Byron Taylor, chairman of the Association of Electricity Resellers (ERASA), says the organisation represent nearly 70% of the large resellers in the country. ERASA’s code of conduct already includes most of the requirements in NERSA’s guidelines and according to Taylor, big changes are not necessary to comply with the requirements.

Taylor further says that ERASA members have attended several workshops and meetings with NERSA in the past seven years in order to prepare for better regulation of the industry. The organisation saw in which direction NERSA was going and saw to it beforehand that their activities comply with the regulations. He emphasises that other and especially smaller resellers add one after the other levy to the approved electricity tariffs.

Eric Bott, Technical Director of Energy Measurement Consulting (EMC), who investigates on behalf of clients, such as retail groups, their electricity costs, found in one small office block an over-collection of 30% at one unit and an under-collection at other units. He also says over-collection at shopping centres often happens.

Most metro councils these days have a special tariff at which resellers can purchase electricity wholesale. It is a discount tariff, which leaves space to make a profit when they sell electricity at the existing municipal retail tariff to end consumers. NERSA states clearly that such reselling tariffs must enable resellers to make a profit.

At other municipalities, resellers can purchase electricity at wholesale tariffs available for commercial and industrial clients and then resell it at the dame tariff applicable to municipal end consumers.

According to the guidelines, resellers must have mechanisms in place to handle complaints of consumers. They must indicate clearly on consumers’ electricity invoices of account statements how consumers obtain access to these mechanisms.

Consumers must submit complaints to the reseller first. If they cannot reach agreement, the consumer can then refer it to the municipality and if that does not work, to NERSA.

Each licenced electricity provider must report regularly to NERSA on the registered resellers and complaints that have been received.

The following items must appear on electricity accounts:

  • the quantity kWh used;
  • the tariff per kWh;
  • the period of the account;
  • the total amount payable in Rand; and
  • the telephone number and email address of the reseller.

The following must appear on prepaid electricity receipts:

  • A breakdown of the costs and levies approved by NERSA.