All of us are not crooks: electricity reseller

Electricity resellers have an important role to play in property management and should not be confused with fly-by-night vendors who over-charge end-users, says Johan Hopley, manager of Impact Meter Services.

Hopley was reacting to Moneyweb’s investigation into the Tshwane company Meinroux Trading Services (Pty) Ltd. trading as Prepaid Electric, which has been over-charging most of its customers by unlawfully applying a sliding scale and unlawfully retaining R10 from every R100 of its prepaid sub-metering customers.

He says municipalities have created the need for resellers by years ago implementing a policy of supplying only one electricity meter per property. The internal distribution to multiple end-users became the responsibility of the developer and later the landlord or body corporate.

Hopley says the management of electricity metering and billing is a specialised field and electricity resellers have been assisting landlords and body corporates in this for years. Impact has been in business for 26 years and serves about 50 000 end-users in Pretoria, Midrand and Madibeng.

Clearly the reseller should receive fair compensation for this service, Hopley says.

In the last few years some municipalities have introduced bulk domestic tariffs at which the resellers may buy the electricity and reseller tariffs at which they are supposed to sell the electricity to domestic end-users.

The City of Tshwane is at the forefront of this and the energy regulator Nersa has recently compelled the metropolitan councils to accommodate resellers in their tariff structure, Hopley says.

Currently domestic resellers in Tshwane pay 120c/kWh to the municipality, as well as R430 for each complex. They sell to pre-paid and post-paid end-users at 137c/kWh, says Hopley.

He says a reseller enters into a contract with the municipality and has to pay a deposit equal to two months’ consumption to the municipality for every complex it manages.

The barriers to entry are high, he says. “To get started with ten complexes with 30 units each, can cost up to R20 million if one includes the cost of proper meters, infrastructure to read the meters, deposits, billing software, cost of collections and the cash flow to deal with delays in collections and advance payments.”

Impact installs its own meters and retains ownership. Hopley says this is done because developers tend to install the cheapest and inferior meters.

Fly-by-night venders

Vendors like Meinroux on the other hand have no agreement with the municipality and install their prepaid meters downstream from a normal domestic meter, especially for owners with a small number of tenants on the premises. The owner is trying to reduce their risk of being stuck with the tenant’s electricity bill and therefore opts for the prepaid meters. This is supported by a perception that prepaid electricity is cheaper than billed electricity.

In some cases vendors serve whole complexes, Hopley says.

The vendor does not enjoy the bulk tariff that the resellers does and ends up unlawfully adding its margin to the tenant’s tariffs, he adds.

He believes the owner should pay for the vendor’s service and if he recovers it from the tenant, it should be done through an administration fee or through the rent.

He says vendors are able to enter the market with just R100 000. They need the software and an agreement with a vendor network like Blue Label’s UniPin which enables them to sell tokens through local shops, but also adds cost. However, he believes the market is flooded by fly-by-nights and that vendors do not offer the comprehensive service resellers do.

In Tshwane Electrovend closed its doors early this year, abandoning customers. This followed the vendor promising customers cheap electricity through an advertising campaign on Radio Rippel.

Recourse and regulation

Hopley believes vendors should also be accommodated in the municipal tariff structure, but should refrain from entering into situations where there is no margin to cover their costs.

He also supports calls for Nersa to license or accredit resellers and revoke the accreditation of parties acting unlawfully. He further calls for a standing panel with representation by resellers and the local authority to deal with issues in the industry.

Hopley advises body corporates to check every month that the complex’s municipal account is paid in full and to check the tariffs applied to end-users. The tariffs should be stipulated in the contract between the reseller and the body corporate, he says.

As the cost of electricity increases, he says it is becoming imperative on prospective tenants to prevent nasty surprises by enquiring about the electricity regime and applicable tariffs before entering into a contract with a landlord.

Source: Moneyweb

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