Businesses on Incorrect Electricity Tariffs could Lose Millions

by Tygue Theron


Jul 31, 2020

by Tygue Theron


Jul 31, 2020

Ensuring that a business is being billed correctly for electricity by its local municipality, Eskom or their landlord, through detailed tariff analysis can often lead to a significant saving in utility costs. Tariff analysis should also be the first step in any organisation’s energy management process, as a simple switch can save up to millions of Rands a year.

This is according to Tygue Theron, Commercial Head at Energy Partners Intelligence – a division of Energy Partners and part of the PSG group of companies – who says that many local businesses are inadvertently paying significantly more in energy tariffs than they rightfully should.

“It is hardly surprising, since the South African municipal tariff structure for grid-tied electricity is quite complicated, with over 900 different tariff options. In addition, businesses should brace themselves for further tariff increases. We forecast that Eskom may pursue a 25% for the 2021/22 financial year – while this is by no means an absolute certainty, it is very possible. What is certain, is that Eskom is still in dire need of a lot of capital, either through tariff increases or another equity injection. We expect that a substantial portion of the state-owned entity’s debt will become the end users’ burden in the near future.”

Theron says that Energy Partners has witnessed a multitude of cases where local businesses have decreased their monthly bill by as much as 15% by simply switching to the optimal tariff structure. “By building a comprehensive tariff database, we advise clients on which tariff structures are most suitable for the business, and through this consultative process often assist in saving millions on energy costs.”

He notes that Energy Partners Intelligence has achieved up to R48 million in savings for some of its clients within the first year of switching to the correct municipal tariffs. “These savings reoccur every year as tariffs increase. In addition, our clients have saved up to R12 million in total bill claims since inception and up to R129 million in tenant bill recoveries.”

Theron explains that there is a vast number of different tariff structures in South Africa that can be applied to local businesses. “The 900+ different tariff types are applied according to the type of business that is using the power, the amount used and the time when the client’s usage is at its peak. Most businesses are bearing the brunt of annual municipal tariff increases because they are often unaware that they may be billed according to the wrong tariff structure.”

He notes that the various tariffs were put in place to encourage more conscientious energy use amongst businesses. “It is therefore not a matter of trying to get as much as possible out of businesses, it is actually a method to incentivise organisations to use power more responsibly. This is why, if one trusts a service provider to navigate this complex system, reducing energy spend can be fairly straightforward for a business.”

Theron has some advice for businesses that want to reassess their own energy costs. “The first step is to find out which tariff the company is on, and which alternative tariffs they can be switched to.”

The next step is to see if there is any meter data for the business, so that one can simulate other tariff costing at the current consumption rate. He explains that most large businesses have electricity meters, which can provide invaluable information about how the site is using energy throughout the day or week. “Instead of simply accepting your high monthly energy bill, you can dive into the data provided by meters to see when and where there is an unnecessary waste of energy. An example of this would be air-conditioning which runs for a whole building during the weekend when everyone is at home. The meter often reveals easy-to-implement savings opportunities to cut costs.”

The final step is ongoing engagement with the municipality to make sure accounts are in good standing order and that the billing is calculated correctly, according to Theron. “Managing a large company’s energy bills, identifying the right factors to motivate for billing claims and pushing municipalities to accurately apply tariffs is extremely time-consuming and requires specialised skills.”

With the nationwide COVID-19 lockdown still causing many businesses to see significant decreases in their own profit margins, it has become more important than ever before to become as energy efficient as possible to save business costs. “Getting a business onto the optimal tariff structure is by far the most cost-effective and least disruptive way to start doing that,” he concludes.

Read More

Related News