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How to buy electricity at the lowest possible rate

How should I buy my electricity to make sure that I pay the best rate possible? With Eskom and municipal rates being what they are today, every South African is asking (or should) be asking this question.
Numerous articles by so-called “experts” reporting on this matter have been published in the media over the past few months, spreading fables and urban legend about what the best time to buy electricity is and how large or small your monthly purchase amounts ought to be. We decided to answer these questions once-and-for-all and hope to provide the answers in a manner that everyone can understand.

Are our answers credible and will you be able to trust them?

Prepaid24 is an online vendor of prepaid electricity and is the largest independent operator in South Africa. For those who don’t want to stand in queues at the municipality or shops and don’t want to struggle with other online platforms’ service offerings, Prepaid24 has been offering a professional service for the past 11 years. With exceptional client service and a trusted “Live Chat” facility, Prepaid24 has become the preferred electricity platform of a large segment of South Africans, enabling them to transact from the safety of their homes, with a provider they can trust and contact seven days a week.

Prepaid24 serves over 95% of South African municipalities and have built up an extensive client base during the past 11 years, since offering the nation’s very first prepaid electricity EFT payment platform back in 2009.

At Prepaid24, we work with clients and their tariff calculations on a daily basis. You can, therefore, be assured that the information in this article is 100% trustworthy and reliable. So, let’s get going!

How to buy electricity at the lowest possible rate

First (and VERY important to note) is that municipalities predominantly have one of two tariff structures:

a)      A flat tariff: The electricity (Kilowatt-hour - kWh) you purchase is bought at a flat rate (e.g. R2,00/kWh).

b)     A step tariff: The electricity you purchase monthly is priced in “blocks”:
    -        0-R200, you buy at R1,50/kWh;

    -        R201-R500, you buy at R2,00/kWh;

    -        R501-R1000, you buy at R2,50/kWh;

    -        R1001 & up, you buy at R3,00/kWh.
With these two structures in mind, let us consider the flat tariff first:

This is called the “flat tariff” for a reason – it remains the same for the whole month. Thus, in the example where your municipal tariff is R2,00/kWh, you will always be receiving exactly that. Though this may seem like an over-simplification, let us consider Pete who purchases R1000’s electricity monthly. To address all the urban legend and advice going around, here are three scenarios: (VAT is first deducted before the units are issued.)
  1. He purchases R1000 on the 1st of the month (1 x  434.78 kWh);
  2. He purchases R1000 on the 10th of the month (1 x 434.78 kWh);
  3. He purchases R200 on the 1st, 5th, 10th, 18th & 25th of the month (5 x 86.96 kWh).
How much Kilowatt-hours did Pete receive if he did these transactions in 3 separate months? R2,00 buys 1 kW, so R1000 will buy  434.78 kWh (VAT is first deducted before the units are issued). In all three scenarios, exactly the same amount of kWh will be received! In other words, if you live in a municipality that has a flat tariff, it does not matter if you purchase large, small, early or late in the month; you will always be paying the same for a Kilowatt-hour. There are no exceptions as some have led consumers to believe.

But maybe Pete lives in a municipality that has a step tariff in place. What then? For this example, we’ve taken actual tariffs from Ekurhuleni Municipality to show you two scenarios:
  1. He purchases his full R1000 with one payment on any day of the month;
  2. He breaks up his R1000 into 4 x R250 purchases.
You will note that Pete will get the same kWh in both scenarios, as the timing and breakdown of purchases within a single month do not influence how much you get charged per unit. But for the accountants and analysts among us, here is a detailed breakdown of the two scenarios:

How to buy electricity at the lowest possible rate
click to enlarge

As you can see, Pete received 677.36 kWh in both scenarios, regardless of whether he bought all his electricity at once or chose to make multiple payments at different times of the month.

This shows that you don’t need to buy within a specific day of the month, neither do you need to scientifically calculate your purchase amounts to the nearest millionth! None of us need that added pressure in our lives.

We are, however, left with the obvious (and very necessary) question: How do I ensure that I pay as little as possible for my electricity?

If you are a resident in a municipality with a step tariff in place, here is our advice and the only way that you can make sure that you never pay more for electricity than you need to: “Only purchase as much electricity as you use within a month.”

Though residents in flat tariff municipalities have the luxury of buying 2 or 3 months in advance without any price complications, this is not the case for everyone. By buying electricity too far ahead in municipalities with step tariffs, many people end up paying unnecessary high rates for electricity. This happens because they purchase too many units in the top “blocks” of their municipal tariff system.

There are of course cases, like the annual municipal price increase on the 1st July, when many South Africans are wise to do exactly this: In light of electricity prices going up in July, they buy some extra units in the months leading up to the increase, having made their tariff calculation and understanding that, by making the inflated purchase, they will actually be saving money.

It is our hope that this article will give you more clarity and bring readers to a better understanding of how electricity tariffs work. We also hope that many of those notorious “do’s” & “do not’s” will be well and truly put to bed.

Should you have any questions or uncertainties regarding your prepaid electricity purchases, or if you want one of our professional consultants to do a personalised tariff calculation on your behalf, please feel free to contact Prepaid24 by visiting: Prepaid24 Live Support.

We’ll gladly provide you with the following:
    -        Your municipality’s tariff structure;

    -        Your municipality’s current tariff steps/blocks;

    -        A calculation of how many units you ought to receive for an amount of your choice.
If you have multiple homes or business premises in various areas across South Africa, we will be more than happy to provide this service for each of these properties and enable you to make informed decisions in the execution of your monthly prepaid electricity purchases.

19 Oct 2020 12:08

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Comment
Anonymous
Good afternoon - Please be so kind and explain to my why do i not get my 100 free units as in Pete's breakdownSee below purchase madePAID TOKENS-----------DESCRIPTION: Credit TokenRECEIPT: 07206618TARIFF NAME: 1 (DOMESTIC TARIFF)DATE/TIME: 2020-10-05 15:14:59PAID UNITS: 584.90 KwhFREE UNITS: 0.00 KwhTOTAL UNITS: 584.90 KwhTARIFF: 50 Kwh @ 1,1449 R/Kwh: 300 Kwh @ 1,3596 R/Kwh: 234,9 Kwh @ 1,7221 R/Kwh:AMOUNT: 869.57VAT: 130.43TOTAL: 1000.00
Posted on 20 Oct 2020 14:04
Anonymous
This is a great explanation, it really helps
Posted on 20 Oct 2020 15:59
Anonymous
Why is winter time prices higher than summer? I buy R2,000.00 per month. R1,000.00 and then 2 minutes later R1,000.00. Both are also different amounts. In summer I get 533.4Kw for the first R1,000 and then 486.50 for the second R1,000.00 Which makes sense. But in winter I got 436kw for the first R1,000 and 374.50Kw for the second R1,000. Quite a drop in winter.
Posted on 20 Oct 2020 16:21
Anonymous
I also would like to know.
Posted on 21 Oct 2020 11:57
Anonymous
Hi, If you buy more than a month's supply of electricity in one go, you will pay more. do not buy more than a month's supply. If I buy R 1000 on the 1st and it lasts me 2 months, I will have paid more, due to not receiving the benefit of the stepped tarrif in the next month.
Posted on 21 Oct 2020 12:35
Prepaid24 (Pty) Ltd
Good Morning,please note that the free electricity gets generated by your municipality. Meaning you will have to be registered for free basic electricity at your municipal office. You will then receive the free units when you purchase for the first time of each month.
Posted on 22 Oct 2020 08:59
Prepaid24 (Pty) Ltd
Good Morning,kindly note that the municipality determine the tariffs at which they charge. The winter tariffs are on a higher tariff as users tend to use more electricity during winter times. This is implemented by some municipalities to encourage users to use less electricity.Regards Gené Williams, Team leader @ Prepaid24
Posted on 22 Oct 2020 13:09