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How Electricity Tariffs Work

An electricity tariff is a means with which Eskom or local municipalities bill their customers for the provision of electricity. There are numerous fees applicable, varying from one municipality to the next, with the two main constituents being consumptive-based charges (kWh) and demand charges (kVA). These typically form the base of the tariff and will vary according to other parameters, such as voltage, distance from the electrical source, customer energy demand, etc.

Small power users, such as residential, small tenanted space, etc. are charged typically on consumptive-based electricity tariffs. The kWh rate is high, for example R 1,20 per kWh as in the City of Cape Town tariff example below:

Image 1 electricity tariffs

Image 1: City of Cape Town Small Power User 1

Large power users, for example large commercial buildings, large hotels and factories would typically have a demand-based tariff with a low consumption charge.

Image 2: City of Cape Town Large Power User Medium Voltage electricity tariffs

Image 2: City of Cape Town Large Power User Medium Voltage

Even complex Eskom electricity tariffs have the two main components, namely consumption and demand. The consumption (kWh) charges are usually called “energy” charges on Eskom bills. Power-Star has expertise in understanding tariffs from having dealt with municipalities from all over southern Africa and abroad.

tariff 3 picture electricity tariffs

Depending on your operations and how energy is being used, you may, or may not be on the most appropriate tariff structure. Energy costs can be significantly lowered by either moving from one tariff to another or by better understanding your current tariff. The information that we gather with our online meter can be used to optimise your energy usage and lowering costs. For a better understanding of your electricity tariff and how your operations impact the costs, get in touch with us, we are here to help.

8 Comments

  1. I would like to know how i can have my electricity tariff reviewed. I bough a house a year ago and inherited a really high tariff. What can i do

    Reply
    • Hi Benita,
      As a residential property owner you should be billed on a domestic or lifeline tariff by the City of Cape Town. Check your email for more information.

      Reply
  2. I recently bought a house. The current tariff is 500.0 – 1000.0kwh @#169.2c/kwh. This is as per my prepaid voucher. It appears that this is a business tariff, which the previous owner had. How can I change it as I do not have a business.

    Reply
    • Hi Dale,
      That is a little steep. I would suggest that you contact your utility provider (City Power – 011 375 5555) and ask on which tariff you are being billed. If you qualify, request to be moved to a domestic tariff. City Power charges a fee to switch between tariffs so be sure ask about the exact amount.

      Reply
  3. What criteria is used to determine what tariff you are charged? Can an Large Power user change to prepaid for business?

    Reply
    • Hi Nicki,
      Your energy usage (kWh) and demand required (kVA), determines which tariff you are on. Should you qualify for a variety of tariffs, it is your (the consumer’s) responsibility to activate the most beneficial tariff.
      A Large Power user is determined by supply rating of over 500 kVA. We provide a tariff comparison service to determine which tariffs are possible and which one is the most affordable.

      Reply
  4. Hi,

    Regarding medium voltage commercial users, our tariff is R149.39 per unit for 400 KVA demand and R0.70 per unit for 150000 KWh consumption.

    Now if we install a grid tied utility interactive PV system, will such a system only reduce the consumption on the bill? Because @ R0.70 that would not be viable.

    Is it possible to get billed on a different tariff system where the only consumption is billed at a higher rate in order to make it more cost effective for a PV system?

    Thank you!

    Reply
    • Hi Johann,
      There is a variety of factors we should look at.
      Step 1 would be to send us a copy of the bill in question so that we can compare against viable alternative tariffs.
      Step 2 would be to explore solar PV options that will have a fair ROI.

      Reply

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