Are Your Electricity Bills Too High?

In light of the impending electricity tariff increase from 14% to 20% and more (depending on regions in South Africa), property owners are rapidly adopting privately owned, secondary, prepaid electricity metering solutions to help curb utility revenue collection risks on rentals.

Both commercial and residential tenants that have to pay higher electricity prices are also looking for solutions to monitor their electricity usage and try and save on usage as electricity bills are starting to increase and will probably continue year after year.
In addition to collection of rent, landlords also have to collect revenues from tenants for utilities consumed. Unlike rental, which is due on a given date, utility collection is problematic in that utility bills are only available to landlords in the month following that in which the utilities were consumed by the tenant.

For the tenants a completely different problem arises; they have no idea how much they are using until the electricity bill arrives, as no monitoring system is in place.

This means landlords must collect money for electricity and water in arrears, and tenants have to pay after the fact, which exposes the landlord to the risk of having to collect required amounts before the bill is due to be paid to the municipality. While tenants, are left without the ability to cut down on usage. In practice, this situation presents a risk to the landlord and uncomfortable bills for tenants. This is where the tenants dispute their billed amounts with the landlord, and the landlord collects electricity bills late.

Both for landlords and for tenants, this situation has never been the best, but since the electricity prices have been somewhat acceptable and not so high, both sides lived with the situation. Now with increases in electricity, bills are getting higher and cash flow tighter. Utilities revenue collection is becoming more of a problem than anyone wants to deal with. This situation can be easily avoided. Tenants can monitor their own usage while landlords can get their electricity bills paid in time all of the time. Making life easier all around.

To solve this problem for landlords and tenants, many residential and commercial landlords have turned to privately owned, secondary, prepaid electricity metering solutions to help that help reduce risk and improve cashflow on both sides.

These meters do not replace the existing municipal meter on a property and are installed inside the dwelling alongside the main distribution board. They serve to implement a system whereby tenants pre-pay the landlord in advance for electricity and so the tenants can monitor their usage and never again receive a surprise bill. With the landlord prepaid the risk of non-payment for electricity by the tenant is eliminated.

Electricity bills can be substantial but are traditionally higher during the winter months when people start using electrical heaters in an effort to stave off the cold. Geysers also start drawing more electricity as they cool down more frequently.

Non-payment by a tenant in these times can mean a substantial loss to landlords, who often rely on rentals for extra income or to cover mortgage payments. Tenants usually get a massive shock in winter when all of the sudden the bills are doubled. This situation creates a cash flow problem for them as well.

The risk associated with late payment or non-payment for electricity is dramatically increased as prices of electricity escalate. This also causes a bigger cash flow problem for tenants. Aware of this, an increasing number of Landlords are opting for the prepaid solution to avoid the associated financial risk of not doing so, and many tenants both residential and commercial are asking landlords to install prepaid meters to monitor their own usage.

While primary prepaid metering solutions are available from municipalities, obtaining a municipal solution is often a long and inefficient process. In majority of cases the municipal route can also be more costly than the price of buying and installing a secondary prepaid meter.

Municipalities are also willing to install only one prepaid meter per ERF, which is a problem for landlords with multiple tenant dwelling units or granny flats and commercial properties. A similar type of problem is also found in sectional title schemes where the building or complex is fitted with a single bulk meter, and resident billing is calculated based on a participation quota.

When compared with the municipal, primary meter option, from the perspective of a landlord, the privately owned, secondary, prepaid solution has a number of advantages. In addition to being easily purchased and installed at a lesser cost, the privately owned nature of the secondary prepaid meter means that the landlord not only remains in control of the utility management on the property, but experiences an improvement in cash flow and elimination of the risk of loss associated with non-payment of electricity.

For the tenants, cash flow improves when they can actually monitor their usage of electricity and never again get surprise electricity bills that eat into budget for other things, or end up in disputes for landlords.

Many tenants have been able to reduce their usage by having a meter in their own premises that shows them, on daily-basis, how much electricity they have remaining.

As electricity prices and other costs increase, the trend towards prepaid solutions seems to be gaining momentum as landlords strive for better management of the traditional risks associated with rentals.