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Rogue electricity resellers should be regulated – Sapoa

Tariffs too high to add anything to it, Nersa hears.

PRETORIA – Dennis Goldman, chief electrical engineer of City Property told a public hearing on Monday that high electricity tariffs are a serious concern for tenants in retail and industrial properties.

He said it will be unaffordable to add to the tariff to provide for the margin of electricity resellers.

Goldman, a member of the Sapoa sustainability committee, addressed the public hearing organised by the national energy regulator (Nersa) about guidelines for electricity reseller tariffs. Sapoa members control 90% of the commercial and industrial property in South Africa, Goldman said.

Resellers typically act as agents of body corporates at residential sectional title complexes and landlords at commercial and industrial complexes. They usually take responsibility for the management of internal electricity reticulation, including meter reading, billing, collection for individual end-users and payment of the bulk account.

Moneyweb earlier reported that some resellers over-recover and pocket the difference and employ various questionable practices, usually without the knowledge of the body corporate or landlord. (See: How middle men pad your municipal electricity bill – expert)

Goldman limited his comments to resellers in the commercial and industrial market. He called on Nersa to reign in rogue resellers.

He said every licensee (municipalities or Eskom) should set their own reseller’s tariff and this should be approved by Nersa.

Alternatively, he said a percentage discount should be set at which resellers would buy electricity from the municipality or Eskom. The basis for the discount is the savings the bulk supplier (municipality or Eskom) incurs because he does not do the reticulation beyond one bulk point of supply. That would have the lowest administrative burden and provide consistency, Goldman said. It would also ensure that end-users won’t be in a worse position than if they bought electricity directly from the municipality or Eskom, whoever the local distributor is.

He said Sapoa believes Nersa should regulate the resellers industry.

Dr Rod Crompton, full-time regulator member for petroleum and pipelines at Nersa and member of the Nersa panel said at the hearing that a discount would mean that municipalities will lose revenue and other consumers will end up subsidising the reseller tariff.

He asked why costs related to internal electricity reticulation couldn’t be recovered by landlords through rent. Goldman said rent is calculated on square meterage. Different businesses that utilise the same amount of space differ in their electricity usage and linking rent to usage won’t be accepted by tenants.

Madaleen Wienand, Managing Director of Bodacious Monitoring, a management agent that regularly works with many resellers, said Ekurhuleni metro is the only municipality she knows of with a by-law stating that resellers may recover reasonable cost and the landlord may devise his own tariff by splitting the cost among individual end-users.

She said this should be the point of departure for Nersa.

Municipal by-laws usually state that consumers supplied by resellers may not be in a worse position than if they were supplied directly by the municipality. That is too vague, she said.

She said money received by resellers should be placed in a trust account, covered by fidelity insurance and regularly audited. The interest on these moneys should be used to cover the fidelity insurance and regulatory cost and resellers should top up if it doesn’t cover the cost.

Wienand called on Nersa rather than municipalities to regulate the reseller industry, because smaller municipalities won’t have the capacity to enforce regulation. She said resellers should be licensed or registered.

Louis Diederichs, trustee of the reseller Utility Management for Africa (UMFA) that deals with 66 municipalities countrywide, agreed that end-users should pay the same tariffs, whether supplied directly by municipalities or by resellers. He called for a standardisation of electricity tariffs across municipalities and said if that was achieved a national resellers tariff would be unnecessary.

Leshan Moodlar, chief electrical engineer at the eThekwini metro said in a presentation on behalf of eThekwini and the Association of Municipal Electricity Utilities (AMEU) that there is a lack of clarity on the different roles of resellers and municipal electricity distributors.

He said tariffs are based on cost and it is impossible to calculate a tariff for resellers without knowing their cost structures. He said municipalities don’t have the skills or mandate to regulate resellers and warned against tariffs that will lead to other consumers subsidising resellers.

Moodlar said Nersa is only focusing on reseller tariffs without looking at other aspects like safety, technical ability and reporting.

Moodlar said the AMEU was of the opinion that Nersa should first develop a proper regulatory framework and the setting of tariffs should flow from that.

From the questions posed by some of the Nersa panel members it seemed as if their might be doubt whether the regulator should get involved in the reseller industry or leave it for the market to sort itself out.


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