Warning to Eskom’s residential consumers: your electricity bill may need closer scrutiny

Eskom’s financial position poses a national challenge. All South Africans need to contend with higher electricity prices and the reality of frequent blackouts. Consequently, I had resolved to start proactively managing my household’s electricity usage. A closer look at my electricity bill, however, revealed that Eskom may be overcharging me. While not conclusive, the evidence provided in this blog is sufficient to warrant further attention and to warn other direct clients of Eskom to be on the lookout for similar behaviour.

Eskom has been experiencing financing difficulties recently as a result of various factors; including the heavy use of expensive diesel generators to avoid load-shedding and cost overruns from new build projects. In mid-June 2015, the utility unsuccessfully approached the regulator (Nersa) for a tariff rate hike of up to 25%. After its application was rejected, Eskom mentioned that it would consider alternative sources of funding. Eskom’s debt rating was downgraded to junk status earlier this year. The rating downgrade increases the cost of borrowing, making it a less attractive source of funding. Moreover, the utility cannot boost its revenue through price increases without regulatory approval.

On the 12th of November 2015, Eskom submitted a request to Nersa for another price increase. The utility hopes to claw-back the R22.8 billion shortfall incurred during the 2013/2014 multi-year price determination. Eskom claims that this shortfall was due to declining sales volumes and increases in variable operating costs such as diesel.[1] But as Eskom’s previous request to Nersa demonstrated, it is by no means certain that the price increase will be approved. There is thus a clear incentive for Eskom to consider alternative ways of raising its revenues.

Keeping Eskom’s rejected tariff increase request in June in mind, it is suspicious that my electricity statement for June, which is issued in arrears in July, contained a massage at the bottom of the bill (in the finest of fine print) stating that Eskom would henceforth be reading electricity meters only once every quarter, and not monthly. They encourage consumers to submit their own meter readings via an online platform or through their contact centre. This tiny-fonted message had not appeared on my earlier bills or the bills thereafter. The likelihood of a reasonable person missing this notice is very high. I would have missed it (were I not looking for something), neither did I hear or see any announcements making me aware of my responsibility to alert Eskom of my household’s power usage.

According to my bill, Eskom started estimating my consumption in July. From June to July my electricity consumption increased, but this is in itself not unusual, as most households’ electricity consumption peaks in the coldest months of July-August due to increased heating costs. An actual meter reading for September was provided, and this is where the suspicious billing behaviour starts. In the three months up to September my bill indicates that my household used 6 850 kWh of electricity for the quarter, which equates to an average of 2,280 kWh a month from July until September. This usage seems high for us historically.

Based on consumption patterns from the previous year (as depicted in the figure 1 below), the consumption for my household should be declining from August onwards as the weather warms up. However, the bill for October indicates that our consumption increased by 27% compared to the last reliable monthly meter reading in June to 2,589 kWh. For the corresponding period last year (June – October 2014), our household consumption of power declined by 38%.

 

Figure 1: My Household’s electricity consumption over 18 months

In comparison, the meter reading that I took for November indicates that my household’s average usage for October and November (assuming an accurate reading in September) is 1415 kWh per month. This is 1174 kWh less than the 2589 kWh that Eskom has estimated (and billed me) for in October. There has been no drastic change in my household’s consumption patterns between these two periods of time. We added no new appliances and the geysers are in good working condition. It is also hard to believe that mine is an isolated incident.

When considering aggregate electricity demand for the province of Gauteng for the same period of time – June 2014 until September 2015 – there is no evidence of significant differences between this years’ spring and last year. As expected, aggregate demand declined with rising temperatures. This is the typical demand profile for South Africa’s seasonal electricity consumption. During the recent system status update, Eskom confirmed that the demand profile from August to October has remained relatively similar over the last 3 years.[2]



Figure 2: Comparing Electricity Demand and average temperatures

I have contacted Eskom for an explanation through their call centre. I am still waiting for answers after being promised a response within two working days. As I type this blog, it has been over a week.

The lack of transparency and effective communication around Eskom’s change in billing policy and the inconsistent way in which consumption patterns are communicated to me as a consumer raises suspicion; especially given Eskom’s cash flow challenges. More importantly, Eskom’s approach does not seem to treat the customer fairly. What controls are in place to ensure that estimates are reasonable, based on known seasonal changes? How and when are bill adjustments implemented when actual meter numbers are collected or submitted? Why is the utility’s estimation policy not clearly documented on any public platforms?

Based on my experience, I would urge Eskom’s residential customers to scrutinise their billed energy consumption by taking the following steps:

· Check the “total energy consumed for billing period” on the Eskom bill. This information is also presented on the bottom left hand corner of the first page on the bill, giving a 12 month picture of what has been consumed. This chart is also known as a load profile, as displayed figure 1 above.

· Simply compare the pattern from your latest bill (November 2015) to the pattern at the same time last year (November 2014). Unless you have added more appliances or your electricity usage has changed drastically – the two charts should look broadly similar; otherwise contact Eskom and ask for more information.

If you are not satisfied with Eskom’s response, you could consider raising the issue with your neighbours and collectively write a complaint to Nersa (the electricity regulator). The form to do so is included here.



[1] MYPD3 (2013-14) Regulatory Clearing Account Submission to Nersa, November 2015. Available [online]: http://www.nersa.org.za/

[2] Presentation by Brian Molefe, CE of Eskom titled Quarterly System Status Briefing: Summer Status. November 2015. Available [online]: http://www.eskom.co.za/news/Documents/SystemStatusPresNov2015.pdf