How to Understand and Manage Electricity Expenses

How to Understand and Manage Electricity Expenses

Electricity is essential to every modern home – and regardless of how you access this vital public utility, there’s a good chance that each month your consumption varies as seasons, the weather, and your behaviours change. 

For that reason, it’s important to understand how we access electricity as a public service in South Africa, and how we can manage this expense month-to-month. It’s worthwhile to note that more than one method to access an electrical connection exists – and understanding your connection type, provider, and how much you can expect to pay each month, can help you get ahead. 

How am I charged for electricity? 

South Africans can either access their electricity through their municipalities by purchasing electricity as prepaid units or paying to Eskom directly. 

In the case of prepaid meters, customers will need to purchase how much electricity they will need on a pay-as-you-go basis. The more electricity a customer purchases, the more they will pay per unit of electricity they buy. 

Alternatively, customers will receive municipal or Eskom statements on a monthly basis, where they can settle their electricity costs in arrears. Both events, however, are subject to what is called the Incline Block Tariff. 

What is the Incline Block Tariff? 

Most South African municipalities use what is called the “incline block tariff” or ‘IBT’ system, which essentially means that you will pay more for electricity as your usage increases.  

The Incline Block System means that your monthly consumption will usually sit in-between a ‘block’ or range of electricity units used each month. This ‘brackets’ customers into different categories – for example, one household may use less than 600 units per month, while a larger household might use less than 1 000.   

This means that the household using 600 units per month will typically be charged a different rate (usually, a lower one) when compared to the household using 1000 units per month. In effect, a household using less than 600 units would pay 137.80 c/kWh, while a home using less then 1000 units a month may pay up to 234.06 c/kWh. 

How do I move from one block to another? 

Households that increase their electricity usage may automatically move from one block to another – and this is easily done if one purchases or ‘tops up’ additional electricity throughout the month. 

To avoid moving into another block throughout the month (and potentially buying more electricity for less as a result), it is often worthwhile to buy either an estimated or average amount of units at the start of the month to keep your budget on-track. 

What charges apply? 


Value Added Tax (VAT) is applied to all sales of electricity whether charged by a municipality or by Eskom, directly. At present, the VAT is charged on 15of sales. 

Arrears charges for municipal rates 

Some municipalities may charge their customers arrears rates as deductible expenses from their prepaid electricity purchases. This means that if you were between 30 to 60 days in arrears on a rates payment, up to 20% of the tendered amount of electricity you purchase could be deducted.   

Households between 61 and 90 days in arrears could see up to 40% of their purchase deducted, while households in arrears for between 91 – 120 days could see 50% of their purchase deducted. 

Home user charge 

If you live in the City of Cape Town municipality, you may also be charged a Home User Tariff. This is charged in the event that you have a prepaid electricity meter or you have a municipal property valuation of R1 000 000 or more. 

The home user charge amounts to R148.88 plus VAT, which totals R171.21. 

Do I qualify for free electricity? 

If you meet certain criteria, you may be eligible for a free amount of electricity per month, called a ‘lifeline’ tariff. 

To be eligible for a lifeline tariff, you will need to meet all of the following conditions: 

  • You have a municipal property valuation of R400 000 or less 
  • You receive less than 450 kWh per month on average, including any free electricity 
  • You have a prepaid meter. 

How can I manage expenses and risk during load shedding? 

While load shedding isn’t new for South Africans, managing blackouts, the impact on how much electricity you use, and potential damage to your appliances can be stressful. However, our easy-to-follow guide can help you prepare your budget and household for when load shedding is next a reality. 

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