City Power’s New R230p/m Prepaid Electricity Charge – What Are Your Options?

As a homeowner supplied by City Power in Johannesburg, you likely have read or heard about the changes in connection fees and electricity prices. With municipalities across South Africa having increased their electricity prices by an average of 12.7% on July 1, 2024, and early indicators suggesting even steeper hikes next year, now is the time to consider your options. Is prepaid electricity still your home’s cheapest option and for how long?

New Connection Fees for City Power Prepaid Customers

Starting July 1, 2024, City Power introduced a R230 per month "connection fee" on its prepaid tariffs. For the first time in Johannesburg, clients buy electricity, and only a portion of the purchase goes to actual units of electricity after the R230 monthly fee is recovered. Interestingly, homes with prepaid supplied directly from Eskom have had connection fees for a few years now.

While this new connection fee of R230 per month is lower than the originally proposed R550 per month, it represents a significant shift in how electricity costs are charged.

Why the New Charges?

Eskom, South Africa’s primary electricity supplier, is moving towards fixed charges, focusing more on connection and capacity charges rather than the actual consumption of electricity units. This shift aims to ensure long-term sustainability as the rise of solar power threatens traditional consumption charges.

City Power’s changes, however, appear to be more about aligning its internal charging structures between prepaid and postpaid. Believe it or not, prepaid electricity has been undercharged or cheaper for most clients compared to postpaid services. This new connection fee is part of an effort to bridge that gap between prepaid and postpaid electricity charges.

Prepaid vs. Postpaid: Which is Cheaper?

As of July 1, 2024, postpaid clients on a single phase (60A) supply will pay a connection fee of R1070 per month, while those on a three phase supplies will pay R1365 per month connection fees, regardless of electricity usage. These hefty fixed fees offer slightly cheaper electricity rates compared to prepaid, but you need to consume quite a lot of electricity before postpaid becomes more affordable.

City Power 2024/2025 60A Single Phase Supply Charges

To illustrate the cost differences, the graph below shows the total charge for Prepaid and Postpaid based on different levels of electricity consumption:

As the table shows, prepaid electricity is more cost-effective for homes using up to 1848 kWh per month or spending R6284. For a typical three-bedroom, two-bathroom home consuming around 1000 units per month, prepaid electricity is R467 per month cheaper.

For homes with three-phase residential connections, the break-even point is even higher, at around 2737 kWh per month or R9443.

Therefore, for smaller homes and larger homes equipped with solar power, prepaid electricity remains the more economical choice.

What to Expect over the next few years

Fixed and demand-based charges will continue to increase over and above the average rate of electricity price hikes. These changes will swing the balance of charges away from variable consumption charges to fixed fees.

In addition to fixed and demand-based charges, time-of-use charges will also be pushed down to consumers. This will enable municipalities to charge differently for electricity at different times of the day. Electricity costs will be higher during peak hours (outside of solar production hours). This pricing strategy aims to encourage consumers to shift their usage to off-peak times, promoting better load management and integration of renewable energy sources.

Prepaid or Postpaid?

For City Power clients, while prepaid electricity has a lower connection fee, it will remain the cheaper option for most homes. 

Finding the most affordable electricity structure can be a complex task. Each municipality in South Africa offers different pricing options. The most affordable structure will depend on your home’s energy usage patterns, solar generation, and the ability to shift loads.

Let Metrowatt help you find the best holistic solution to save you thousands in the long run.