The cost of electricity will increase by 15% in April. That is triple the rate of inflation which means a bigger portion of our budget will go to paying for electricity.

It is worth taking the time to understand how your electricity is charged for and to find ways to cut the costs.

How much you pay compared to another household can vary significantly depending on who you buy your electricity through and whether you buy prepaid or are on a billing system.

If you get your power directly from Eskom, which is the case in many rural areas and in Soweto as an example, you will be charged according to a different system than if you receive your electricity from a municipality.

Municipalities add surcharges allowing them to effectively collect a tax.

Some municipalities like Ekurhuleni have different tariff plans depending on how much a household uses.

Cape Town and Johannesburg charge a higher monthly service and capacity fee than Ekurhuleni, but their rate per unit is lower.

It is important to check your own municipality tariff plan and understand how your electricity usage impacts your bill.

Most municipalities use the “incline block tariff” or IBT system. This means that the more electricity you use or buy in a month, the more you pay per unit.

Different municipalities use the IBT system differently.

Ekurhuleni uses the IBT system for what they deem to be “low-usage” households and then charge a higher flat fee for higher users.

If you are on the wrong plan, it could end up costing you a lot of money.

For example, medium to high users, who consume above 600 units a month are better off on the residential and bulk residential flat fee.

In most cases buying your electricity prepaid works out cheaper than being on a billing system.

While some municipalities charge a higher price per unit for prepaid, billing customers pay a service and capacity charge.

These additional fees add several hundred rands to the bill and could result in a billing customer paying double the amount for electricity than a prepaid customer.

Take the time to understand your electricity costs and tariff plan to make sure you are being as cost effective as possible.