Primary or Secondary PrePaid Meters For Real Estate Investors

When considering buying a prepaid meter as a home owner or a landlord there are several options that one should be aware of. In the electricity prepaid metering industry there are two options and many types of meters.

The two options are: municipal prepaid meter and landlord owned meter.
Many landlords and home owners are not aware of the difference between a municipal prepaid meter (primary meter) and a landlord owned meter (secondary meter).

Both landlords and home owners come across two main barriers to entry when inquiring about installing prepaid meters: First is the price, second barrier is the simple fact that municipality simply does not supply prepaid meters in some areas or that the waiting list to get a prepaid meter installed is 6 months to 2 years with some municipalities. That said, they are not aware of the fact that they are only inquiring for the first option, the municipal prepaid electricity meter.

While landlords with rental property have the option to install sub-meters, also called secondary meters that are owned and managed by the landlord, the home owner wanting a prepaid meter for their primary dwelling unfortunately does not have this option and must turn to the municipality.

To better under this we will look now at the difference between the municipal prepaid meter also called "primary" and the sub-meters which are landlord owned and managed meters.

1. The municipal meter is owned by the municipality and the applicant will only get one at the price of the municipality, waiting list they have and provision of the area if such exists.

2. The secondary meter can be purchased by any landlord, it can be received and installed in a matter of days, the landlord manages the meter and the kwh rate is the same as the municipal tariff for the area.

The first option means that they are at the mercy of the rules and pricing of the municipalities. If the municipality does not provide prepaid meters for their area or the price is prohibitive then really this options is not viable.

Furthermore, with a municipal meter the landlord has absolutely no control of the meter. In other words, the tenant can purchase electricity from any Point of Sale the municipality prescribes and in the same time carry on living without paying the rent to the landlord or avoiding the landlord in that regard.

The second option that landlords have is to purchase a landlord owned meter. Owning a sub-meter does not require municipal approval of any sort. With sub-meters the landlord can buy a meter, often at a third of a municipal meter price and the availability is almost immediate, no long waiting lists for installation.

Sub-meters are also used in multiple dwelling ERFs. Municipality will not provide in almost all cases more than one meter per ERF, which means that if the landlord is letting out a house with one granny flat/cottage or more, the only option is a sub-meter for each tenant. This is being done also in shopping centers and industrial properties, where here are many tenants on one ERF.

Should the landlord opt for a sub-meter, this will mean that the primary meter owned by the municipality will not be removed and the landlord will continue to received the municipal bills. However, the landlord will receive all moneys for prepaid electricity from the tenants. From the amounts collected during the month, the landlord can now pay the bill that will arrive at the end of the month from municipally.

When understanding this setup it becomes evident why the home owner doesn’t really have the sub-meter option. A landlord is avoiding arrears from late or non-payment by a tenant and ensuring the tenant can monitor their own use of electricity. However, as a home owner, one would still receive the municipal bill, which in effect can make a sub-meter of no effect as home owners want to alleviate themselves from municipal bills.

With sub-meters though the landlord is not allowed to re-sell electricity (in South Africa) at a tariff greater than that which the municipality stipulates, the landlord is entitled to install a secondary meter and issue electricity tokens for electricity sold at the municipal rate and, at the same time, the landlord is allowed to charge a service fee for doing this.

Because sub-meters are managed and controlled by the landlord, this also means that the tenant has to approach the landlord to receive electricity tokens, which in turn means that if tenants does not pay for their rental, they will have to face the landlord sooner or later to get electricity tokens.

As opposed to primary prepaid meters, landlord owned and controlled meters now add the additional value of not having to chase the tenant who is avoiding calls from their landlord for late or non-payment of rental, sooner or later will have to approach the landlord for additional electricity tokens.

In summary, though primary meters seem to be the only solution known by landlords, savvy property investors and property owners that need to manage tenants are finding out that sub-meters are often a cheaper, faster to get and install solution that affords them a level of control that is non-existent with primary prepaid metering provided by the municipality.

As for home owners, unfortunately if the wish to stop getting bills from municipalities then, this means that they will have to go the municipal route and go through their local municipality process to purchase a municipal prepaid meter at the municipal cost and installation time.