Electricity tariffs to remain high despite onset of rains

Electricity distributor the Kenya Power and Lighting Company has increased the fuel cost segment of its billing, signalling that consumers are unlikely to get relief from the heavy cost burden they have been bearing in recent months despite the onset of heavy rains.

The rains were expected to cause an immediate drop in the cost of electricity as the country consumed more of the less expensive hydro power and cut back on the more expensive thermal power.

A steep drop in hydro power’s contribution to the national grid has seen electricity bills surge by a margin of 60 per cent since March on the back of rising fuel costs charges — a varying item on the bills that is linked to the amount of power on the national grid that is generated from thermal sources.

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Power producer KenGen and the Energy Regulatory Commission (ERC) reckon that the hydro power dams will be replenished in December at the earliest should the rains persist at the current rate.

“We have filled a meter within two days and if the rains continue like this, we should get to 30 meters in December,” a senior KenGen executive said.

That outlook means that electricity consumers will continue to bear a heavy cost burden for the remaining part of the year because of the continued reliance on fuel-driven power generators to meet demand.

Though the portion of thermal power on the national grid is expected to decline marginally, rising crude oil prices is expected to erode any potential pricing gains to consumers in the next two months.

Crude prices hit a one-year high of $79 per barrel on Monday having risen from below $70 last month, driven by optimism over the pace of global economic recovery.

Investment analysts, led by Goldman Sachs, are forecasting that crude prices will continue to rally and could hit $90 a barrel before year end—pointing to a possible steep rise in the cost of fueling thermal power generators.

KPLC has informed power consumers, through the latest Kenya Gazette notice, that they will next month pay a fuel cost surcharge of Sh7.75 per unit of power up from Sh7.43 on this month’s power bill.

This component of the bill has risen from Sh4.10 in March, adding pressure to the rate of inflation that has also been subject to a steep rise in food prices and the ongoing recovery of global petroleum prices.

The high cost of electricity will affect more than one million consumers, most of whom have already suffered significant losses of purchasing power because of the escalating food, water and transport prices.

Besides the direct cost of domestic consumption, the rising power prices is jerking up production costs for manufacturers who are passing the additional expenses to their consumers.

The Central Bank of Kenya (CBK) has warned that the cost of living is set to rise further in the remaining part of the year, fuelled by rising water and energy prices.

“Inflation is likely to rise as a result of the rising fuel costs as diesel is used to generate thermal energy,” said CBK in their latest update on the economy.