New policy promises even higher power bills

Sudath Perera, the general manager of apparel manufacturer Alltex EPZ says Kenya’s relatively high production costs which are mainly driven by energy costs have made locally manufactured goods less competitive when compared to peer countries such as Bangladesh, Egypt, India, Indonesia, Madagascar and Sri Lanka.

Mr Perera says though pass through costs and thermal generation are common features in these peer countries, the fraction of operating costs passed on to Kenya’s consumers appear to be much higher.

“Unfortunately KenGen and KPLC are both monopolies and that is why it is easy for them to pass on all costs to consumers,” said Mr Perera.

Mr Njoroge however reckons that by locking the exchange at a particular level, KenGen hedges its foreign exchange rate exposure on the overall economic performance.

Some forward currency contracts also require that companies taking them must have a substantial fraction of their income in the hedged currency.

“It would probably have been even much more expensive to take out a hedge with a private company,” says Mr Njoroge.