Short rains hand power users Sh2bn bill relief

Electricity consumers countrywide will save Sh2.1 billion in February power bills after heavy rains and a strengthening shilling reduced the pass-through costs charged for fuel cost and forex adjustment.

READ: Consumer fears mount over rising cost of living

Fuel cost charges for electricity consumed this month will drop to Sh5.44 per kilowatt hour (kwh) from Sh8.02 in December while forex charges will drop to Sh1.4 per kwh from Sh2.12, according to information on pre-paid power tokens purchased this week.

The new rates are due to be published in the Kenya Gazette on Friday.

A reduction in the cost of power will lower inflation and reduce the cost of producing goods, according to Joseph Kieyah, an analyst at the Kenya Institute for Public Policy Research and Analysis (Kippra).

The drop in forex and fuel cost charges on some 650 million kwh will reduce the power bills of 1.8 million consumers and save them in excess of Sh1 billion that would have been paid to government as value added tax (VAT).

A household consuming 120 units of power per month, for instance, will see its bill drop by a fifth from Sh2,373 in December to Sh1,910 in February.

“The drop in power costs is good news to consumers who will now have greater headroom to save or spend on other items,” said Prof Kieyah.

Inflation has eroded the earnings of workers after climbing steadily from 5.4 per cent in January last year to 19.7 per cent in November before dropping to 18.9 per cent last month.

The drop in power costs — one of the drivers of inflation — is expected to offer reprieve to households whose expenses went up in December due to holiday festivities and in January due to payments of school fees and back-to-school shopping.

Aside from easing pressure on household budgets, a fall in electricity bills will benefit the economy by reducing the operational costs of businesses, especially manufacturers, who may in turn reduce the prices of goods and services.

Manufacturers have been passing on the rising costs of electricity and raw materials to consumers, making Kenyan goods less competitive in the regional markets compared to those from Egypt and South Africa, both of which have cheaper power.

The Kenya Association of Manufacturers estimates that local power charges are two times higher than in Egypt and South Africa, the two countries that are Kenya’s main rivals in the Common Market for Eastern and Southern Africa.

“The drop in power bills is a welcome development for manufacturers,” said Jaswinder Bedi, the chairman of the Kenyan Association of Manufacturers and CEO of Bedi Investmnets, a textile firm. “Demand for manufactured goods has been falling due to high power costs in recent months and we are seeing consumers shift to cheaper imported goods.”

He said Kenya should fast-track the move towards cheaper power generation, arguing that more manufacturers, including multinationals, were outsourcing their production to low-cost countries like Egypt.