Sigh of relief as KPLC adjusts prices

Electricity bills are expected to drop significantly from next month as Kenya Power and Lighting Company adjusts the fuel cost element in the tariff to Sh3.18, the lowest since May 2008.

While attributing the drop to increased use of cheaper hydro power to meet the country’s power needs, KPLC Managing Director Joseph Njoroge said electricity prices will fall further in September as the country switches off a significant portion of expensive emergency power.

Poor weather that depleted water in the dams prompted the government to turn to the more expensive fuel driven generators to meet the country’s electricity needs, a move that pushed power bills up 60 per cent in the year to January.

“The prices will drop further once we stop 100 megawatts of expensive emergency power on July 20th (Tuesday),” added Mr Njoroge.

The Energy Regulatory Commission (ERC) reckons that the move will push the fuel segment of the electricity bill to below the three shilling mark.

This will see the cost of electricity join the falling food prices in highlighting Kenya as a low inflation country—enhancing its investment credentials in the region as investors view the nation as a low-cost production location.

Inflation stood at 3.2 per cent in June compared to 3.9 per cent a month earlier.

Policy makers say that Kenya’s inflation gives it’s a competitive edge over Uganda and Tanzania whose cost of living index stood at 4.4 per cent and 7.2 per cent respectively in June.

At Sh3.18, it means that homes, industrial and commercial enterprises that consumed 566 million units last month will make a saving of Sh181 million.

This is a relief to the 1.2 million consumers as most have suffered a significant blow to their purchasing power on stagnant incomes and expensive basic household items.

The reduced cost of electricity offers reprieve to industrialists who have been complaining about expensive electricity, blaming it for hurting their competitive edge in a regional market where low priced goods have emerged as the key driver of market share growth.

The World Bank says that the power crisis including supply and costs is shaving 1.5 per cent off the country’s GDP in lost business opportunities, besides weakening the country’s competitiveness in attracting fresh investments.

On April 20 the government issued a three month notice to British power firm Aggreko to reduce its supply of emergency power to the national grid by 100 megawatts.

This will reduce the amount of power produced by Aggreko to 40 megawatts, down from 290 megawatts in December, a drop that has seen the fuel charge drop from a record high of Sh7.90 in November.

In mid August, KenGen, on behalf of the Government, contracted Aggreko to provide an additional 140 megawatts of emergency power to cushion the country against the effects of the power shortfall — that had forced a rollout of a two-month power rationing in August.

Though the Meteorological department is forecasting a period of light rains to August, KenGen, the bulk power generator, indicated that its hydro power generation dams are full and that the light rains would not hurt their capacities.

This suggests reduced reliance on thermal power in meeting the country’s power needs, hence cheaper electricity.

Last month, KPLC bought 556 million kilowatts hour (Kwh) of electricity with thermal contributing 163 million Kwh, according to the Kenya Gazette notice.

This means that thermal accounted for 28 per cent of total amount of electricity that KPLC bought from KenGen and Independent Power Producers (IPPs), down from 66.4 per cent in November.

The falling cost of power is emerging at a time when the country is facing risks of power shortfall to feed its growing economy.

At present the reserve margin -- the gap between peak demand and what is available -- has shrunk to below 10 per cent compared to the optimum limit of 15 per cent.

Policy makers have identified supply and cost of power as one of the biggest challenges the government will face in coming years.

The government has allocated Sh34.1 billion this year to help in the construction of new power plants and reinforcement of the country’s transmission system, which leaks a significant amount of power.

The Energy Regulatory Commission (ERC) is also working on a new electricity calculation formula, especially the fuel cost charge, to reduce volatility in the cost of power.