Forex levy to raise power bills by Sh300m on weak shilling

The volatile shilling will see electricity consumers pay Sh300 million through their power bills as forex levy over the next month, reflecting the impact of the strengthening dollar on household budgets.

The Energy Regulatory Commission increased the forex adjustment levy to Sh0.40 per unit of electricity consumed in May from Sh0.15 in April, marking the biggest jump since August 2013.

Kenya’s monthly power consumption has averaged 750 million units in recent months, meaning consumers will pay a forex levy of about Sh300 million, up Sh112.5 million in April.

The shilling is trading at levels last seen three years ago against the dollar, raising living costs in a country that largely depends on imports for its consumer and capital goods. It was trading at Sh97.10/20 to the dollar last Friday.

The shilling has been under pressure in recent weeks due to falling revenues from tourism and horticulture – the key foreign exchange earners – amid concerns over a rising import bill.

The forex levy comprises expenses incurred in foreign currency by power generators such as KenGen, the independent power producers as well as Kenya Power. This makes the power sector attractive to foreign investors looking to be cushioned from currency risks.

Variable items

The foreign exchanges adjustment is now the key mover of electricity prices among the variable items on the power bills given the fuel surcharge has remained unchanged at Sh2.51 per unit for the third month in a row.

The effects of the weaker shilling have also been felt at the pump after the ERC this month raised petroleum prices to the highest level since the year started.