Kenya seeks to add inflation and forex rates on water bills

The Kenya government is seeking to increase the cost of water by revising the structure of monthly bills to include inflation and foreign exchange adjustments to boost the financial health of water service providers.

The state is looking for consultants to help it develop the new billing system that will include the monthly variation in inflation, exchange rate and the cost of energy (electricity and fuel) placing the water companies at the same level as Kenya Power.

The intention is to allow the water companies to adjust their monthly prices relative to the exchange rate and energy cost with seeking the approval from the regulator—Water Services Regulatory Board (WRSB).

As a result, consumers will receive water bills akin to those of electricity statements in which the fuel and foreign exchange adjustments vary every month.

“The indexation should be based on a composite formula against exogenous shocks, which include domestic inflation, exchange rate, foreign inflation and energy tariff,” says the Water ministry in the tender notice.

“This will be with a view to improve the cost recovery performance of water service providers and promote sustainable use of water.”

The chief executive of WRSB, Mr Robert Gakubia, said the revised water bill would lead to a rise in the cost of the commodity.
“It means that water will become more expensive and it will also offer the loss making water companies a soft landing,” added Mr Gakubia.

The highly priced water will be a double blow to consumers who will bear the full cost of the increments on the domestic front as well as feel the weight of the resulting upward adjustment of prices of goods as industrialists pass on costs to consumers.

The government says the increment is necessary to enable the suppliers pay for the surge in the cost of treating water and to allow the companies to build financial muscle to upgrade their ageing supply networks.

On average, light water consumers using tapped water drawn from rainwater are charged a subsidised rate of Sh20 acubic metre or 1000 litres while heavy consumers pay up to Sh55.

Community-based water projects that are in peri-urban areas with the backing of some local banks are charging as much Sh60 per cubic metre.

Besides the consumption charge, the consumers also pay monthly fixed charges for the meter and sewerage network that ranges between Sh50 and Sh800 and Sh89.50 and Sh1045 respectively depending on the level of their consumption.

The warning shot from the Government ushers in a period of high utility bills that began mid last year with high petroleum prices and the soft Kenya shilling against major currencies.

Though power bills have dropped 20 per cent this month relative to December, it remains 22 per cent higher compared to last January due to an increase in fuel cost adjustments that come with increased reliance on fuel driven generators

The combined impact of high water and power tariffs is expected to pile inflationary pressure in an economy where the surge in prices stands at levels last seen in the early 1990s. Inflation is currently running at 18.93 per cent.