Economy

Kenya Power makes first ever tariff cut

chumo

Kenya Power managing director Ben Chumo. The firm is implementing new tariffs that were gazetted in December 2013. PHOTO | FILE

Kenya Power will on Wednesday make it first ever tariff cut in a review that will affect households consuming more than 50 units of electricity monthly.

Homes using between 51-1,500 units of power will pay Sh12.75 per unit from the Sh13.68 they have been paying.

The new tariffs, which were gazetted in December 2013 with a phased application schedule, will see homes consuming above 1,500 units pay Sh20.57 per unit ,from Sh21.57.

“There has never been a tariff cut before,” said Joseph Oketch, Consumer Affairs manager at the Energy Regulatory Commission.

The July 1 review will offer homes respite after the volatile shilling pushed the forex levy in power bills to an 18-month high in June, denying consumers cheaper electricity despite increased generation of low-cost hydropower.

The impending drop in tariffs, though marginal, is expected to save big domestic consumers of electricity millions of shillings – freeing up money for savings or increased spending on consumer goods.

Electricity bills take up a larger portion of rich households’ expenditure compared to the poor households, meaning a cut in tariffs could translate to huge savings for affluent consumers.

Low consumers of electricity (0-50 units per month) will continue paying the Sh2.50 a unit that was introduced in December 2013, up from Sh2.

The July tariff adjustments will be the third and final phase of a billing structure that was set in December 2013. The new tariffs are expected to remain in force for one year when they will be due for a review.

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Electricity consumers also pay a fixed charge of Sh150 regardless of consumption levels. The charge remains unchanged. Kenya Powers’ customer base has widened to 3.3 million.

The cost of energy is also expected to drop for commercial and industrial consumers, possibly pulling down consumer goods prices and sharpening the competitiveness of manufacturers in the regional market.

Small commercial power consumers will from Wednesday pay Sh0.50 less per unit at Sh13.50 while all categories of large commercial users and industrialists will save Sh0.25 per unit.

Electricity remains one of the biggest costs of production for Kenyan goods, a fact that has prompted the government to invest heavily in cheaper renewable power sources such as steam wells, coal and wind farms.

Besides the cash that goes to Kenya Power directly, power bills are loaded with taxes, inflation charge, Water Resource Management Authority (Warma) levy and the variable fuel and forex levy.

The fuel levy dropped to Sh2.31 per kWh last month from Sh2.51 in April and the forex charge rose to Sh0.60 from Sh0.40 on the volatile shilling.

The fuel levy is linked to the amount of power generated from expensive diesel generators and supplied to the national grid.