Stronger shilling eases forex charge on power bill

Kenya Power has announced a fourth consecutive drop in foreign exchange adjustment charges owing to the strengthening of the Kenya shilling against major foreign currencies.
Forex charges are expected to ease marginally from Sh1.38 per to Sh1.31 per kilowatt hour effective March this year.

However, the fuel cost charge is expected to go up for the first time since November last year owing to increased thermal power generation, which relies on diesel. The fuel cost charge is set to increase by 16 cents to Sh5.64 per kilowatt hour.

This means that electricity consumers will pay at least 9 cents more per kilowatt hour they use after effecting forex and fuel cost adjustments.

“The primary contributor to end-user electricity tariff increase is the fuel cost adjustment,” said Eng Joseph Njoroge, the chief executive officer of Kenya Power.

Addressing members of the Consumer Federation of Kenya at a consumers’ gala held at Panafric hotel last Friday, Eng Njoroge said the country needs to cut its reliance on hydropower which is susceptible to weather changes.

Foreign exchange fluctuation adjustment charges are passed on to consumers to meet payments to suppliers for purchase of materials, loan repayments and other activities requiring payment in foreign currencies.

Fuel cost recoveries are recognised as the actual amounts passed to the customers to recover the fuel expenses incurred in thermal generation.

The Kenya shilling touched a low of 107 against the US dollar in October last year, precipitating an increase in electricity costs due to the rise in the cost of importing fuel to cover for thermal power generation.

Consequently, fuel cost charges and forex charges hit a high of Sh9.03 and Sh2.74 per kilowatt hour respectively in November last year.

The onset of the short rains in December marked a reprieve for power users as it led to the refilling of power dams along the Tana cascade, increasing the proportion of cheap hydropower in the electricity retailer’s basket. Hydropower is considered seasonal, due to its fluctuation depending on season and weather conditions.

Data from the listed power distributor shows that hydro accounted for about 47 per cent of the energy Kenya Power retailed last year, followed by thermal at 31 per cent while geothermal contributed about 20 per cent.

The upward review of fuel cost charges comes against the Sh3.37 drop per litre of diesel announced by latest the Energy Regulatory Commission last week.

The resultant increase in electricity costs is likely to negatively impact on inflation which slowed to 18.31 per cent in January from 18.93 in December last year.

The Kenya shilling opened on Tuesday at 82.90 against the US dollar, and has been firming gradually against the greenback from 85.09 at the beginning of this year.

Kenya Power says electricity costs are likely to come down in the next two years when current undertakings to increase generation of geothermal and wind power come to fruition.