Uhuru’s cheap power pledge unfulfilled on high tariffs

High tariffs offered to Kenya Power have dented President Uhuru Kenyatta’s pledge to cut electricity prices during his tenure despite injecting cheaper geothermal to the national grid.

Data from the Kenya National Bureau of Statistics indicate that middle class homes are paying more for power under the Kenyatta administration compared to the previous Kibaki regime — which had been blamed for making Kenya uncompetitive through costly electricity.

Households consuming 200 kilowatt hour (kWh) paid Sh3,497 last month compared to Sh3,094 in December 2012, five months before Mr Kenyatta assumed power.

The higher electricity prices have also been linked to revision of value added tax (VAT) on electricity from 12 per cent to 16 per cent in September 2013.

“The cut in fuel cost adjustments on bills due to geothermal power were offset by review of tariffs due to Kenya Power and the new VAT charges. The new geothermal only stopped the escalation in billings,” said a source at the Energy Regulatory Commission who spoke on condition of anonymity.

Kenya injected 280 megawatts of cheaper geothermal energy to the grid, leading to reduced use of expensive diesel generators and ultimately lower fuel cost charge.

An extra fuel charge is added to normal power rates depending on the amount of diesel generation used and global fuel costs. The fuel levy now stands at Sh2.85 per kWh from Sh5.35 in December 2012, a drop of Sh2.50.

But this gain was offset by the new Kenya Power tariffs brought into force in January 2014 and the second phase in July the same year that saw an increase in the fixed charge — payable regardless of consumption levels — and the energy charge, which account for more half of the monthly power costs.

READ: Kenyatta orders audit of thermal plants amid high cost of power

The fixed charge for domestic consumers rose to Sh150 per month from the Sh120 while the energy charge per kWh for those consuming above 50 units increased to Sh13.68 from Sh8.10, a Sh5.58 rise.

The Sh5.58 increase is higher than the Sh2.50 gain. The inclusion of the impact of fixed charge and the four percentage increase on VAT further diminishes the impact of the additional geothermal power.

This is damning to Mr Kenyatta’s administration that has been calling on businesses to transfer the benefits of the “rock-bottom” electricity prices to consumers in the form of lower product costs.

Businesses have in recent years complained that expensive power makes Kenya’s products uncompetitive.

Before the injection of geothermal power, the fuel charge had peaked at Sh7.22 in August 2014.

The share of geothermal electricity fed to the national grid stood at 43.7 per cent in November 2016, up from 33 per cent in July 2014 while thermal’s has dropped to 18.3 per cent from 33 per cent over the period.

Hydropower generation now accounts for 37 per cent of the energy mix from 32.7 per cent in July 2014.

Hydropower is the cheapest at Sh3 per unit, but is prone to weather conditions, followed by geothermal at Sh7 and thermal at Sh20.