Electricity prices surge to 6-year high on forex levy

Electricity prices have hit a six-year high, piling pressure on households already grappling with rising food costs.

Power bills for homes that consume 200 kilowatt hours (kWh), mostly middle class, rose from Sh3,642 in July to Sh3,944 last month – the highest cost since the government started making public the data in 2012.

Users of 50 units of electricity paid Sh651 in August, up from Sh576 a month earlier, data from the Kenya National Bureau of Statistics (KNBS) shows.

READ: Consumers to pay Sh1bn in forex related power bills

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The higher costs came after the forex charge in power bills hit a six-year high last month to compensate Kenya Power and electricity producers for foreign currency costs as the shilling fluctuated against the US dollar.

The Energy Regulatory Commission (ERC) more than doubled the forex levy to Sh2.35 per unit of electricity consumed in August, pushing up power bills.

The ERC adjusts the levy every month to reflect the prevailing forex rate. Increase in electricity costs helped to drive up inflation from 7.47 per cent in July to 8.04 per cent last month, shooting above the Central Bank of Kenya’s preferred ceiling of 7.5 per cent.

Inflation

Electricity prices have a direct bearing on inflation, being one of the items in the basket of goods and services whose pricing is tracked to measure the cost of living.

READ: Rising food costs push August inflation to 8.04 pc

Consumer bills also come loaded with a fuel levy, which is linked to the amount of power generated by diesel generators and injected into the national grid.

The levy has remained at higher levels of Sh2.85 per unit since February due to a sustained use of expensive diesel generated electricity to compensate for a steep dip in hydropower production as the effects of drought bite.