Economy

Water set to cost less with cut in power charges

TAP

This is set be a major relief for consumers who are grappling with high water charges due to recent rate hikes. FILE PHOTO | NMG

Water costs are expected to drop with the energy regulator’s plan to cut electricity charges for pumping at night.

The Energy Regulatory Commission (ERC) is moving towards offering discounted tariffs as an incentive for bulk water providers to switch water pumping to late night when demand for power is low.

The ERC has also set a condition that the companies cut water prices for them to enjoy the lower power rates.

This is set be a major relief for consumers who are grappling with high water charges due to recent rate hikes, especially in major towns, driven by rising operation costs.

“We plan to offer water service companies special tariffs for them to shift to night pumping and storage that should result in lower consumer prices,” said Joseph Oketch, director of electricity at the ERC.

Kenya has about 86 water supply companies.

The energy regulator in 2015 also cut tariffs for street lighting by 60 per cent to Sh4.36 per kilowatt hour (kWh), down from Sh11 between 6pm and 6am paid for by county governments.

The discounted tariffs were meant to boost 24-hour economies in counties and reduce insecurity.

Energy officials reckon that the country consumes less than half the peak power demand between midnight and 5am.

Peak hours begin at 9am, with demand at its highest between 6pm and 9pm when people return home from work and switch on house lights, cooking appliances and TVs.

Kenya’s current peak demands stands at 1,649 megawatts.

The plan to cut tariffs for water pumping and ultimately retail prices will help remove some sting from the impending rise due to introduction of value added tax (VAT) on sewerage services.

The Kenya Revenue Authority (KRA) in March won a long-running war with the water services regulator to charge VAT on sewerage services, setting up consumers for an increase in in monthly water bills.

This means water will start attracting 16 per cent VAT charge after Attorney-General Githu Muigai gave a legal opinion supporting the taxman’s position that sewerage services are not exempted from tax.

As much as 75 per cent of water bills is made up of sewerage costs, meaning that a new 16 per cent increase adds a heavy burden on consumers.

For instance, a consumer with a water bill of Sh1,000 — and therefore a sewerage fee of Sh750 — will have to remit Sh120 more to the taxman as VAT.