Kenya Power has published new electricity charges that will see consumers pay the highest tariffs ever beginning next month.
The fuel cost segment of the power tariffs will rise to a record Sh8.2 per unit up from the current Sh6.7 and Sh3.8 in January, according to a legal notice in the Kenya Gazette.
This means that households consuming 100 units of electricity or less will next month pay Sh2,323.2 compared to Sh1,808.4 in January or a 28.4 per cent increase that is expected to add impetus to the inflation rate. (Also read: Automation of power supply system underway, says Njoroge)
Inflation, or the rate at which the cost of goods and services are rising, stood at 16.6 per cent in August, having risen from less than six per cent in January.
Fuel cost is a pass-through charge that electricity producers levy consumers and is mainly driven by the amount of power coming from fossil fuel-dependent thermal power generation.
This and the exchange rate adjustments have become the biggest drivers of the cost of power which in turn determines the cost of manufactured goods and services and ultimately the rate of inflation.
Mr Kaburu Mwirichia, the director-general of the Energy Regulatory Commission, attributed the rise in fuel-cost segment of power tariffs to high petroleum prices and increased reliance on diesel-powered plants to produce electricity.
“We have tried to ease this cost burden on consumers with the continued suspension of the planned increase in the fixed charges that Kenya Power recently applied for,” he said.
The amount of thermal power on the national grid has been growing steadily in the past 12 months to peak at 610.8 million Kwh in July compared to 262.6 million Kwh from the cheaper hydro sources, according the Kenya National Bureau of Statistics.
This reflects a steady decline in output from hydro sources that stood at 325.4 million Kwh in a similar period last year.
Month-on-month inflation rose from less than four per cent in the fourth quarter of last year to peak at 16.6 per cent last month, driven by surging international fuel prices and a severe drought that has caused acute food shortages in parts of the country.
Most households have lost their purchasing power to high inflation, slowing down demand for goods and services, and casting a dark cloud over the economy. Last month, food, alcoholic beverages, housing, energy and transport components of the consumer basked topped the list of inflation drivers that the latest rise in power charges can only escalate.
A recent weakening of the shilling against major world currencies has denied the economy the benefits of the ongoing fall in global crude prices. The Kenyan currency closed last week’s trading at an average of Sh94 against the dollar from Sh81.2 in January.
Poor households, which spend large segments of their income on food and utilities, are set to bear the brunt of the rising electricity costs even as turbulence persists in the currency market.
The rate of inflation for low-income households in Nairobi stood at 16 per cent in July, more than four percentage points higher than the capital’s middle and upper classes and half a percentage point above the national average.
Apart from the adverse impact on household budgets, the high fuel cost component has a negative chain reaction in the economy. It forces manufacturers to charge consumers more for goods and also hurts the competitiveness of Kenya’s exports.
Manufacturers said they will pass any additional electricity costs to consumers to remain profitable, setting the stage for a general rise in the pricing of goods next month.
“A rise in the cost of electricity by the gazette margins will push our costs up by between one per cent and two per cent,” said Mr Rakesh Rao, the chief executive at paint maker Crown Berger.
“We have no choice but to pass on the costs to consumers since the prices of raw materials are also going up,” he said.
Manufacturers have over the years complained of high electricity charges, saying these hurt the competitiveness of Kenyan goods in external and domestic market that has come under increased pressure with the opening up of the economy in tandem with regional and international trade agreements.
The Kenya Association of Manufacturers estimates that local power charges are more than twice as high as in Egypt and South Africa – Kenya’s main rivals in the Common Market for Eastern and Southern Africa.
The high tariffs are expected to hold in the short term as Kenya Power signs up more thermal electricity producers to cope with rising demand.
Kenya’s total electricity consumption rose by 10 per cent to 3,523 Kwh in the first seven months of the year compared to 3,200 Kwh in a similar period last year, according to Kenya National Bureau of Statistics.
Demand is expected to continue rising in the medium term as more households are wired to the national grid and industrialisation picks pace.
Kenya Power says it connects 200,000 new customers per year under the Rural Electrification Programme which seeks to boost the fraction of the population with access to electricity from the current 30 per cent.
As the cost of commodities rise across the board, consumers are realigning their spending to focus on necessities such as food, cutting back their consumption of other non-essentials such as alcohol and entertainment.
The cost of electricity could however come down as the short rains intensify, reducing the country’s reliance on the more expensive thermal power.
Frequent variation in supply and pricing of electricity is expected to continue until longer-term measures to stabilise the sector are in place.
‘These are consequences of decades of under-investment in the energy sector,” said Mr Mugo Kibati, the director-general of Kenya Vision 2030 secretariat.
“Lasting solutions will only come from increased investment in geothermal, wind, and nuclear energy,” he said.
Mr Stephen Mutoro, the secretary-general of the Consumers Federation of Kenya, said his organisation will next week petition the Treasury through ERC to institute measures that can stop the fuel cost component of power tariffs from rising further.
“We shall seek to have the fuel cost charges fixed or maintained at some level.
The rising cost of electricity is taking place at a time when per capita income is low and this is hurting consumers,” Mr Mutoro said. [email protected]
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