Markets & Finance

Electricity users get reprieve from drop in fuel

elec

A Kenya Power worker inspects a transmission line. Electricity users are set to benefit from the drop in oil prices which has lowered the fuel surcharge imposed on power consumers for the month of October. Photo/File

Electricity users are set to benefit from the drop in oil prices which has lowered the fuel surcharge imposed on power consumers for the month of October.

Kenya Power on Friday gazetted the fuel levy for October, revealing a 25 cents-per-unit reduction to Sh5.18 per unit compared to the charge in September.

This translates to an overall reduction in power costs for users of about Sh180 million, going by the month’s total consumption of 711.6 million units.

The reduction was however tempered by an increase in the foreign exchange fluctuation adjustment charges, which went up from Sh1.39 to Sh1.46 per unit, translating into a Sh50 million increase in electricity costs.

The forex levy had remained stable at Sh1.39 per unit in August and September.

“Notice is given that all prices for electrical energy will be liable to a foreign exchange fluctuation adjustment of 146 cents per kWh...(and) a fuel cost charge of 518 cents per kWh for all meter readings taken in October, 2013,” said Kenya power in the gazette notice.

The cost of power for consumers had risen by almost Sh300 million between August and September on account of a rise in petroleum prices which had brought a fuel adjustment levy increase of 36 cents per unit. Fuel cost is a variable component of electricity charges that is determined by the amount of diesel-generated electricity on the national grid, which mainly rises with the decline in the amount of power coming from hydro sources, especially in the dry season.

Raising hopes

The forex element of electricity bills reflects the strength of the shilling against major world currencies.

The shilling has been strengthening against the dollar in recent weeks, closing Friday at an average of 84.75.

The recent gains are likely to be manifested in the November forex adjustment costs, raising hopes of a further fall in the domestic electricity bills. Kenya Power acting MD Ben Chumo said two weeks ago that a reduction in power bills is only possible if Kenya reduced reliance on expensive thermal power generation.

“This means lower add-through costs to the customer on fuel levy charges in the power bill,” said Mr Chumo.

Power consumers of less than 200 units per month also faced an increase in VAT on their power bills to 16 per cent from the previous 12 per cent starting September, following the enactment of the new VAT Act.

However, there has been a proposal by the Parliamentary Budget Office to have the increase on electricity VAT rescinded, alongside seven other essential items.

According to the PBO, consumers will stand to save a collective Sh1.761 billion per year if the VAT increase is reversed.

Other levies faced by domestic electricity consumers include an ERC levy of three cents per unit, a rural electrification levy of five per cent on the base rate and an inflation adjustment levy that currently stands at 31 cents per unit, and which is reviewed every six months.

Domestic consumers pay a fixed charge of Sh120, and for the first 50 units consumed they pay at a rate of Sh2 per unit. Additional units up to 1,500 units are charged at Sh8.10, with the rate going up further to Sh18.57 for units consumed above 1,500.

[email protected]