Economy

Electricity users save Sh3bn on falling fuel levy

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Electricity users have saved Sh2.9 billion lower fuel surcharge levied on power bills over the past three months following increased injection of cheaper geothermal power. PHOTO | FILE

Electricity users have saved Sh2.9 billion thanks to a lower fuel surcharge levied on power bills over the past three months following increased injection of cheaper geothermal power to the national grid.

Data from the Energy Regulatory Commission shows fuel cost adjustment, which is linked to the amount of power generated from expensive diesel-driven generators, dropped to Sh3.47 per kilowatt hour (kWh) for bills to be settled this month from Sh4.79 in October and Sh7.22 in August.

Going by the monthly consumption of electricity, which was 794 million kWh in October, the net impact of the adjustment will be a saving on power bills of about Sh2.9 billion over the past three months given that consumption has remained little changed over the period.

This is the result of cheaper fuel and injection of additional geothermal power into the national grid, with 140 megawatts having been added to the grid in late July and the second tranche of 70 megawatts added on September 16. At Sh3.47, the fuel surcharge – which is responsible for steep electricity bills – is trading at levels last seen in October 2010.

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This will cut electricity prices by about 10.2 per cent for homes that consume about 50kWh this month to Sh580.78 compared to Sh800.15 in August – representing a 27.4 per cent drop since the injection of the 140MW of geothermal power in late July.

Middle class households that use 200 units of power monthly expect to see their bills drop by 6.8 per cent to Sh3,807.81 compared to Sh4,685 in August – an 18.7 per cent drop.

The foreign exchange fluctuation adjustment cost, however, increased to Sh0.30 per kWh from Sh0.23 in October and Sh0.17 in September. Savings on power bills will ease pressure on inflation, which stood at 6.43 per cent last month, down from 6.6 per cent in September and 8.36 per cent in August.

The falling electricity prices offers reliefs to businesses that say expensive power make Kenya’s industry uncompetitive in a regional trading block where product pricing influences market share growth. “As we go to December, we see fuel levy Sh1.78.

With more geothermal power, we want to completely remove the fuel charge cost from our bills,” said Davis Chirchir, the Energy and Petroleum secretary.

A wobbly shilling and heavy dependence on diesel-powered generators to produce electricity due to low water levels in hydro-electric dams had been blamed for the rise in fuel surcharge and forex adjustment costs.

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