Higher electricity bills loom in new tariff review plan
Energy Regulatory Commission boss Kaburu Mwirichia. FILE
What you need to know:
Kenya Power last reviewed power tariffs in July 2008 and had applied to the Energy Regulatory Commission (ERC) for approval to raise the rates by 25 per cent in June 2011.
The government, however, suspended the tariff review to protect consumers who were grappling with double-digit inflation.
Kenya Power is allowed to raise its tariffs every three years to offset increases in operational and capital costs.
Electricity bills are set to rise later this year following confirmation by the energy sector regulator that it will allow Kenya Power to increase monthly tariffs charged on consumers.
The electricity distributor last reviewed power tariffs in July 2008 and had applied to the Energy Regulatory Commission (ERC) for approval to raise the rates by 25 per cent in June 2011.
The government, however, suspended the tariff review to protect consumers who were grappling with double-digit inflation.
“We are talking with Kenya Power with regard to the tariff review which will come this year,” said ERC director general Kaburu Mwirichia.
Kenya Power is allowed to raise its tariffs every three years to offset increases in operational and capital costs.
“The market has changed and they will amend the tariff structure used when they first applied for a review (in 2011),” he said.
Under Kenya Power’s initial application, households consuming between 51 units and 1,500 units were to pay Sh11.79 per kilowatt hour (Kwh) from the current Sh8.10 per Kwh.
Those consuming above 1,500 units were to pay Sh22 per unit from the current Sh18.75. Retail electricity tariffs are also adjusted periodically to cushion power generators and the transmitter against fluctuations in fuel costs, foreign exchange and inflation, which are passed on to the end-user and have a neutral impact on Kenya Power’s revenue.
The power distributor had also sought to increase bills for industrial consumers by between eight and 12 per cent, in what raised fears of eroding Kenya’s attractiveness as a manufacturing base.
While higher tariffs will hit consumers hard, it is expected to lift the fortunes of Kenya Power, which says rising operating costs is hurting its margins.
Managing director Joseph Njoroge said that new tariffs would help the utility firm raise funds for investment in electricity distribution network.
Higher revenue is also aimed at winning the confidence of financiers like European Investment Bank and the World Bank on whom the company relies on to fund its large capital expenditure.
The company’s sales stood at Sh45 billion in the year ended June 2012 compared to Sh42.4 billion the year before, representing a six per cent growth rate.
Its net profit grew 9.4 per cent to Sh4.6 billion from Sh4.2 billion in the same period, weighed down by faster growth in expenses.
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