The energy sector regulator’s decision to drop the planned abolition of electricity subsidies for low-income households may be a big win on the political and social front, but the battle to bring down the cost of power is far from being won.
The Energy Regulatory Commission (ERC) had in January said it would from next month create a new tariff to have uniform charges for domestic customers, eliminating a subsidy that has for long helped to keep power bills for small consumers low.
Reversal of the decision means bottom of the pyramid power users will continue paying lower tariffs. This should not mask the painful reality that the cost of electricity has generally been rising in the past 12 months, blunting Kenya’s competitive advantage.
The Kenya National Bureau of Statistics (KNBS) data shows that electricity bills for homes that consume 200 kilowatt hours (kWh) per month hit Sh4,067 last month, up from Sh3,575 in February last year -- having crossed the Sh4,000-mark for the first time in December.
Even more damning is the fact that low-income earners – the lot that consumes 50 units of electricity - had their bills grow by 22 per cent to Sh682 last month, up from Sh669 in December and Sh559 in January last year.
A recent World Bank report indicates that the price of electricity is a leading factor in making Africa uncompetitive, relative to other emerging economies like India and China.
At this rate, it will be impossible for Kenya to battle for foreign investors against countries like Egypt at a time when Kenya has tapped manufacturing as the engine for economic success and reverse growing youth unemployment whose rate is highest in East Africa.
The electricity problem is the product the ballooning bill is driven by high fuel levy, which last month rose to a 40-month high of Sh4.51 per unit.
This is blamed on the increased use of diesel generators as the government struggles to inject additional cheaper geothermal power to the grid.
Kenya has proven potential of 7,000 megawatts of geothermal energy from geologically active Great Rift Valley. That’s key to luring foreign investors.
Energy sector honchos must ensure that a country with such a profile should not jam its grid with diesel-generated energy.