Homes pay Kenya Power extra Sh15bn for fuel surcharge

Kenya Power workers carry out repair works along Haile Selassie Road, Mombasa. FILE PHOTO | KEVIN ODIT | NMG

Households paid an extra Sh15.3 billion to Kenya Power following increased use of electricity generated from costly fuel generators, reflecting the inflationary pressure across Kenya’s economy.

The listed utility said that fuel adjustment surcharges to consumers in the year to June increased to Sh26.49 billion from Sh11.18 billion.

The jump is linked to increased generation of electricity using diesel due to a fall in hydroelectric power, shining a spotlight on power purchase agreements signed with private investors.

Energy consumers in Kenya often complain of high electricity charges, with some of the costs being attributed to idle capacity charges to compensate power generators for electricity generated but ultimately not used.

The utility’s net profits doubled to Sh3.5 billion and it did not declare dividends—the fifth year it has frozen shareholder payouts.

“This increase in dispatch from thermal plants was due to inadequate electricity generation from hydro sources owing to failed rains, unavailability of key geothermal plants, the interruption of the Loyangalani-Suswa transmission power line, and an increase in fuel prices globally during the year,” said Kenya Power in reference to the surge in the fuel surcharge.

Drought, which has left millions of people in need of food aid, has driven down water levels in hydroelectric power dams, increasing reliance on the costly generators.

The uptake of electricity from thermal energy plants jumped from 876 gigawatt hours (GWh) to 1,539 GWh in the year under review.

This increased the fuel surcharge to Sh7.09 per kilowatt hour in the October bills, an increase from Sh4.63 in January, while the forex charge has gone up from Sh0.73 per unit to Sh1.48.

The increase in the cost of electricity unleashed pricing pressure across the economy as producers of services and goods factor in the higher prices.

The government has unsuccessfully pushed for review of the power purchase agreements to ease the burden on consumers. Under the typical power purchase agreement, a power producer gets paid for any electricity produced, even if it is impossible for Kenya Power to sell it to consumers due to excess capacity and other reasons.The price of crude oil in the global market has risen significantly this year on supply shortage concerns due to the Russia-Ukraine conflict. Russia is the world’s third largest oil producer.

The shilling has depreciated by 6.7 percent against the dollar this year, exchanging at 121.30 units.

Kenya Power’s revenue rose by 9.1 percent or Sh13.2 billion to Sh157.4 billion, while the cost of sales rose by 22 percent or Sh21 billion to Sh115.2 billion.

“Finance costs increased from Sh9.05 billion to Sh12.69 billion, attributable to the depreciation of the Kenya shilling against major world currencies,” said Kenya Power.

The lower gross margins, however, did not translate into the bottom line after the company incurred lower tax charges, which helped it raise its net profit from Sh1.49 billion to Sh3.5 billion.

Kenya Power’s tax bill for the year to June stood at Sh1.62 billion, down from Sh6.7 billion in the year to June 2021. The company did not indicate the reason for the lower tax bill.

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