Electricity consumers will start paying a new levy for street lighting within the next six months through their monthly bills if a new parliamentary report is adopted, putting an additional cost burden on homes and businesses.
The National Assembly Committee on Energy has directed the Energy and Petroleum Regulatory Authority (Epra) to introduce the Street Lighting Infrastructural Support Levy (SLISL) on the monthly electricity bills.
The millions of shillings that will be raised from the levy will help fund the installation of street lights across the country to boost security and drive a 24-hour economy without burdening the utility firm Kenya Power.
The levy looks set to trigger an increase in the cost of electricity in an economy where consumers often complain of steep power bills, which are partially due to idle capacity charges that compensate power generators for electricity that is generated but never used.
If adopted, however, the levy will ease the financial burden of the street lighting project on Kenya Power at a time when the utility is struggling to collect cash from the counties.
“Within six months of adoption of this report, Epra institutes a review of the pass-through-costs to introduce a Street Lighting Infrastructural Support Levy (SLISL) as a minimal pass-through cost in electricity bills across all consumer categories,” the committee says.
“It (SLISL) would be specifically allocated to fund the street lighting projects to guarantee the sustainability of the vital programme and reduce the financial burden on Kenya Power.”
Kenya Power says that it has stopped seeking payments from the county governments and has since been directed to only tap money budgeted in the National Street lighting programme in a bid to avoid incurring further costs.
“The company is seeking assistance from the national government in having the county governments pay these amounts,” Kenya Power disclosed in its latest annual report.
The firm is grappling with increased costs from the project, with unpaid bills for street lighting rising to Sh808.6 million in the year ended June from Sh641.8 million a year earlier.
Street lighting accounted for 102 Gigawatt hours or a paltry one percent of the 9,855 GWh that Kenya Power sold in the year that ended June.
Kenya Power started the street lighting project in 2014 in a bid to provide adequate public lighting to industrial and residential areas, commercial centres, roads, railway and public transport and drive the 24-hour economy.
The cost of electricity under the street lighting band is discounted and is the lowest amongst all consumption categories, barring the tariff for special economic zones and the Time of Use tariff.
A unit of electricity under street lighting costs Sh9.23 and this will fall to Sh9.15 in the year starting July 2025, compared to Sh12.23 per unit for subsidised consumers, who use less than 30 kilowatt-hours (kWh) a month.
The discount is meant to spur installation of street lights across the counties, notably outside Nairobi.
The street lights levy will add to the slew of surcharges in power bills.
Currently consumers pay seven categories of taxes and levies on their monthly bills, with the biggest being the fuel cost charge (FCC).
Others are the 16 percent value-added tax (VAT), forex adjustment levy, rural electrification levy, inflation charge, Water Resources Authority levy and energy sector levy.
This together with the payment of idle capacity charges in power purchase agreements between Kenya Power and generators have made electricity costly in the country and uncompetitive against countries like Egypt.
Under a typical power purchase agreement, a producer gets paid for any electricity generated, even if it is impossible for Kenya Power to sell it to consumers because of reasons including excess production.
The MPs did not, however, disclose the rate of the proposed charge as the government seeks to raid consumers and raise funds to finance the project that was started a decade ago.
The new levy will, however, lead to a rise in the cost of electricity given that it will be an additional pass-through cost loaded on to consumers in their monthly bills.
An increase in the cost of electricity could potentially trigger a rise in inflation given that producers of goods and service providers factor in electricity costs when pricing their products and services.
The new levy looks set to reverse the gains made over the past year when electricity prices have dropped, with domestic consumers getting 39.2 units for Sh1,000 spent compared to 35.9 units a year ago.
Prepaid consumers who use up to 30 units a month (lifeline) are getting 49.3 units of electricity for every Sh1,000 spent, a significant rise from the 44.3 units they got for a similar amount a year ago.
Power bills have in the past year dropped mainly due to reduced use of the expensive and dirty thermal power plants to meet peak demand and also a strengthening shilling against major global currencies like the dollar.
Introduction of the new levy will mirror the current trend where the government is using consumers of a product to raise cash for a project. For example, consumers pay the road maintenance levy at a rate of Sh25 per litre of petrol and diesel to raise billions for upgrading of roads.
There is also the petroleum development levy (PDL) charged on every litre of fuel and which is used to, among others, stabilise pump prices and upgrade infrastructure in the petroleum sector.
PDL is charged at the rate of Sh5.40 per litre of diesel and petrol and Sh0.40 per litre of kerosene that consumers buy.
