Electricity prices dip slightly on lower fuel charge, stronger shilling

Electricity prices have fallen marginally on the back of a drop in fuel costs and forex adjustment charges.

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Electricity prices have fallen marginally on the back of a drop in fuel costs and forex adjustment charges, extending relief to households and businesses.

The Energy and Petroleum Regulatory Authority (Epra) set the fuel cost charge (FCC) at Sh3.55, down from Sh3.57 last month, while the forex adjustment has been lowered to Sh0.83 from Sh1.1 last month.

This (drop in FCC and forex charge) has led to the slight fall in electricity prices, with Sh500 now fetching 19.7 units compared to 19.5 units for the same amount last month.

The drop comes at the right time for consumers who are coming off the spending spree of last month’s festive season and the re-opening of schools, which took a heavy toll on their pockets.

“The net effect is that end-user tariffs will decrease by Sh0.27 kilowatt per hour plus 16 percent VAT across all categories,” Epra says in a brief.

This extends from last month when electricity prices had also dropped on account of the fall in the FCC.

Falling fuel prices, reduced dependence on thermal plants, and a strengthening shilling are behind the drop in the two charges, which will extend the relief that consumers enjoyed last month.

Increased generation from the country’s dams, coupled with higher electricity imports from Ethiopia and Uganda, have been key in reducing reliance on thermal plants to shore up supply, especially during peak demand.

Kenya has seen a significant increase in hydropower generation since March, following heavy rains. Hydro is the cheapest source of electricity in the national energy mix, highlighting why increased production from the dams is key to lowering power bills.

FCC and forex are the two biggest pass-through costs that, alongside the gazetted electricity tariffs, determine power bills that consumers pay monthly.

The FCC is collected by Kenya Power to pay power plants that use diesel to generate electricity, while the forex adjustment is a charge that is used to service foreign currency loans used to finance the construction of the plants.

Reduced electricity bills are key to driving power demand and ultimately boosting Kenya Power’s electricity sales.

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