Electricity prices up for first time in six months

Electricity prices have increased by an average 2.8 percent or 86 cents per unit this month.

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Electricity prices have increased by an average 2.8 percent or 86 cents per unit this month, marking the first increase since January in what is set to raise the cost of living.

In the latest monthly review, the Energy and Petroleum Regulatory Authority (Epra) has raised the Fuel Energy Charge (FEC) to Sh3.59 per unit in June from Sh3.52 in May. FEC is a pass-through cost collected by Kenya Power and remitted to power producers who burn diesel to generate electricity. The increase signals increased uptake of thermal power, which is the most expensive power source, last month.

Epra has also raised the foreign exchange rate fluctuation adjustment (Ferfa) to Sh1.76 per unit from 97 cents in May. Ferfa is a provision for the cost of servicing foreign currency loans used to finance power generation.

The increase indicates higher payments of power purchase costs to power producers during the month. Independent power producers (IPPs) are paid in foreign currency, particularly in US dollars and euros.

The increase means a customer in the Domestic Ordinary 2 category will pay Sh1,028 for electricity this month to get 32.9 units, marking an increase of about Sh28 from Sh1,000 to get the same quantity of power.

This marks the first time that power prices have increased since January.

Prices had declined for five months in a row as consumers enjoyed the twin benefit of increased production of cheaper hydropower due to sufficient rains during the period.

They also enjoyed lower prices due to a strong shilling, which reduced the burden of foreign currency-denominated power purchase costs to IPPs.

Among others, the price increase is set to exert pressure on the cost of living, coming at a time when inflation rose in May for the first time since January, according to the Kenya National Bureau of Statistics (KNBS).

Inflation averaged 5.1 percent in May, marking an increase from five percent in April. It is the first increase since January, when the cost of living measure rose to 6.9 percent, up from 6.6 percent in the previous month.

This was largely driven by food inflation, which increased in May due to higher vegetable price inflation attributed to supply disruptions attributed to the recent heavy rains and flooding in some parts of the country.

Fuel inflation, however, declined during the month, reflecting a downward adjustment in pump prices and lower electricity prices.

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