High electricity bills shock for the big consumers

Industrialists and big domestic consumers are facing higher electricity costs burden this month following the coming into effect of tariff increments announced in December.

The power bills escalation arises from the fact that the drop in fuel and forex adjustment costs in the past month failed to offset the higher tariffs set for core consumption leaving users worse off.

Current power bills show that variable segments of costing such as inflation, fuel and forex adjustments dropped by a total of Sh2.10 per unit of power consumed in December that postpaid consumers must settle this month.

While this was enough to offset the Sh0.50 per kilowatt hour increase in the energy charge for those consuming less than 50 units per month set in December’s review of tariffs it was not adequate to cushion consumers of more than 200 Kwh whose tariffs rose by a minimum of Sh3.52 per unit.

Energy Regulatory Commission, the regulator, increased the power tariffs to strengthen electricity distributor Kenya Power’s financial position that had weakened significantly since the last review in July 2008.

Power tariffs are expected to increase further in July for certain categories of consumers before taking a downward path in July 2015.

The Ministry of Energy has, however, announced that it expects the injection of additional 280 megawatts of cheaper geothermal power to further reduce the fuel cost charge — one of the biggest factors in electricity billings — bringing more relief to consumers.

“Completion of these two projects (Olkaria I and IV) should effectively address the issue of power costs in Kenya,” Energy secretary Davis Chirchir said on Monday, adding that he expects consumers to start feeling the impact from July.

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Kenya Power’s billings show that low-income households using 50 Kwh are paying Sh517.2 for December consumption compared to Sh609.7 for the same units in November, representing a 15.2 per cent drop.

The steep drop in charges arises from the fact that the inflation levy that had averaged Sh0.3 per Kwh in the three months to November has been eliminated from the billings.

The ERC said inflation had been included in the core non-fuel tariffs, a move that saw it disappear as a separate item in the December bills.

ERC officials said the stand-alone inflation charge is likely to remain out of power bills until July when it may be reintroduced with the update of the cost of living index.

Variable charges of forex and fuel also dropped to Sh0.15 and Sh5.19 per Kwh respectively in December from Sh1.31 and Sh5.63 in November.

The lower forex charge is linked to the revision of the benchmark exchange rate from the previous 64.9 units to the dollar — set in 2008 — to the current 84.9 that closely trails the existing market rates.

The drop in fuel cost charges is linked to the shutting down of a number of emergency diesel-driven power generators last year.

The variable charges are meant to cover the costs incurred by power producers, including investment in equipment and imports of diesel to run the emergency power plants.

Savings from these variable elements of electricity billings have, however, failed to cushion heavy domestic consumers and industrialists from cost escalation.

READ: ERC’s new power tariffs to hit industrial users hardest

Households using 180 Kwh of power have, for instance, seen their December bills rise to about Sh3,230, up from Sh3,035 in November. Small commercial outfits using 2,724 units of power are paying about Sh66,930, up from Sh64,965 in November.

The higher billings for industrial and big domestic consumers arise from the new non-fuel tariffs that escalate with increased consumption.

Energy charges for those using between 51 Kwh and 1,500 Kwh rose to Sh11.62 per unit of electricity consumed in December from Sh8.1 per unit the previous month.

Those using more than 1,500 Kwh are now paying the energy charge at the rate of Sh19.57 per unit from the previous Sh18.57.

Electricity tariffs are expected to rise further in July for all categories of consumers according to a tariffs schedule released by the ERC in December. Domestic consumers will, for instance, pay a fixed charge of Sh150 from the current Sh120.

Similar increases have been set for commercial consumers, raising the prospect of a general rise in the cost of goods and services in the second half of the year.

Consumers could, however, get relief from the commissioning of the 280 megawatts from Olkaria I and IV the same month.

The minister said completion of the twin projects would mark the beginning of an ambitious journey towards reducing reliance on expensive thermal power.

The ministry recently shut down all emergency diesel power plants, save for Aggreko’s 30 megawatts (MW) plant in Muhoroni.

Retirement of the emergency power generators has removed a total of 260 megawatts of expensive electricity from the national grid over the past two years, significantly cutting down the fuel cost segment of consumer bills.

Fuel cost currently accounts for up to 40 per cent of the total consumer bills and pushing it further down amounts to big savings for consumers, putting Kenya on the path to becoming a low-cost energy economy.

The injection of the 280 MW of geothermal power to the national grid will raise the contribution of renewable power sources to about 70 per cent from the current 61 per cent.

The government plans to scale up the country’s power generation capacity to 5,000 MW from the current 1,712 MW and is banking on cheaper sources of power like wind and geothermal to attain that goal.

There are plans to build additional plants at Olkaria V, VI and VII sites to generate 350MW of geothermal power.