Markets & Finance

Power bills shock as fuel levy, VAT increases effected


Kenya Power technicians at work. September electricity bills will see a significant jump as a fuel cost surcharge is introduced, as well as the 16 per cent VAT. FILE

Power consumers will pay about Sh300 million more in their September bills on account of rising fuel prices, pointing to a significant jump in this month’s electricity bills that will also be subject to the recent value added tax (VAT) increase.

Kenya Power on Friday gazetted an increase on the fuel cost surcharge from Sh5.07 to Sh5.43 per unit of consumption.

“Notice is given that all prices for electrical energy ... will be liable to a fuel cost charge of 543 cents per kilowatt hour for all meter readings taken in September, 2013,” said the firm in the gazette notice.

The fuel cost charge has gone up by Sh1.09 since July, reflecting the rising prices of oil in the international markets.

Power consumers also face an increase in VAT on their power bills to 16 per cent from the previous 12 per cent, following the enactment of the new VAT Act.

(READ: Cost of power to go up after VAT and water levies)

Low use consumers of 200 units or less per month are also no longer exempt from paying the VAT under the new law. Kenya Power has already notified consumers of the tax changes.

A levy on usage of water from hydro-electric dams is also set to be introduced to settle a Sh630 million debt owed to the Water Resource Management Authority (WRMA) by KenGen.

The change in fuel cost charge was announced in a gazette notice published by Kenya Power on Friday. This is the second straight month it has gone up after coming down from Sh6.21 to Sh4.34 between March and July 2013.

Fuel cost is a variable component of electricity charges that is determined by the amount of diesel-generated electricity on the national grid, which mainly rises with the decline in the amount of power coming from hydro sources, especially in the dry season.

The power distributor in the gazette notice, however, retained the forex adjustment levy at Sh1.39 per unit, reflecting the stable exchange rate in August. The forex element of electricity bills reflects the strength of the shilling against major world currencies.

The forex levy had gone up sharply from July’s 95 cents per unit to Sh1.39 in August, which came after the shilling slid from the 85 level to the 87 level against the dollar.

Other levies faced by domestic electricity consumers include an ERC levy of three cents per unit, a rural electrification levy of five per cent on the base rate and an inflation adjustment levy that currently stands at 31 cents per unit and which is reviewed every six months.

Domestic consumers pay a fixed charge of Sh120, and for the first 50 units consumed pay at a rate of Sh2 per unit. Additional units up to 1,500 units are charged at Sh8.10, with the rate going up further to Sh18.57 for units consumed above 1,500.

The additional water levy has been put on hold after the Consumers Federation of Kenya went to court seeking orders to stop implementation of the charge of five cents per unit.

Kenya Power’s bid to raise power tariffs by at least 25 per cent was turned down by ERC in February. This would have seen domestic consumers of 50 units or less pay a fixed charge of Sh200, up from the current Sh120, while the cost of every unit would have gone up fromSh2 to Sh5.1.

The cost of 51 to 1,500 units would have increased to Sh11.4 from the current Sh8.1 per unit, while for small commercial users the energy charge would rise from Sh8.96 to Sh13.66 per unit.

Power consumers could, however, benefit from a reduction in their power bills in the next five years under a Sh450 billion plan by the government to generate 5,000MW of power by 2017.