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Economy

Fuel levy raises power bills to 41-month high

An aerial view of Kiambere dam power substation. FILE PHOTO | NMG
An aerial view of Kiambere dam power substation. FILE PHOTO | NMG 

Kenya Power #ticker:KPLC has raised the fuel adjustment surcharge it levies on March electricity bills to a 41-month high, piling inflationary pressure on homes and business reeling from expensive power.

Fuel cost charge, which is linked to the amount of power produced by diesel generators and supplied to consumers, hit Sh5.35 per kilowatt hour (kWh) of electricity consumed this month from Sh4.51 in February. 

This is set to further raise power bills to a new all-time high after months of steady increments.

Power bills for homes that consume 200 units per month, mostly middle class, stood at a record high of Sh4,068 last month, having crossed the Sh4,000-mark for the first time last December.

In December 2014, homes consuming 200 kWh paid Sh3,018, meaning that electricity prices have increased by 34 per cent over the period—one the fastest growth among basic household items.

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The Energy Regulatory Commission (ERC) adjusts the fuel levy in power bills every month, along with a forex levy, which is down to Sh0.95 per unit from Sh1.19.
The forex charge compensates for foreign currency costs, including loans that power producers have in their books.

The rise in fuel levy and the drop in forex levy has had a net effect of pushing power bills by Sh0.60 per unit, translating to an additional burden of more than Sh600 million this month, based on the country’s consumption levels and electricity levies.

Electricity prices have a direct bearing on inflation, being one of the items in the basket of goods and services whose pricing is tracked to measure the cost of living.

Kenya Power does not benefit from the monthly adjustment of the pass-through costs since it only collects the revenues from customers for onward remission to electricity producers, leaving a neutral impact on its revenues.

This month’s fuel levy of Sh5.35 per unit returns the country to levels last seen in 2014 before it added 280 megawatts of cheap geothermal power to the grid that helped reduce reliance on expensive thermal power.

But last year’s drought cut dam water levels and depressed hydropower production, triggering a spike in thermal power generation as an alternative.

The ERC data indicates that homes and businesses consumed 855 million units of electricity last month. Low-income earners who consume 50 units monthly paid Sh682 last month, a burden that is set to grow this month on the higher fuel levy.

Kenya recorded steady drops in power bills from 2015 following the injection of additional 280 megawatts of cheaper geothermal energy to the grid between July and December 2014. This led to reduced use of expensive diesel-generated power and lower fuel levy in power bills.

But the bills have been on an upswing recently due to a spike in the intake of expensive thermal power as poor weather cuts production of cheaper hydropower, erasing benefits of the cheaper steam power.

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