Electricity consumers will soon enjoy stable and predictable electricity prices through a fund that will curb sharp rises in the monthly fuel and forex adjustment levies in the bills.
The Kenya Electricity Generating Company (KenGen) #ticker:KEGN said plans are advanced to establish a fund meant that will compensate producers and consumers when the country increases reliance on expensive thermal generation plants during dry seasons.
KenGen chief executive Rebecca Miano said Kenya’s reliance on power from hydro sources leaves both consumers and producers with negative financial implication when rains fail.
“Whenever a generator suffers revenue losses under the PPA for failure to meet its obligations due to prolonged drought, the generator will be paid from the fund,” she said.
“Further, during the prolonged period of droughts when the more expensive thermal plants are dispatched to meet the demand due to hydro risk, then the fund will offset some portion of the fuel charge costs.”
The Hydro Risk Mitigation Fund will enable the energy regulator to pass half the benefits of lower hydropower prices to consumers during heavy rains and cut the fuel levy by a similar margin when there is drought or during power plant repairs.
Electricity prices fluctuate monthly depending on the use of diesel generators in the power grid.
Consumers pay more for electricity during drought as the country is forced to increase use of expensive thermal power to compensate for a dip in hydro production.
Manufacturers, through their lobby group — Kenya Association of Manufacturers, have often complained of budget overruns due to steep increases in their monthly power charges.
Power bills come loaded with a fuel cost charge, adjusted monthly by the energy regulator, which is linked to the amount of power produced by diesel generators and injected into the national grid.
The proposed fund will be set up at the Treasury and managed by the Energy Regulatory Commission if Kenya sticks to earlier proposals.