Kenya Power sets stage for higher electricity bills
Households consuming less than 50 kilowatts per hour (Kwh) will see their energy charge rise to Sh5.1 from the current Sh2 for each unit of power consumed. File
What you need to know:
Increases set for between next month and 2015 set to hit consumers hard and make exports more expensive.
The public has been invited to share their views with ERC and Kenya Power during a meeting next Monday before the first of two increments this year is effected on March 1.
The Consumer Federation of Kenya (Cofek) said it would resist the increment in the fixed charge.
Kenya Power is set to raise electricity tariffs by more than a half from next week in a move that is expected to hit household budgets hard and weaken the competitiveness of industries.
The utility firm has tabled the proposed tariff review before the Energy Regulatory Commission on the grounds that the existing tariffs were not sustainable in view of an ambitious capacity expansion and operating costs.
The public has been invited to share their views with ERC and Kenya Power during a meeting next Monday, February 25, before the first of two increments this year is effected four days later on March 1.
Another increment would be effected in July and subsequently after every year until July 2015. The tariffs being reviewed exclude the variable foreign exchange and fuel cost adjustments which are reviewed every month.
This would be a break from tradition where Kenya Power tariffs are reviewed after every three years, the last one having been in July 2008.
The regular review filed in February 2011 was pushed back to help consumers and the economy cope with a high inflationary regime prevailing at the time.
The firm had applied to raise the rates by 25 per cent from June 2011. The power distributor agreed to absorb the rising costs in the interim period but is now poised to pass a drastic, if graduated increase to consumers.
From March, domestic consumers will pay a fixed charge of Sh200, up from the current Sh120. A fixed charge is paid by a consumer on a monthly basis regardless of the units consumed.
Households consuming less than 50 kilowatts per hour (Kwh) will see their energy charge rise to Sh5.1 from the current Sh2 for each unit of power consumed.
Those consuming between 50 and 1,500 Kwh will see their energy charge increase to Sh11.4 from the current Sh8.1 for each unit of power.
Small commercial users will see their energy charge rise from Sh8.96 to Sh13.66 per Kwh, a 52 per cent increase. From Jul 1, 2015, domestic consumers will see their fixed charge rise to Sh300.
The Consumer Federation of Kenya (Cofek) said it would resist the increment in the fixed charge.
“We will be proposing to the regulator to at best omit it and at worst, maintain the current rate of Sh120 for domestic consumers,” Cofek programme officer Margaret Obondo said.
She said the lobby would push for a six-month notice before any new tariffs are implemented which, if agreed upon, would give consumers some respite until September.
“While we appreciate that KPLC plans an additional capacity ... the proposed increment may be ‘cost-reflective’ but not cost-effective,” she said in a statement.
The ERC, which has to approve the new tariffs, said last week it was in negotiation with Kenya Power. The fact that the tariffs are being exposed to public scrutiny suggests ERC is on the whole happy with the proposal
The new tariffs set the stage for a fresh inflationary pressure on households and business alike. Kenya Power, however, says the higher tariffs will benefit the economy in the long term by funding reliable and adequate electricity supply.
The new tariffs are expected to be a major driver of inflation in the medium term as electricity gains a heavier weighting in the consumer price index.
The rate of inflation stood at 3.67 per cent last month, rising marginally from 3.2 per cent in December, signalling the onset of a new round of price rallies.
Higher electricity bills would in the short term erode the country’s ability to attract and retain manufacturing interests, benefiting rival low-cost manufacturing bases in Africa and Asia.
Kenya-based industrialists bear the high costs of electricity, which also makes goods and services more expensive and hurts the competitiveness of Kenya’s goods in export markets.
The higher tariffs come at a time when the country is opening its economy on the back of international trade agreements, exposing its industries to increased competition from low-cost economies.
The Kenya Association of Manufacturers estimates that local power charges are more than twice as high as in Egypt and South Africa — Kenya’s main rivals in the Common Market for Eastern and Southern Africa.
The high tariffs are expected to hold in the medium term until the country retires most of the expensive thermal power and replaces it with cheaper sources like geothermal and wind.
The interconnected installed capacity currently stands at 1,672 megawatts (MW), including the 120 MW of the emergency capacity.
Kenya Power estimates that the country will need an additional 1,248 MW of electricity supply to meet the growing demand for power averaging five per cent on an annual basis.
The power distributor plans to spend about Sh80 billion in the medium term to upgrade and expand its current distribution system.
