The establishment of the fund will coincide with long rains expected to fill up dams and raise hydropower output.
The initiative will enable the energy regulator to pass half the benefits of lower hydropower prices to consumers during heavy rains and increase the fuel levy by a similar margin when there is drought or during power plant repairs.
The proposed fund, which acts like a hedging tool, aims to cushion consumers against volatility in power bills caused by price changes when the country switches to expensive diesel-generated electricity during drought or generator repairs.
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.
The Ministry of Energy will by June set up a fund meant to keep electricity prices stable and predictable.
The establishment of the fund will coincide with long rains expected to fill up dams and raise hydropower output.
The initiative will enable the energy regulator to pass half the benefits of lower hydropower prices to consumers during heavy rains and increase the fuel levy by a similar margin when there is drought or during power plant repairs.
The plan, the first in the region, was first announced last September following complaints by businesses over sharp fluctuations in electricity costs.
“We are awaiting the heavy rains from April through June to set up the power stabilisation instrument. The fund should make it easier for consumers to predict their power costs,” said Energy Principal Secretary Joseph Njoroge.
The proposed fund, which acts like a hedging tool, aims to cushion consumers against volatility in power bills caused by price changes when the country switches to expensive diesel-generated electricity during drought or generator repairs.
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 the 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 fuel surcharge has been rising steadily to stand at a 40-month high of Sh4.51per kilowatt hour (kWh) this month. This was due to increased uptake of expensive thermal power to compensate for a sharp dip in hydropower production, hit by last year’s drought.
“If there is a drop in fuel cost obligations by say Sh3 per unit due to increased hydropower, we will lower fuel cost charge in power bills by Sh1.50 instead of the whole Sh3 with the other half going to the fund,” said Mr Njoroge.
The proposed fund will be set up at the Treasury and managed by the Energy Regulatory Commission.
Hydropower costs about Sh3 per unit, seven times cheaper than thermal power.
