Inflation charge points to higher power bills in January

Mr Charles Keter, Energy and Petroleum secretary. FILE PHOTO | NMG
Mr Charles Keter, Energy and Petroleum secretary. FILE PHOTO | NMG 

A slight drop in charges for diesel-generated power has been offset by a surge in inflation and forex adjustment costs, piling pressure on homes and businesses facing increased electricity bills.

The Energy Regulatory Commission (ERC) raised the forex levy in power bills for January to a five-month high of Sh1.40 per kilowatt hour (kWh) from Sh1.16 per unit last month, the effect of which will see bills rise by about Sh200 million in total.

The charge compensates for foreign currency costs, including loans that power producers have in their books. The inflation charge has touched a new all-time high of Sh0.42 per unit from Sh0.39.

It is adjusted every six months with the last review being in July 2017.

The increases are set to push up inflation pressure that eased to a 55-month low of 4.50 per cent last month from 4.73 per cent due to easing of food prices.

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

Consumer power bills also come loaded with a fuel levy, which like the forex surcharge, is adjusted every month by the energy regulator.

The fuel charge, which is linked to the amount of power produced by diesel generators and injected into the national grid, has dropped by five cents to Sh4.30 per unit, still a three-year high.

The benefits of the drop have, however, been wiped out by the rise in inflation levy (by Sh0.03 per unit) and forex charge (by Sh0.24), which will raise overall power bills by about Sh200 million in January.

The rise comes at a time when electricity distributor Kenya Power #ticker:KPLC is battling complaints from consumers over being overcharged in the months of November and December.

Kenya Power’s annual report showed the utility was backdating bills worth Sh8.1 billion to recover costs incurred on diesel generators last year which were not fully billed to homes and businesses between last February and August.

This action was taken to keep a lid on rising power prices as drought deeply cut hydropower production. The bill is part of the Sh10.1 billion identified as unrecovered power fuel costs in Kenya Power’s annual statement for the year ended June 2017.

About Sh2 billion has been defrayed so far, leaving out Sh8.1 billion to be recovered in coming months. Energy secretary Charles Keter has linked the costly electricity to over-estimation of consumption and increased injection of expensive thermal power to the grid following repairs of cheaper geothermal plants.

Kenya Power says that customers owe it the unrecovered cash since the firm had paid the pass-through charges to power producers in full but had only passed a fraction of the burden to the consumers.

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