The cost of electricity rose to an all-time high in January, fuelling inflation and piling pressure on household budgets, according to the newly released industry data.
The Kenya National Bureau of Statistics (KNBS) data shows that power bills have surged by up to 22 per cent in the past 12 months, making electricity one of the commodities whose prices are rising at the fastest rate even as distributor Kenya Power #ticker:KLPC fights charges of inflating its monthly billings.
Power bills for homes that consume 200 kilowatt hours (kWh) per month, mostly middle class, hit a record high of Sh4,069 in January, having crossed the Sh4,000-mark for the first time a month earlier.
Low-income earners who consume 50 units of electricity paid Sh682 last month, up from Sh669 in December and Sh559 in January last year.
This represents a 22 per cent cost surge a year for consumers at the bottom. The billings were partly inflated by a consistent increase in inflation and forex adjustments that are reviewed monthly.
In January, the Energy Regulatory Commission (ERC) raised the forex segment of the power bills to a five-month high of Sh1.40 per unit while inflation charge soared to an all-time high of Sh0.42 per unit.
The forex levy compensates for foreign currency costs, including loans that power producers have in their books while inflation is adjusted every six months in step with the cost of living.
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. Inflation rallied to 4.83 per cent in January from 4.50 per cent, driven by higher prices of food, electricity and fuel.
The higher bills data by KNBS coincided with Kenya Power’s admission early last month that it erroneously slapped thousands of homes with inflated bills in December and November.
The Nairobi Securities Exchange-listed firm admitted to the error after customers made noise over its backdating of bills worth Sh10.1 billion to defray costs incurred on diesel generators last year which were not passed on to them.
The State-owned power distributor said it had recovered Sh2 billion already, leaving Sh8.1 billion to be recovered from homes and businesses in subsequent months.
The ERC last week said that up to 900,000 consumers out of Kenya Power’s 6.5 million customers were charged erroneously, an issue blamed on the firm’s billing system upgrade late last year.
Kenya Power revealed the Sh10.1 billion bill to be backdated in its annual report, explaining that costly power due to increased uptake of expensive diesel-generated electricity was not fully billed to homes and businesses between last February and August. The spike in thermal power use was due to drought that cut hydropower generation.
Consumers pay a fuel cost charge through their monthly bills, which is linked to the amount of diesel-generated power on the grid. The fuel cost levy is supposed to go up when thermal power intake increases.
The levy, however, got stuck at Sh2.85 per kilowatt hour (kWh) between February and August despite the share of thermal power intake rising past that of hydropower in the period, indicating the government’s intervention. This action was taken to keep a lid on rising power prices in an election year.
The Energy ministry has since disowned the disclosure in the report, insisting there was no backdating of power bills.
But consumers, represented by Apollo & Co Advocates, last month sued Kenya Power and obtained an order from the High Court temporarily barring the utility firm from recovering the bills until the case is heard and determined.
The Competition Authority of Kenya (CAK) is also investigating the firm over the inflated bills after the city law firm enjoined it in the suit, along with the Auditor-General and the Attorney-General.
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.
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.
Because diesel-generated power is expensive, it is only produced when there is a shortage of cheaper hydropower and available geothermal energy has been fully injected into the grid.