Power bills rise Sh1bn in March on fuel levy hike

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Economy

Power bills rise Sh1bn in March on fuel levy hike


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Kenya Power workers repair a power supply line. FILE PHOTO | NMG

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Summary

  • The costly fuel surcharge in power bills is linked to increased reliance on diesel-powered generators to produce electricity and the rise in petroleum prices.
  • The Energy and Petroleum Regulatory Authority (Epra) has attributed the increased use of thermal-powered plants to reduced generation from cheaper Lake Turkana Wind Power and a breakdown in one of the country’s hydro-electric dams.
  • The forex levy comprises expenses incurred in foreign currency by power generators such as KenGen, the independent power producers as well as Kenya Power.

Electricity consumers will pay Sh1.20 more per unit or an extra Sh1 billion to Kenya Power #ticker:KPLC this month on increased compensation to expensive diesel plants, piling pressure on households.

The energy regulator has raised foreign exchange and fuel adjustment surcharges it levies on March electricity bills, hitting household budgets at time when petrol prices have hit a nine-year high.

The fuel surcharge has increased to Sh3.54 per kilowatt hour (kWh) from February’s Sh2.61, rising to the highest levels in 19 months.

The foreign exchange fluctuation has increased slightly to Sh0.77 per kWh, compared with Sh0.66 previously.

This means that electricity costs will increase by Sh1.20 per unit, inclusive of taxes, pushing the total bills to above Sh1 billion given the monthly consumption of over 800 million kWh.

The costly fuel surcharge in power bills is linked to increased reliance on diesel-powered generators to produce electricity and the rise in petroleum prices.

The Energy and Petroleum Regulatory Authority (Epra) has attributed the increased use of thermal-powered plants to reduced generation from cheaper Lake Turkana Wind Power and a breakdown in one of the country’s hydro-electric dams.

The forex levy comprises expenses incurred in foreign currency by power generators such as KenGen, the independent power producers as well as Kenya Power.

The additional electricity bills is a blow to households and businesses that are grappling with expensive fuel due to rising crude costs in the global market.

Motorists in Nairobi are paying Sh122.81 per litre of petrol from Sh115.18, representing a Sh7.63 increase, and Sh5.75 more for a litre of diesel at Sh107.66.

Petrol is now retailing at levels last seen in November 2011 while diesel is selling at the highest level since December 2018.

The rising electricity and fuel prices are expected to put more upward pressure on the economy where the year-on-year inflation rate rose to 5.8 percent in February from 5.7 percent in January.

The costs of energy and transport have a significant weighting in the basket of goods and services that is used to measure inflation in the country.

Producers of services and manufactured goods are also expected to factor in the higher cost of petroleum products, unleashing pricing pressure across the economy with ramifications on the cost of living measure.

The Sh1.20 a unit jump in power prices is the highest in nearly two years. Kenya Power is now seeking to lower fixed charges in contracts signed with electricity generating companies, a move that will boost its financial performance and lead to reduced power bills for consumers.

The Auditor-General says the electricity distributor has identified a reduction of capacity charges — paid to power firms regardless of generation – as one of the key actions that will pull it out of deep losses.

The electricity distributor says the move will also serve to bring down electricity bills.

Reduced bills will ease household budgets given that electricity prices are among expenses whose costs have jumped the most under President Uhuru Kenyatta’s administration since 2013.

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