Business

Tougher times for Kenyans as cost of power increases

Monday, October 24th, 2022 07:45 | By
Kenya Power technicians replacing a faulty transformer. Although Kenya enjoys the greatest diversified energy mix – non-renewable and renewables such as hydropower, geothermal power, wind energy, and solar energy – in sub-Saharan Africa after South Africa, low levels of investment have ensured inconsistencies in its supply. PD/file

Kenyans should brace for higher electricity costs after the Energy and Petroleum Regulatory Authority (Epra) announced that exchange rate fluctuation adjustments which will be passed on to consumers for the second time in a row.

With electricity being a key economic enabler, the knock-on effect of this move will have a spiral effect on various sectors, further increasing the cost of living for ordinary Kenyans.

“Notice is given that all prices for electrical energy will be liable to foreign exchange adjustment of plus 148.29 cents per kilowatt hour for all meter readings taken in October 2022,” said Daniel Bargoria, EPRA director general in a gazette notice.

The forex chargewas adjusted upwards to cater for the weakening shillings against the dollar. A weaker shilling signals that importation cost will remain elevated thus further impacting end users.

Cost of living

This, coupled with higher taxation and levies on electricty will see the cost of living rise, making it hard for Kenyans in the lower income brackets to meet their daily needs.

Nick Mbogo,  a consumer says his electricity costs has increased by 38 per cent in the past one month, he noted that while he paid Sh1000 for electricity on 3rd, September and received 62.75 units, his last purchase yielded only 38.96 units. “That is like 40 per cent increase in such a short time,” complained Nick Mbogo.

For the sixth straight month, the nation’s total inflation rate increased to 8.5 per cent in August from 8.3 per cent in July, mostly due to high cost of fuel and food costs.

Epra also announced an increase in power rates by 15.7 per cent in September, erasing the 15 per cent decrease posted in January this year.

For domestic users who use more than 100 units per month, the regulator also increased the pass-through cost, which includes fuel, foreign exchange, and inflation adjustments, raising the cost of a kilowatt hour unit to Sh25.30 ($0.21).

Fuel cost charges

The increase in power prices comes despite a slight decline in the cost of fuel announced mid this month. Fuel prices impact power tariffs through the energy charge – the largest component of the electricity bill that caters for the actual power consumed.

The regulator had in September increased the fuel cost charge (FCC), the largest component determining power prices – by about 47 per cent to cost Sh6.79 per unit of power consumed. Kenyans are still set to face higher power bills this month after FCC was further increased to Sh7.09 per unit effective October, up from Sh6.79 last month.

The current government started doing away with subsidies in September pushing the cost of electricity up and this means that one kilowatt hour of domestic electricity prices will rise from the current Sh16.00 to over Sh17.00.

Further data now shows that households and businesses consumed less electricity in the month of September, consumption dropping by 11.83 million kilowatt-hours (kWh) from August, as increased power costs and inflation continued to raid people’s income and working capital.

Dip in electricity consumption

Epra says that electricity consumption stood at 1.11 billion units in August, just before the government eliminated the 15 per cent power reduction effected in January 2022, which saw a spike in power cost last month.

Electricity consumption is one of the key inputs during production mainly in the manufacturing sector, and is often used to gauge the country’s economic performance.

A decline in power usage could reflect a slump in economic activity or businesses and households seeking other cheaper alternatives such as solar power to save their expenses.

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