Consumers to pay more as Kenya Power increases charges

Kenya: Kenyans are expected to pay more for electricity starting this month owing to a rise in the rate of inflation and the weakening of the shilling in recent months. This is even as plans to cut reliance from diesel fired electricity generators by migrating to cheaper geothermal power are in high gear.

The electricity distributor, Kenya Power, yesterday in the Kenya Gazette notice, revised upwards inflation adjustment by 18 cents per unit of electricity consumed for the month of July to December period this year.

This means consumers will pay 48 cents per unit over the next six months for inflation adjustment up from 30 cents per unit that they have been paying in the January to June period this year.

This has been due to marginal but steady rise in the rate of inflation, which measures the cost of living, has gone up to 7.67 per cent in July, which is outside the Central Bank target of 7.5 per cent. Kenya Power, in yesterday’s notice, increased foreign exchange fluctuation adjustment to 30 cents per unit for readings taken in July up from 28 cents in June.

Thermal plants

However, the power distributor retained the fuel cost charge at Sh7.22 per unit of electricity. While electricity tariffs are regulated and can only be adjusted after the Energy Regulatory Commission has approved such a review, Kenya Power has a free hand in adjusting the inflation and foreign exchange rates. This cushions the firm from the cost that may come about due to a surge in the cost living or the weakening of the local currency against major world currencies. Companies along the power production and supply chain have huge loans denominated in foreign currencies hence the need to factor the position of the shilling against other currencies in the power bills.

Kenya Power also regularly adjusts the fuel cost charge, which goes up and down depending on the use of thermal power plants. The three are passed through costs and are passed on to consumers. The review of the inflation and forex fluctuation adjustment might dampen the fact that the power industry has been looking forward to the commissioning of additional electricity generation capacity from geothermal and wind.

KenGen on Thursday announced that it is getting ready to commission some 140 megawatts from its geothermal fields of Olkaria in the course of August.

The firm is currently implementing a project, will increase generation capacity on its geothermal power plants at Olkaria by 280MW, half of which is ready and is only undergoing tests before it is commissioned this month. The remaining 140MW is expected to be commissioned by end of 2014. It is also putting more turbines on its wind farm on Ngong' Hills, with plans to increase capacity from the area to 25MW from the current 5.1MW.

Additional capacity from the substantially cheaper electricity generation sources were expected to replace substantial capacity generated by Independent Power Producers that use diesel for generation, making power costly.