ERC shields Kenya Power from heavy losses after implementation of new off peak tariff

Meter reading

Large power consumers may not benefit from the recently introduced off peak electricity tariff. This is after the energy industry regulator put tough conditions that users have to meet to benefit from the tariff.

According to Energy Regulatory Commission (ERC), industrial electricity users will only be eligible for the discounted off peak power tariff if they can exceed their monthly average consumption.

In a move that could shield Kenya Power from incurring loss of revenue from heavy power users, the Energy Regulatory Commission (ERC) Friday set a threshold that the consumers have to achieve before they benefit from the new tariff.

Under the new tariff, users will pay 50 per cent of their current costs. A similar plan initiated about ten years ago saw many industrial consumers shift their operations to off peak hours. They, however, had to grapple with the challenges of unstable and inadequate power supply.

Under the new tariff announced by President Uhuru Kenyatta in November, industrial and commercial power users will pay half of the current charges when they use power during the off peak hours of between 10pm and 6am. On Saturdays and public holidays, the off peak hours will be from midnight to 8am and again from 2pm to midnight and then the whole day on Sunday. The tariff came into effect December 1.

ERC in a public notice said the power consumers will only benefit if their consumption going forward is over and above their average consumption over the last six months.

“Customers will be required to meet their monthly Energy Consumption Threshold then any unit over and above that threshold is billed at the discounted tariff. The threshold shall be the existing average monthly consumption for last six consecutive months and adjusted for a growth factor of six per cent,” said the energy industry regulator in a public notice Friday.

The new tariff means heavy users that pay Sh7.10 per unit of electricity during on peak hours will pay Sh3.55 when operating off peak hours. Large power users pay between Sh9.20 and Sh7.10 per unit, with the heavier users paying lower charges. The power consumers are also subject to other costs such as the fixed charge, demand charge, fuel cost charge and foreign exchange fluctuation adjustment.

The Government hopes that the new tariff will increase industrial activity, particularly manufacturing that has been among the major casualties of Kenya’s costly power plans. A number of manufacturers have shut down their local plants opting to import from markets that have cheap power. Manufacturing is among the critical sectors in the creation of jobs and wealth.

ERC added that the threshold for new firms setting up operations will be determined by their consumption over the initial three months.

“For new customers, Energy Consumption Threshold shall be the average monthly consumption for the first three consecutive months and adjusted for a growth factor of six per cent,” said ERC.

“Customers operating at 100 per cent production capacity during on peak and off peak hours, will be given a five per cent discount on the applicable energy rate… upon satisfactory confirmation by KPLC that their production is at 100 per cent.”

Forex adjustment

At the same time, energy consumers will see a slight reprieve in their monthly power bills after ERC reduced the fuel cost charge for the December bills. The regulator said power users will this month pay a fuel charge of Sh2.85 per unit, which is a decline from Sh4.35 they paid in November.

The lower fuel costs could be attributed to the recent rains that increased water levels at the hydroelectricity dams, reducing reliance on thermal power producers.

The decline, which could potentially mean a drop in power costs, has, however, been negated by the Foreign Exchange Fluctuation Adjustment. Forex adjustment has gone up to Sh1.28 per unit for readings taken in December, up from 80 cents per unit in November.

The component is meant to cushion power industry from changes in the exchange rates, where a weak shilling would mean fluctuations in repayments of foreign denominated loans.

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