Why cost of electricity will not come down soon

It appeared to have succeeded in January last year when electricity prices came down by 15 per cent. This reduction was, however, momentary and was supported by a Sh14 billion subsidy from the National Treasury.

The price has gone up again in recent months owing to higher fuel and foreign exchange adjustment costs.

The Kenya Kwanza administration came to power on promises of, among others, lowering the cost of power for Kenyans.

Its first few days in power in September coincided with a hike in costs. And now, the tariff review application by Kenya Power is a headache for the current administration.

In the proposal for reviewing the tariff, Domestic Lifeline consumers will see the cost per unit of electricity go up to Sh14 from Sh7.70 in the tariff published in January 2022, which led to a 15 per cent reduction in the cost of power.

This is the cost of energy before taxes, levies and pass-through costs (fuel and forex adjustments) are loaded. Power prices for ordinary domestic consumers will increase to Sh21.68 (also before taxes and levies are loaded) from Sh12.60 per unit.

The average cost of a unit of electricity across all consumer categories including the commercial and industrial will increase to Sh19.04 from Sh16.95.

With the additional taxes, levies and pass-through costs, some of the consumer segments will see their per unit cost of power increase to over Sh30.

Kenya Power also wants to reduce the number of people under the lifeline band - a subsidised consumer category targeted at low-income households. The band covers people consuming 100 units and below per month, but Kenya Power in the application wants this reduced to 30 units.

The proposal has not gone down well with many Kenyans. The Consumers Federation of Kenya (Cofek) noted that there are numerous areas of cost reduction for Kenya Power and it does not necessarily have to resort to high power costs.

Power prices for ordinary domestic consumers will increase to Sh21.68 from Sh12.60 per unit. [iStockphoto]

"Again, keep in mind that this is a proposal based on the law and regulations before the regulator can give a determination, they have to look at it, and subject it to public consultation," said the official.

Future demands

He said while Kenyans could make convincing arguments to Epra during the public consultation phase and see the increase blocked, there is always a case for modest increases in pricing to enable the sector to cope with future demands. "We do not want to end where South Africa is at the moment, where while the demand kept growing, the investments were curtailed by suppressing growth in tariffs, which in turn led to under-investment in generation and transmission.

"Eskom (the country's electricity utility) has been left without adequate capacity...the result is that they are doing what we were doing in the late 1990s and early 2000s, rationing power. It is chaos and it is affecting not just South Africa but the entire Southern Africa power pool," he said.

South Africa has been going through a power crisis for a number of years, which got worse recently with consumers experiencing scheduled daily rationing that at times last as long as 10 hours.

"If there are no investments in the sector, we (will) go down. Then we will not be talking about high prices but a crisis of darkness," said the Energy ministry official.

"The cost of darkness is more expensive than expensive power."