Electricity prices surge 10pc on costly fuel, weak shilling

Kenya Power engineers fix a faulty transformer

Kenya Power employees fixing a transformer. Electricity prices have risen by 10 per cent in the latest monthly adjustment due to higher fuel prices and a weaker shilling.

Photo credit: File | Nation Media Group

Electricity prices have risen by 10 per cent in the latest monthly adjustment due to higher fuel prices and a weaker shilling.

The Energy and Petroleum Regulatory Authority (Epra) has raised the fuel cost charge (FCC) to Sh8.3 per kilowatt-hour (kWh) up from Sh6.59 per unit last month.

It is the highest rate of the fuel energy component since June 2012 when it hit a record Sh9.03/kWh. 

The Epra has also raised the foreign exchange rate fluctuation adjustment (Ferfa) to Sh2.16 per unit from Sh1.85 per unit last month due to the weakening shilling against the dollar. 

This has raised the unit cost of power for lifeline consumers to Sh22 per unit up from Sh20 last month which will force customers to pay more for the same quantity of electricity.

This comes weeks before the energy regulator is expected to publish new power tariffs that will significantly further raise power prices.

New tariffs

Epra is expected to put in place new tariffs that will be in effect from April 1 for the next three years.

This comes as global crude oil prices have been fluctuating in recent weeks, but analysts project prices to go up in the coming months owing to increased demand, especially from China.

The Kenya shilling – which was trading at 128.36 against the US dollar yesterday – has continued to lose value against the greenback piling more pressure on firms like Kenya Power which have a huge demand for dollars.
The utility says its total monthly average use of foreign currency is $50 million and €20 million.

The higher power prices are set to heavily hit consumers at a time inflation has increased to end a three-month consecutive decrease.

Inflation climbed to 9.2 per cent in February, coming after it slowed for three consecutive months to hit 9 per cent in January.
KNBS’s Consumer Price Index (CPI) showed that in that month, food commodities contributed greatly to the high inflation.
The high inflation has heavily hit businesses which saw demand for goods and services shrink for the first time in six months, according to Stanbic Bank’s Purchasing Managers Index (PMI).

The PMI fell below the 50 neutral mark to 46.6 last month – the first time it has fallen below the neutral point since August last year.

“The reading indicated a solid deterioration in operating conditions, driven by renewed contractions in many of the covered metrics,” said the report.

Four of the five monitored sectors in the survey saw new orders decrease, with particularly sharp falls seen in manufacturing and wholesale, and retail, while agriculture was the only sector where sales increased.