Kenya Power set to enjoy forex windfall
Kenya Power technicians at work. Kenya Power is projected to net almost Sh700m after it increased the foreign exchange charges on electricity bills.
What you need to know:
- Kenya Power is projected to net almost Sh700 million this month after the energy regulator increased the foreign exchange charges on electricity bills.
- Epra nearly doubled the foreign exchange fluctuation adjustment (Ferfa) to Sh1.36, up from 73 cents.
- The energy regulator also raised the fuel cost charge (FCC) to Sh6.79 per kilowatt-hour (kWh) of electricity, up from Sh4.63.
Kenya Power is projected to net almost Sh700 million this month after the energy regulator increased the foreign exchange charges on electricity bills.
The Energy and Petroleum Regulatory Authority (Epra) nearly doubled the foreign exchange fluctuation adjustment (Ferfa) to Sh1.36, up from 73 cents, to cater for the weakening of the Kenyan shilling against the US dollar.
The energy regulator also raised the fuel cost charge (FCC) to Sh6.79 per kilowatt-hour (kWh) of electricity, up from Sh4.63.
This means that going by last month’s electricity consumption of 1.11 billion units, the utility firm could net at least Sh9.05 billion from the new rates, which is about Sh3.1 billion higher than the Sh5.95 billion earned in August under the old rates.
The adjustment of Ferfa could see Kenya Power book an extra Sh699 million in revenue from September bills should the sales remain the same as those recorded in August.
The shift in FCC would net an extra Sh2.3 billion, although this amount would not translate to a gain for Kenya Power since it collects the charge on behalf of independent power producers.
The power prices for September shot up after the government ended its subsidy on electricity.
Epra had extended the subsidy to cater for a 15 per cent cut in prices in January this year on orders by former President Uhuru Kenyatta.
Policy change
The removal of the electricity subsidy and the partial withdrawal of the fuel subsidy comes at the same time as a policy change by the new administration of President William Ruto, who is keen to withdraw consumption subsidies.
Petrol prices hit a historic high of Sh179.3 per litre of petrol last week after the government opted not to apply a subsidy on the product.
The price of diesel shot up to Sh165 from Sh140.03, even as that of kerosene jumped to Sh147.94 per litre after Epra increased its cost by Sh20.
The government applied a partial subsidy of Sh20.82 on diesel and Sh26.25 on kerosene.
Diesel is the most consumed fuel product and is heavily used for transport, electricity generation and agriculture.
Kenya Power could receive a bigger boost to its revenue should Epra approve an application for a tariff review it plans to submit between October and December as part of a strategy to help it climb out of the financial hole created by the power price cut in January.
The Energy Act 2019 provides that power tariffs be reviewed every three years.
This hasn’t been respected because Epra has often delayed or amended the rates to ease inflation pressure.
The three-year price review is crucial to firms along the country’s power supply chain and involves forecasting electricity demand, generation costs, the cost of transmitting and distributing electricity, and players' need to sustain operations.
The last comprehensive review of electricity prices was in 2019. That year, Kenya Power submitted a plan seeking to increase electricity prices by 20 per cent, which would have led to a sharp increase in power costs.
