By Macharia Kamau
For many years, paying for electricity has been one headache after another thanks to the frequent adjustments in tariff rates, mostly upward movement.
First there is the question relating to fuel adjustment costs that mostly tend to inflate the bills and linked to frequently changing international crude prices. Then there are foreign exchange losses that are factored in the bills, making the customers dig deeper into their pocket to settle their monthly electricity bills.
According to industry insiders, the unstable power billing system is largely as a result of a huge loan incurred by local power generators and rising price of oil.
Total debt of Sh93 billion by both Kenya Power and KenGen factored in the bill and a regular fuel adjustment costs brought about by changing international crude prices has left customers with the headache of guessing how much they should pay for power every month.
Power utility firms are allowed to alter fuel and foreign exchange costs monthly. This has, however, left their customers not sure how much they should pay for power.
Kenya Power long-term loans stood at Sh24.5 billion as at June 30 2011, out of which Sh14 billion is from international lenders.
While in the case of KenGen, the long-term borrowings stood at Sh68.6 billion, as of June last year, of which Sh43 billion is foreign currency denominated. In the 2010/2011 financial year, the firm realised Sh315 million in foreign exchange losses that are recovered by passing them on to consumers as per the Power Purchase Agreement (PPA), with Kenya Power.
The loans are taken mostly for development of power projects that include transmission and new power generating projects.
Adjustment cost
The two cost components, foreign exchange losses due to currency fluctuation and volatile fuel prices, account for a substantial fraction of the electricity bill, sometimes as much as 50 per cent of the amount that a consumer pays for power.
Kenya Power and other power utilities have in the past argued that these elements are not within their control. The Power Purchase Agreements (PPA) between the power producers and Kenya Power allows them to pass over additional costs incurred due to foreign exchange losses and increases in cost of crude oil in the international markets to retail customers.
