Consumers pay more for power despite promises of lower tariffs

The effects of a drop in the international crude oil prices and increased injection of power into the grid is yet to reflect on the monthly electricity bills for consumers. Many power users are disappointed that their expectations of big drop in power prices are yet to be realised.

Figures from Kenya Power indicate only a slight drop in the fuel cost component from Sh2.53 per Kwh in January to Sh2.51 in February this year.

But wiping all the benefits arising from cheaper crude oil prices, the shilling exchange rate against the US dollar has depreciated to 91.4217 from the SH85 to Sh89 level it has been oscillating over the past few months.

The foreign exchange adjustment on electricity bills for consumers has increased from 29 cents per kilowatt hour to 41 cents per kilowatt hour, the highest level over the last eight months.

For already hard pressed consumers, suffering from rising cost of living, even a slight fall in electricity prices is a relief to their pockets.

“I have noticed a slight drop in my monthly electricity bills from Sh680 in January to Sh560 in February this year. I hope this trend will continue,” said Kezia Adhiambo, a teacher in Eldoret. While electricity bills are dropping, for most consumers the fall is still below earlier expectations.

“Overall, we are yet to have significant reductions in the cost of electricity. Although fuel costs have fallen drastically, a weakening shilling exchange rate against the US dollar as well as the many taxes involved, have wiped out any gains that could have been passed on to consumers,” said Consumers Federation of Kenya (COFEK) CEO Steve Mutoro.

He acknowledged that while there is a small reprieve for electricity consumers, the reduction is still insignificant with a lot of confusion still surrounding what constitutes actual power cost. “We expected much higher reductions in cost of power when the two power plants at Ol Karia were commissioned. We are so far not excited by the small reductions we are seeing at the moment,” said Mutoro.

Regulatory Commission

Latest figures from the Energy Regulatory Commission (ERC) indicate that the maximum allowed prices for the month of February were Sh13.19 per litre for Kerosene, that of super petrol decreased by Sh8.17 per litre, while that of diesel decreased by Sh7.83 per litre. These prices are for the period between February 15 to March 14, 2015.

ERC said in a statement that taxes and levies, supplier margins and distribution costs are fixed and do not change with reduction in international prices. Accordingly, with a lower cost of the product their contribution into the final price is higher in percentage terms than in the last review.

Furthermore, petroleum products imported into Kenya are paid in US dollars. As a result, when the shilling depreciates against the US dollar, more shillings would be required to purchase a given volume of product.

Consequently, any benefits arising from changes in international prices are adjusted taking account of the prevailing exchange rate which depreciated by 1.05 per cent in the period under review.