Power prices set to rise after fuel cost hits three-year high

A Kenya Power employee reads a meter. Consumers are expected to be hit by higher power bills in October.

Kenyans should brace themselves for higher electricity bills at the end of this month owing to a prolonged dry weather. This has resulted in significant reduction of power generated from the hydroelectric dams.

The depletion of water levels at the dams that include Masinga has seen the country rely more on the costly thermal generators that burn diesel to produce electricity.

The cost of diesel is passed on to power consumers and reflects on the monthly power bills as the fuel cost charge. However, the short rains are likely to give consumers a reprieve with water levels at hydroelectric dams expected to rise and increase hydroelectricity’s share in the national power generation mix.

This component has been revised upwards to Sh3.35 per unit of electricity consumed in October, which is in comparison to Sh2.85 per unit in September.

The fuel cost has remained at Sh2.85 for more than a year now and this month’s charge is a three-year high, with such levels last seen in November 2014 when the Fuel Cost Charge (FCC) was set at Sh3.47 per unit.

FCC was adjusted to Sh2.85 per unit in December last year from Sh2.34 in November and Sh2.31 in October following the dry spell that necessitated the increased use of thermal electricity. “Notice is given that all prices for electrical energy... will be liable to a fuel cost charge of plus 335 Kenya cents per kilowatt hour for all meter readings taken in October 2017,” said the Energy Regulatory Commission in a Gazette notice yesterday when it revised the fuel cost charge up.

The cost is, however, not in the region of Sh7.22 per unit seen in August 2014 and in previous years, where on occasion the fuel charge would go as high as Sh9 per KWh.

Adequate rains

The commissioning of two geothermal power plants at Olkaria with a combined generation capacity of 280 megawatts has enabled the country reduce reliance of diesel fired thermal plants, with the subsequent management of the fuel cost charge at under Sh3 per unit over the last three years.

The October-December short rains season might however result in a reprieve for power consumers in the coming months. The Meteorological Department earlier this week said it expects regions that host the hydroelectric dams to receive adequate rains that would see water levels rise and electricity generation by power plants on these systems to return to normal.

“The major river catchment areas for the country’s hydroelectric power generating dams are forecast to receive near-average to above-average rainfall. This means that surface water run-offs may register average to above-average inflows into rivers Sondu Miriu, Tana and Athi.  This is expected to increase the water levels in dams, and improve the capacity for hydroelectric power generation in the hydropower dams,” said the Department in a report.

According to the ERC public notice yesterday, consumers will pay Sh1.01 per unit as foreign exchange fluctuation adjustment, compared to 64 cents in September and Sh1.63 for the Water Resource Management Levy.

ERC revises the fuel cost charge, the foreign exchange fluctuation adjustment and the WARMA Levy every month. Every six months, the energy industry can revise the inflation charge, which enables players in the power industry cope with rise in the cost of doing business.