Kenyans should brace for another round of power price hikes following the weakening of the shilling against the US dollar which has seen a rise in foreign exchange levy component of the monthly electricity bill.
In its latest review of some cost components that make up the monthly bills, the Energy Regulatory Commission (ERC) increased the foreign exchange levy to Sh1.28 per unit of electricity for power consumed in February. This is a steep rise from 84 cents per unit charged for electricity consumed in January.
The forex adjustment, which goes up or down depending on the performance of the shilling against other currencies, is meant to cushion electricity industry players from a weak shilling especially when making repayments for loans denominated in foreign currency, mostly the US dollar.
The shilling has in recent weeks taken a beating, trading on average at Sh103.9 against the dollar for the better part of January and at some point touching a high of Sh104. Yesterday, the Shilling was trading at Sh103.6.
The Fuel Cost Charge, however, declined marginally to Sh2.85 per kilowatt hour in February from Sh2.93 in January. The charge, which is a pass through cost that Kenya Power collects on behalf of thermal power generators, has been on the rise recently following the switching on of diesel fired plants due to a prolonged dry spell.
While players in the electricity sub-sector have assured that power consumers will not be subjected to power rationing, the situation still looks gloomy, with water levels at the hydroelectricity dams low and fuel prices going up. The cost of diesel, which powers thermal generators, went up by Sh5.03 this month as a result of a 20 per cent global increase in crude prices when the cargo was procured in December.
KenGen Chief Executive, Albert Mugo said the developments necessitated an upward review of power tariffs. Mr Mugo said in line with prevailing weather indications, the electricity generating firm has been forced to depend more on thermal energy as opposed to hydro so as to maintain water levels at their present state.
“We are not yet faced with realities that would force us to contemplate power rationing,” he said Thursday. Power from the diesel component now accounts for 21 per cent of the power consumed in the country, up from 11 per cent. Hydropower has gone down from 40 per cent to 29 per cent. Geothermal, which is not affected by the weather, has remained stable at 44 per cent.
“We believe the cost can be contained in the short-term, but we are talking to the Government to come in and cushion the industry,” said Kenya Power Acting Chief Executive Officer, Kenneth Tarus on Thursday at a briefing.
The reduction in the contribution of hydro dams to the power mix has sparked fears of a possible power cuts and inflated power bills for consumers.