Kenyan consumers set to pay more in ERC’s electricity tariff review

A man reading the electricity meter (PHOTO: FILE)

NAIROBI, KENYA: The Energy Regulatory Commission (ERC) has restructured the subsidised tariff currently targeted at low income electricity consumers in a move that will see many that have enjoyed the low-priced power locked out. They will instead pay higher charges.

Under a new billing structure by ERC, the lifeline tariff has been capped at 15 units of power per month from the current regime where low-income earners had a leeway of up to 50 units, and pay at subsidised rates.

Poor households will also pay a higher rate for energy consumed in the new harmonised tariff of Sh12 per unit, compared to the current rate of Sh2.50 per unit.

ERC has however scrapped the fixed charge that currently stands at Sh150 per month. It has instead factored it in the per unit cost of power.

The new tariff, which ERC expects to be used for August billing, has also reduced power prices for the wealthy domestic power consumers.

Households that consume over 1,500 units a month are charged Sh20 per unit but will now pay Sh16.50 a unit. The same charges will apply for people with less spending capability - consuming more than 15 units.

The new tariff that will take effect in a month’s time is expected to be much simpler, and will give clarity to power consumers on how they are charged for their electricity.

“There have been numerous complaints by electricity customers on the complexity of the tariff regime whereby the billing has not been fully understood,” said ERC when it published the new tariffs, which will go through public consultation in July before implementation starts in August.

“For example, prepaid customers have been receiving varying units for the same amount of money within a billing cycle. This is mainly due to the existing graduated tariff structure for domestic consumers and the application of fixed charge.”

Under the proposed tariff, the energy industry regulator said prepaid customers would not get varying number of tokens whenever they spent the same amount.

For example, if one spends Sh1,000 for the prepaid units, they will always get a constant number of units.

“Consumers on prepaid scheme will be able to get same units for same amount of money for all purchases within the billing cycle,” ERC said in the statement last week.

ERC has been undertaking the tariff review for a while now but was in April instructed to speed up the process by Energy Cabinet Secretary Charles Keter. In determining the new charges, Keter told ERC to consider changes in the power industry that have taken place of time including increased use of technology by Kenya Power in delivery services, such as introduction of prepaid metres, which has brought operating costs down.

The changes have meant reduced operating costs for the power utility firm that does not need intense use of such services as meter readers.

The scrapping of the fixed charge will mean that power consumers do not pay the monthly fee whenever they do not consumer power. While it will be factored in the energy consumption cost, the fixed charge has in the past guaranteed income for Kenya Power.

Ensure predictability

At Sh150 a month, this would mean the power retailer earns Sh12 billion annually from its 6.5 million customers. “The above changes will ensure the tariffs are predictable and that consumers are not charged for any fixed costs when they are not consuming power...,” said ERC.

The regulator however does not expect the changes to affect revenues for Kenya Power and the other sector players. It projects an average 10 per cent increase in revenues for the sector, growing to Sh131.4 billion in the 2018/19 financial year.

This is adequate to meet the financial obligations of the sector, including power infrastructure expansion and returns to shareholders that own power companies. “This tariff review seeks to ensure the financial sustainability of the electricity sector stakeholders while at the same time ensuring supply of reliable and competitively priced energy,” said ERC.