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No trickle-down effect of global fuel prices to local consumers

BUSINESS
By Rawlings Otieno | May 10th 2020

Kenyans should not expect cheaper commodities despite the drop in fuel prices and lower electricity tariffs, Energy Cabinet Secretary Charles Keter has said.

Although electricity tariffs have been dropping since July 2019, prices of commodities have remained the same and in some cases increased.

Mr Keter last week told the Senate Energy Committee chaired by Senator Ephraim Maina (Nyeri) that the drop in fuel prices has marginal drop in the cost of electricity.

“Even if today electricity came down, manufacturers will not reduce their prices. We have been arguing with the Ministry of Industrialisation on how prices can be lowered. But this is a liberalised economy, it is not easy,” Keter said.

According to Keter, pump prices are easily regulated by the Energy and Petroleum Regulatory Authority (EPRA).

Section 11(c) of the Energy Act, 2019, empowers EPRA to set, review and adjust electricity tariffs and tariff structures.

The CS further said the Fuel Energy Cost (FCE) charged on consumers has come from Sh5 to Sh2.5 and is reflected in monthly bills.

Petroleum Principal Secretary Andrew Kamau said fuel is a small component in setting electricity tariffs.

The applicable FEC is a factor of the amount of energy generated from thermal power plants and the price of fuel delivered to the power plants.

Senator Maina had sought to know if electricity tariffs have gone down given the increase of rainfall across the country.

And now the senators are mulling a re-look at Price Control (Essential) Goods Act to tame rogue traders from unduly benefiting from customers yet cost of production has dropped.

Should the law be re-looked, the government will be obligated to issue price ceilings on essential goods to cushion the public from exploitation.

Nominated Senator Mary Seneta questioned why any time there is increase in fuel prices, the cost of commodities go up and when there is a reduction in pump prices, shoppers don’t see any trickle-down effect.

Last month, EPRA in its monthly review reduced prices of petrol and kerosene by Sh18 and Sh18.18 respectively, per litre.

 

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