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Power bill to go up as forex cost hits 3-year high

BUSINESS
By Macharia Kamau | July 10th 2021

Electric power meter measuring power usage.[Getty Images]

The cost of electricity will go up this month after the Energy and Petroleum Regulatory Authority (Epra) increased the foreign exchange component of the power bill yesterday.

The Foreign Exchange Fluctuation Adjustment went up in the review announced Friday to Sh1.16 per unit of electricity that consumers will buy this month.

It is the highest level since July 2018, when consumers paid Sh1.22 per unit for the forex component.

The new rate per kilowatt-hour means the forex charge has shot up 52 per cent from 77 cents in June this year.

The component is revised monthly and is meant to cushion power industry investors from volatility of the Kenyan Shilling against major world currencies.

It usually goes up whenever the shilling weakens against currencies such as the US dollar.

Weakening of the local currency might see the local power industry incur high costs when, for instance, servicing loans, a substantial chunk of their debts being denominated in foreign currencies, including the US dollar and the Japanese yen.

Yesterday’s increase, however, appears to defy the recent strengthening of the local currency, which has made gains against the US dollar over several months now.

The shilling was trading around 107.85 to the dollar last week, having strengthened from above 109 in April and having hit Sh110 earlier in the year.

“Notice is given that all prices of electrical energy specified in Part II of the (Schedule of Tariffs 2018) will be liable to a foreign fluctuation adjustment of plus 116.12 cents per kilowatt hour (kWh) for all meter readings taken in July 2021,” said Epra in a gazette notice yesterday.

Cost of living

The hike in the cost of power comes at a time when Kenyans are still grappling with the challenges dealt by the Covid-19 pandemic, which has eroded their earnings while pushing up the cost of living.

The forex charge dropped sharply in August 2018 when Epra announced new power tariffs, going down to five cents from Sh1.22 in July, a 95 per cent drop.

At the time, Epra said it had rebased the component to be in line with foreign exchange rates.

The forex charge has since stayed low, sometimes to a point where it was in the negative, as was the case in March 2020 when it was negative Sh0.01 per unit of electricity.

Being in the negative meant that power consumers were credited with a few free power units when buying tokens.

It has, however, steadily risen over the last one year.

Forex adjustment is one of the variables in the power bill that are revised monthly. Others include the fuel cost adjustment, which slightly went down for July power prices to Sh3.30 per unit from Sh3.63 in June. Before that, it had shot up sharply from Sh2.92 in May.

Also a pass-through cost, the fuel cost adjustment compensates thermal power producers for the acquisition of heavy fuel oil that they use at their power plants to produce electricity.

Also reviewed monthly is the Water Resource Management Authority Levy, while inflation adjustment is reviewed every six months.

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