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ERC raises consumer power charge as shilling weakens

By Macharia Kamau | August 19th 2017
A Kenya Power meter reader records a consumer’s consumption figures. [File, Standard]

?Kenyans are set to pay more for electricity following a double increase in the foreign exchange component of the monthly bill.

The charge cushions the power industry from costs associated with the weakening of the shilling when repaying electricity project loans advanced by lenders in foreign currencies, by passing the cost to consumers.

In a public notice yesterday, the Energy Regulatory Commission (ERC) increased the forex adjustment for power consumed in August to Sh2.35 per unit, which was a 123 per cent increase from Sh1.05 in July. This means electricity consumers will pay Sh1.30 more for every unit consumed.

“Notice is given that all prices for electrical energy... will be liable to a foreign exchange fluctuation adjustment of plus 2.35 Kenya cents per kilowatt hour for all meter readings to be taken in August 2017,” said ERC Acting Director General Pavel Oimeke in a Kenya Gazette notice.

The forex component is reviewed monthly and goes up or down depending on the movement of the shilling against other currencies. it is the first time that the forex charge has reached that level since November 2011 when it was at Sh2.74.

An increase in the forex adjustment is largely be due to the weakening of the local currency. The shilling has weakened marginally against currencies such as the US dollar and the Japanese Yen over the last two months.

Most of the debts advanced to the power industry are usually in dollar, Yen and the Euro, with the amount advanced by Chinese lenders in Yuan also on the rise.

In June, for instance, the shilling exchanged at a mean rate of 103.3 to the dollar but weakened in July when it changed at 103.7 and at some point inched towards 104. The weakening was partly due to election jitters but the unit recovered this week to settle at 103.2 during yesterday’s morning trade.

A similar trend is seen in the exchange rates for the Yen and Euro, where the shilling weakened against the currencies in the weeks leading to the elections but has now started recovering.

ERC is pushing to have more shilling-denominated debt to cushion consumers from spikes in electricity bills due to currency volatility.

At the same time, other pass-through charges such as the fuel cost adjustment levy, which has been a perennial pain for consumers, remained unchanged at Sh2.85.

The fuel charge has remained the same since early last year despite the rise in the amount of power from diesel-fired thermal plants.

It is meant to cater for the diesel used by the thermal producers, whose output rises in instances such as reduced water levels during prolonged dry weather or inadequate rains.

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