Why fuel prices may go up

Energy CS Davis Chirchir. [Samson Wire,Standard]

The price of Super Petrol is likely to rise to Sh300 in the coming Energy and Petroleum Regulatory Authority EPRA fuel price review, says Energy CS Davis Chirchir.

While submitting a report before the National Dialogue Committee on November 6, CS Chirchir said that the looming increase could be occasioned by the escalation of war between Israel and Hamas.

“Because of the Hamas and Israel war, the international prices of fuel could go up to 150 dollars. This would mean our petroleum prices could go up to Sh300 per liter at the Pump. We hope it will not get there,” said Chirchir.

The CS was referring to an article he read in a local publication but hoped the price would not get higher.

According to the petroleum price review in October, the price of fuel has gone up to Sh217 per liter of petrol.

He further mentioned that the high Petroleum Pump Prices have been caused by trends in the Free on-board (FOB) cost of refined petroleum products in the international markets since early 2023.

Answering reasons that have led to the increase in power pricing, he cited the rapid depreciation of the Kenya Shilling against major foreign currencies and inflation pressure that has pushed up operational costs.

"Within the last months, on average, the Power Purchase obligations, and generation tariffs for PPAs denominated in USD have gone up by 24pc and 31pc to 12pc for those denominated in Euros. Compared to Regional Economies, Kenya shillings has lost 20pc to the Ugandan Shilling and 13pc against the Tanzanian Shilling within the last 12 Months," added Chirchir.

The current average cost of power to domestic customers is Sh28 per unit, while for SMEs the cost is Sh29 per unit, and for Commercial and Industrial customers the cost is Sh. 25 per unit.

The CS said that they plan to reduce the power costs by focusing on ongoing negotiations with the power producers to ensure that the burden of the purchase price is lifted from consumers.

"The energy sector is pursuing renegotiation of the existing operational Power Purchase Agreements (PPAs) of KenGen and Independent Power Producers (IPPs) with a total power purchase cost of Sh143 billion (June 2023)," said Chirchir.

The ministry now plans to cut contracts of the expiring expensive Power Purchase Agreements (PPAs) by making them nonrenewable.

Chirchir further said that the ministry shall explore means of storing excess power to ensure efficient utilization of available installed power capacity.

"The Ministry is exploring the Battery Energy Storage System (BESS) as a means of storing “excess power” during off-peak periods and utilizing it during peak hours thus avoiding the use of thermal power plants which are expensive to run," he added. 

The ministry recommends switching to renewable energy sources such as solar or wind power, which can help reduce power costs while also reducing carbon footprint.