Muna Wahome and Tony Kago
28 October 2005
Nairobi — Power bills for about 500,000 Kenyans were set to rise yesterday after electricity subsidies were virtually scrapped.
The energy industry regulator, the Electricity Regulatory Board (ERB), also ended an arrangement where Kenya Power and Lighting Company employees paid less for power.
In a major policy shift, the board tightened loopholes used by some industries, hotels and other enterprises to avoid paying their rightful bills, under a system where businesses could choose to be categorised in pools which allowed them to be charged lower tariffs.
Such categories have been reduced from eight to five.
Though the KPLC did not immediately announce a raise to its billing system, the removal of the subsidies means that every consumer will now be charged Sh6.65 for the first 50 units of kilowatts consumed, for which they had been charged only Sh1.55 per unit.
The new guidelines are contained in the Retail Electricity Tariffs Review Policy which was launched yesterday.
Reacting to the news, the Kenya Association Manufacturers said it was still too early to comment on the increase.
Spokesperson Damaris Kimilu said: "We need to study the situation and see what it translates into. If it is good, we would definitely appreciate. But any increase in electricity costs will have a bearing on production costs. Most likely it is the consumer who will bear the benefits if any, or the brunt in case of an increment." KPLC spokesman Migwi Theuri said: "We will go by what the board sets as they are the regulators."
Any increase in the charges per kilowatt hour (kwh) of electricity will impact on the 16 per cent VAT charged because it is calculated as a percentage of power consumed.
It will also impact on the ERB and other levies charged on electricity bills because they are calculated as percentages on consumption.
The ERB executive chairman, Mr Matere Keriri, however, told reporters in Nairobi that he could not predict when the new tariffs would be implemented.
He said the Government, KPLC or the ERB can apply for a review following the first tariff policy since 1999. The document was prepared following a stakeholder forum held on July 12.
Although Mr Keriri did not give details, a closer look at the document shows that subsidies for the first 50 kilowatts consumed by households have been whittled away.
Domestic consumers
Under the Life-Line Tariff (LLT) or the poor man's regime, all Kenyan domestic consumers receive subsidy for the first 50 kwh (units).
KPLC currently charges Sh1.55 per unit for the first 50 kwh on top of the Sh75 fixed charge. Most Kenyans will now pay Sh6.65 for every unit of the first 50 kwh - if they exceed the minimum consumption.
"To improve the targeting of this benefit and ensure it only benefits the intended target group, any consumption in excess of 50 units per month shall attract normal charges on all units including the first fifty," says the report.
The KPLC employees who have been paying Sh4 per unit would now be charged like the rest of Kenyans. The ERB shifts the responsibility of subsidising the workers' bills to the company, if it so wishes. "If KPLC wishes to preserve the benefit to its employees it shall award them a fixed amount in their salaries," the report says.
The employee subsidies together with the all-encompassing life-line were deemed to be against the non-discriminatory principle of the Electricity Power Act of 1997.
Likewise, KPLC installations will now pay at the commercial and industrial rates.
Yesterday, Mr Keriri said that the issue of high power costs had to be looked at from the causes. He blamed poor expenditure on systems and costly sources for the spiralling costs.
"Do not ask me where the money went because I was not there," he said. He, however, noted that the Narc Government had gone out of its way to effect positive changes in the industry.
Peak hours
The board said it would officially extend the peak hours from 6pm to 11pm. Previously peak time charges applied between 8pm and 9pm. "[This is] with a view to avoiding past mistakes where, for instance, large consumers shifted energy-intensive production activities to the off-peak period, with a significant negative impact on KPLC's revenue stream," says the document.
During the peak hours, industries are charged more to discourage them from using power which is then utilised by domestic consumers.
Responding to complaints of inflated bills, Mr Keriri said ERB was inspecting metres regularly and challenged those affected to report to his office. He attributed the surge in power bills to forex and fuel adjustments which had nothing to do with tariffs.
Shadow Energy minister Joseph Lagat said Kenya's electricity prices were already high and any attempts to push them further would discourage investors.
"It is unfair, for the board to burden the consumers who are already paying high costs... adequate notice has not been given to Kenyans," he told the Nation.
The MP said the board should not pass on its inefficiencies to the consumer.
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