25 February 2013

Kenya Power Says Price Hike Justified

Kenya Power has defend its need to immediately hike electricity prices saying it has to pay its suppliers for additional capacity. The company has applied to the Energy Regulatory Commission to make substantial changes to power tariffs from next month.

It will today together with ERC hold a tariff review stakeholders' meeting at the KICC. The public responses and Kenya power justifications will determine if ERC will approve the tariffs review and if they will be effected in four days time.

The plans to raise the price of power has not gone down well with domestic and commercial consumers with the Consumer Federation of Kenya asking for at least a six month grace period. The Kenya Association of Manufacturers is also opposed to the increase.

But Kenya Power said some of the additional power projects by independent power producers and Kengen, expected to produce up to 1248 Mw, are ready to start supplying.

"The power projects... are at advanced stages of implementation and some will be come in to operation in March and in May 2013," it said in a media announcement.

"Payment obligations for the power capacity from the plants under construction will be applicable once each of the plants is commissioned. Some plants will be commissioned in March-June 2013 while the rest come into operation between June 2013- 2015."

Kenya Power said it first filed the application to hike tariffs in February 2011 at the end of the three year review period, but this was deferred because the revenues were not immediately required.

It has proposed to increase consumption charges for the lowest band domestic consumers from Sh2 per kWh to Sh5.10, a 155 per cent price increase. It also wants to increase the monthly fixed charge for domestic consumers from Sh120 to Sh200 , a 67 per cent increment.

The smallest commercial settings are set to pay 50 per cent more per units used from Sh8.96 per kWh to sh13.66.On average, the bigger industries will pay 60-70 per cent more for consumption every month.

By 2016 the companies will be paying over 80 per cent what they are paying now. nOn the threat of inflation and increase in commodity prices, Kenya Power said the impact will be minimal as increases will be done gradually.

On Friday, the share price of the country's sole electricity distributor, fell 1.1 per cent to Sh17.55 as investors waited for the energy regulator's decision on a proposed upward review of electricity prices.

Francis Mwangi, a research analyst at Standard Investment Bank said the Kenya Power's operating costs had been steadily rising over the years, while the electricity tariff held steady, risking to undermine the firm's profitability. "If the tariffs are not reviewed upwards, there is an assumption there will be no interim dividend payout."

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