14 July 2014

Kenya: Manufacturers Concerned Over High Power Cost

The steep increase in power tariffs will lower the competitiveness of manufacturers in the Kenyanl market against cheaper, manufacturers are concerned.

Bidco Oil Refinery managing director Vimal Shah said that higher tariffs, which kicked off this month, will increase the cost of manufacturing products locally hence giving imports a competitive advantage. "Increase in power bills makes our products more expensive and if they are not bought, it will led to loss of jobs," he told the star on phone.

The Kenya Association of Manufaturers chief executive officer, Betty Maina said any increase in energy costs affects consumers because manufacturers are forced to increase prices of products in a bid to avoid an over flow in production cost.

"The increase in power bills started last year and we have always said it will lead to high cost of products. But we are viewing it as a temporary problem since the country is now shifting away from thermal power which is very unreliable due to unpredictable weather patterns," she said.

The new retail electricity tariffs are under the second phase of billing structure set by the Energy Regulatory Commission in November last year. The review is set to run to June 2016.

In December, manufacturers consuming up to 15,000 kilowatt per hour commenced paying between three and 10.6 per cent over the average of Sh17.10 per unit to Sh17.99. This marked an average 5.2 per cent rise in their power bills.

The high energy consumers constitutes 40 per cent of total energy consumers. They are expected to pay Sh14 in energy charge per kWh at the end of this month.

However, the ERC says the bills should start falling in subsequent years since the government is rolling out geothermal and solar energy, which are deemed to be more reliable, to the national grid.

The chief executive officer of Devki Steel Mills, Narendra Raval feared that some consumers may be unable to afford locally manufactured products since many manufacturers will increase retail cost. "You cannot sustain competition against importation if the local energy tariff is double the international tariff," he said.

During the launch of the new retail electricity tariff review last year, ERC managing director Fred Nyang noted that the changes were arrived at after considering all factors raised by stakeholders.

"As we eliminate expensive fossil fuel powered plants in the mix under the 5,000MW+ programme, we will end up with power bills decreasing significantly," he said.


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