9 February 2017

Kenya: Power Bills Forex Levy Hits 15-Month High

The weakening shilling has set homes and businesses up for higher electricity prices this month after the forex levy in power bills hit a 15-month high.

The Energy Regulatory Commission (ERC) raised the forex levy to Sh1.28 per kilowatt hour (kWh) of electricity consumed in February from Sh0.84 per unit a month earlier.

The regulator adjusts the forex levy monthly. The charge compensates for foreign currency costs, including loans incurred by Kenya Power and electricity generators -- making Kenya one of the few African states to have dollar-denominated power bills.

The shilling has weakened against the dollar to lows last seen two years ago, having shed 1.2 per cent since the start of the year, at Sh103.70 units.

At Sh1.28 per unit, the forex levy is the highest since October 2015 and will see consumers pay an extra Sh288 million for electricity consumed this month compared to January.

The January bills have remained expensive on increased use of diesel-powered generators in electricity production due to low water levels in the country's hydro-electric dams that have seen a rise in fuel adjustment costs.

A weak shilling means fuel import costs have been rising. The forex adjustments is expected to put more upward pressure on Kenya's economy where the year-on-year inflation rate rose to 11-month high at 6.99 per cent.

The fuel levy, which is linked to the amount of power generated by diesel generators and injected into the national grid, has remained unchanged at Sh2.85 per unit of power since December. This is a 16-month high.

Energy ministry officials have warned of a sharp rise in the price of electricity should the drought persist, depressing dam water levels.

Energy secretary Charles Keter last month said power bills could hit a 26-month high in March if the drought persists with the fuel levy expected to hit Sh3.52 per unit.

Because thermal power is expensive, it is only produced when there is a shortage of cheaper hydropower and available geothermal energy has been fully injected into the grid.

Homes that consume 200 kWh a month paid Sh3,575 in January up from Sh3,497 a month earlier while users of 50 units paid Sh1 more at Sh559, data from Kenya National Bureau of Statistics shows.

A review of power prices, however, shows that bills have increased over the past five years from Sh3,094 (200 kWh) in December 2012 to Sh3,575 last month, contrary to the government's assertion that the costs are down.

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