Costly fuel, weak currency push up Kenya electricity price

Thursday March 09 2023
Utility firm Kenya Power technicians at work.

Utility firm Kenya Power technicians at work. Electricity price in Kenya has risen by 10 percent in the latest monthly adjustment. PHOTO | FILE | NMG


Electricity price in Kenya has risen by 10 percent in the latest monthly adjustment due to higher fuel prices and a weaker local currency.

The Energy and Petroleum Regulatory Authority (Epra) has raised the fuel cost charge (FCC) to Ksh8.3 ($0.064) per kilowatt-hour (kWh) up from Ksh6.59 ($0.051) per unit last month.

It is the highest rate of the fuel energy component since June 2012 when it hit a record Ksh9.03 ($0.070) per kWh.

Read: Private sector crucial for Africa’s energy drive

The Epra has also raised the foreign exchange rate fluctuation adjustment (Ferfa) to Ksh2.16 ($0.017) per unit from Ksh1.85 ($0.014) per unit last month due to the weakening shilling against the dollar.

This has raised the unit cost of power for lifeline consumers to Ksh22 ($0.17) per unit up from Ksh20 ($0.15) last month which will force customers to pay more for the same quantity of electricity.


New power tariffs

This comes weeks before the country’s energy regulator is expected to publish new power tariffs that will significantly further raise power prices.

Epra is expected to put in place new tariffs that will be in effect from April 1 for the next three years.

This comes as global crude oil prices have been fluctuating in recent weeks, but analysts project prices to go up in the coming months owing to increased demand, especially from China.

Read: Survey: Kenya business outlook dim

The Kenya shilling – which was trading at 128.36 against the US dollar on Wednesday – has continued to lose value against the greenback, piling more pressure on firms like Kenya Power which have a huge demand for dollars.

Rising inflation

The utility says its total monthly average use of foreign currency is $50 million and €20 million.

The higher power prices are set to heavily hit consumers at a time when inflation in Kenya has increased to end a three-month consecutive decrease.

Inflation climbed to 9.2 per cent in February, coming after it slowed for three consecutive months to hit 9 per cent in January.

Read: Debt, inflation weigh down on Kenya economy

Kenya National Bureau of Statistics’ Consumer Price Index (CPI) showed that in that month, food commodities contributed greatly to the high inflation.

The high inflation has heavily hit Kenyan businesses which saw demand for goods and services shrink for the first time in six months, according to Stanbic Bank’s Purchasing Managers Index (PMI).

The PMI fell below the 50-neutral mark to 46.6 last month – the first time it has fallen below the neutral point since August last year.

“The reading indicated a solid deterioration in operating conditions, driven by renewed contractions in many of the covered metrics,” said the report.

Four of the five monitored sectors in the survey saw new orders decrease, with particularly sharp falls seen in manufacturing, wholesale and retail, while agriculture was the only sector where sales increased.