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Relief for consumers as forex levy on power bills drops

Homes and businesses will this month save Sh262 million on lower electricity costs after the forex levy on power bills dropped 28 per cent on the strengthening of shilling.

The Energy Regulatory Commission (ERC) cut the forex levy to Sh0.96 per kilowatt hour (kWh) of electricity consumed in March from Sh1.28 per unit a month earlier.

The drop offers reprieve to consumers after the levy hit a 15-month high last month, pushing up power costs.

The energy 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.

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The shilling is now trading at Sh102.56 against the US dollar, having recovered from a two-year low of Sh103.70 units early last month.
Kenya consumes an average of 820 million kWh of power monthly.

This means the forex charge drop by Sh0.36 per unit will see consumers pay Sh262 million less for electricity consumed this month compared to February.

But the lower water level in the country’s hydro-electric dams due to drought has denied the country a further drop in power bills on sustained use of expensive diesel-powered generators in electricity production.

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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.

A strong shilling means fuel import costs have been dropping. The forex adjustments is expected to ease pressure on Kenya’s economy where the year-on-year inflation rate rose to a four year high at 9.04 per cent.

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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 Sh3,691 in February up from Sh3,575 a month earlier, or Sh116 more, data from Kenya National Bureau of Statistics (KNBS) shows.

A review of power prices shows that bills have increased over the past five years from Sh3,094 (200 kWh) in December 2012 to Sh3,691 last month, contrary to the government’s assertion that the costs are down.

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