Electricity charges up by almost Sh4 on weak shilling - Beaking Kenya News

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Tuesday, 17 November 2020

Electricity charges up by almost Sh4 on weak shilling


Electricity users will now pay Sh4 more per kilowatt after the Energy Petroleum Regulatory Authority (EPRA) increased the fuel cost charge and foreign exchange fluctuation adjustment.

New costs published in the Kenya Gazette shows fuel cost charge is up by Sh2.56, Forex charge by Sh0.58 and Water Resource Management Authority (WRMA) Levy by 2.25 cents.

This effectively pushes the average price per kilowatt to almost Sh20 from Sh16 last week.

Prior to adjustment, Sh300 could fetch 12.84 kilowatts of prepaid power at Sh202.95 with the rest of the amount going to statutory deductions.

The value-added tax  component took Sh35.5, Fuel Energy Charge 32.87, Forex exchange 13.78, Warma Sh0.28, REP Charge 10.14 and inflation adjustment Sh4.10.

The new adjustments will now see fuel cost charge rise to Sh35.43, forex charge Sh14.34 and Warma to Sh0.40.

“Notice is given that all prices for electrical energy will be liable to a foreign exchange fluctuation adjustment of plus 256 cents per kWh for all metre readings taken in November 2020,” EPRA said in the gazette notice.  

The increase in power charges is expected to pile pressure on struggling households and industries reeling from the effects of Covid-19 on the economy.

Expensive Power Purchasing Agreements have been blamed for the high cost of electricity in the country, where consumers are paying even for un-utilised power as a result of overproduction.

The country has a generating capacity of over 2,800MW with a demand of about 1,926MW.

The weakening shilling has continued to lift power costs in the country. Yesterday, it dropped to the low of Sh109.28 against the greenback.

Loans advanced to power sector firms for infrastructure projects such as power generation plants and transmission lines are usually in US dollars. There are also instances where the loans are in Japanese Yen or Euros.

Most of the loans were advanced when the local currency was exchanging at Sh85 against the dollar five years ago.

The shilling has since weakened to Sh109.20, meaning that Kenyans could be paying 18 per cent more on dollar  denominated loans.

When the shilling weakens against major currencies, the borrowers usually use more of the local currency to repay these debts and these costs are  passed on to consumers, which is captured as the foreign exchange fluctuation component in the bill.

There is a push to increase the amount of shilling denominated debt to the power sector as well as shift to base the Power Purchase Agreements (PPAs) signed between electricity generators and Kenya Power in local currency.

In 2018, the Ministry of Energy commissioned a study on shilling denominated PPA which showed that it would cushion power consumers from currency volatility.

According to the implementers of the study- GuarantCo, the use of local currency financing will lead to productive recycling of savings within a country rather than increasing the country’s external debt burden.

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