Electricity consumers are paying almost Sh0.50 higher per unit in October on the weakening shilling and high global prices, adding pain to the high cost of living.
On Friday, the Energy and Petroleum Regulatory Authority (Epra) raised fuel cost charges on electricity to the second highest in 10 years as a barrel of oil in the global market went up 0.6 per cent to $94.04 (Sh11,425).
The fuel charge is now at Sh7.09 per unit of electricity consumed this month from Sh6.79 last month.
“Notice is given that all prices for related electrical energy specified in Part II (the Schedule of Tariffs 2018) will be liable to a fuel energy cost charge of plus 709 Kenya cents per kilowatt hour (kWh) for all meter readings to be taken in October 2022,” said Epra in a gazette notice Friday.
The latest rise in the fuel component of electricity brings that cost element close to the record high of Sh9.03 per kWh in June 2012.
Besides, the regulator also raised the Foreign Exchange Fluctuation Adjustment to Sh1.48 per unit from Sh1.37 in September.
This cost is equally passed to consumers to cushion the power sector players from the volatility of the local currency.
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 exchanged at Sh85 against the dollar five years ago.
The weakening shilling closed the day yesterday at 121.16 units against the dollar. It has shed almost seven per cent in value since January when it traded at 113.50.
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 the productive recycling of savings within a country rather than increasing the country’s external debt burden.
For Sh100, a low-cost power user will get 5.19 units of power, with actual electricity charges taking Sh39.99 while the rest at 60 per cent goes to taxes and statutory deductions.
Prior to adjustment, Sh100 could fetch 6.27 units of power, with Sh48.37 for the actual electricity cost and the balance goes to statutory deductions.
Apart from the Fuel cost charge of Sh35.22 and the forex charge of Sh7.1, a consumer who pays Sh100 for electricity in Kenya is deducted Sh12.02 for VAT, EPRA charge of Sh0.15, Water charge of Sh0.06, a REP charge of Sh1.99 and Sh3.47 for inflation adjustment.
The increase in power charges is expected to pile pressure on struggling households and industries reeling from the effects of volatilities in the global market.
Several countries in the world have reported the highest inflation figures this year, with the US, UK and several other European nations registering the highest inflation figures in 40 years.
Kenya's inflation accelerated to a record high in September amid a continued increase in the cost of food, fuel, and housing.
Monthly inflation data by the Kenya National Bureau of Statistics (KNBS) shows the country's overall rate of inflation in September stood at 9.2 per cent compared to 8.5 percent in August.
The high cost of living saw users cut on consumption. According to EPRA, 1.099 billion kilowatt-hours (kWh) in September from 1.11 billion units that were consumed in August after power prices were increased for the first time in 10 months.