ERC verdict sets the stage for rise in electricity bills

Customers queue to pay their bills at a Kenya Power office. Kenya Power is seeking approval of a 21 per cent rise in fixed charge and power consumption tariffs. Photo/File  

By CHARLES MWANIKI

Posted  Wednesday, November 6  2013 at  19:31

In Summary

• Acting director-general for the Energy Regulatory Commission (ERC) Fredrick Nyang’ said in an interview Wednesday that review of the electricity distributor’s application will be concluded next month.
• Tariff adjustment is usually done to cushion Kenya Power from inflation-driven increases in operating expenses and also provide the electricity distributor with cash for upgrading its transmission network.
• Dr Nyang’ also acknowledged that an upward tariff review may be necessitated by a need to give fair returns to investors, who are coming into the sector under a plan to ramp up production in the short term.

The energy sector regulator is set to issue its verdict on Kenya Power’s application for an increase in electricity tariffs, signalling a possible rise in power bills early next year.

The acting director-general for the Energy Regulatory Commission (ERC) Fredrick Nyang’ said in an interview Wednesday that review of the electricity distributor’s application will be concluded next month.

Kenya Power is seeking approval of a 21 per cent rise in fixed charge and power consumption tariffs.

“We will have a meeting in December where we will make and announce some final decisions. We have been having very intense consultations with the sector players over the issue,” said Dr Nyang’.

Kenya Power has had its application for tariff review turned down twice as concerns over the high cost of living forced the government to postpone the price changes that are supposed to happen every three years.

READ: Ruto stops power tariffs increase

The tariff adjustment is usually done to cushion Kenya Power from inflation-driven increases in operating expenses and also provide the electricity distributor with cash for upgrading its transmission network.

Dr Nyang’ said that the discussions have explored the need for the government to make some interventions in the energy sector in order to keep the tariffs at a manageable level while safeguarding Kenya Power’s commercial viability.

The Treasury earlier this year advanced Kenya Power Sh2.7 billion to subsidise the cost of new electricity connections, which helped the company to hold the charge at Sh35,000 having proposed a doubling of this figure.

Dr Nyang’ spoke to the Business Daily after handing over a power generation licence to Aeolus Kenya, the developers of the 61MW Kinangop wind power farm. He, however, declined to disclose the expected changes to the current tariff structure to avoid pre-empting the ERC’s decision.

Kenya Power argues that a tariff increase is necessary to boost its capacity to maintain and upgrade electricity distribution. It has announced plans to spend Sh80 billion in the medium term to upgrade the ageing electricity network.

Under the proposed new tariff structure, domestic consumers from March 2013 were to pay a fixed charge of Sh200 rising to Sh300 from July 1, 2015, up from the current Sh120.

Households consuming less than 50 kilowatts per hour (Kwh) would see their energy bills rise to Sh5.1 from the current Sh2 for each unit of power consumed.

Those consuming between 50 Kwh and 1,500 Kwh would have their energy costs increase to Sh11.4 from the current Sh8.1 for each unit.

In an interview with the Business Daily last month, the acting managing director of Kenya Power, Ben Chumo, defended a tariff increase, saying that the impact on electricity bills would be offset by closing down of diesel power generators and exploiting cheaper power options such as geothermal.