Electricity bills fall as foreign exchange charge drops to zero

Politics and policy

Customers queue at Kenya Power offices. Photo/FILE 

By NEVILLE OTUKI

In Summary

• The foreign adjustment charge has dropped from 13 cents in March to zero for electricity consumed in April and settled in May.
• This will be the first time that the nearly 2.5 million households will not pay for the forex adjustments since 2007.

Consumers of electricity will for the first time since 2007 not pay foreign adjustment costs this month owing to the stability of the shilling against hard currencies, easing inflationary pressure on the economy.

The foreign adjustment charge has dropped from 13 cents in March to zero for electricity consumed in April and settled in May, Kenya Power said in a legal notice published in the Kenya Gazette.

The utility firm said that its fuel surcharge would remain unchanged at Sh5.19 in what is set to lower the cost of electricity that has been on a downward trend in recent months.

This will be the first time that the nearly 2.5 million households will not pay for the forex adjustments since 2007.

“Prices for electrical energy specified in Part II of the said schedule will be liable to a foreign exchange fluctuation adjustment of 0 cents per kilowatts hour (KhW) for all meter readings taken in April, 2014,” read the gazette notice.

Impact

The change will see Kenyan households save an estimated Sh6 million in this month’s power bills, working with the average monthly consumption of 760 million kilowatts.

Kenya National Bureau of Statistics data show the cost of consuming 50 KhW of electricity has dropped from Sh625.50 in April 2013 to Sh513.70 last month

.

This has helped keep inflation in line with government target at between 3.5-7.5 per cent since November. Inflation rose last month to 6.41 per cent, up from 6.27 per cent. 

Housing, water, electricity, gas and other fuel carry an 18.30 per cent weighting in the basket of goods used to measure inflation.

The zero forex adjustment charge is linked to the stable exchange rate that has diluted the currency impact on the operating costs of the power company.

The shilling has held steady at Sh86 to the dollar over the past year and at Sh85 to the Japanese yen over the same period.

Foreign exchange fluctuation adjustment charges are passed on to consumers to meet payments to suppliers, loan repayments and other activities requiring payment in foreign currencies.

The bulk of these payments are based on the US dollar and the yen.

A wobbly shilling in 2011 sent the forex adjustment costs to a new high of Sh2.74 in October of that year when the shilling weakened to a record Sh107 to the dollar, prompting the Central Bank of Kenya to intervene