Reduction in cost of electricity not uniform

Kenya Power Managing Director Ben Chumo (right) with Standard Chartered Bank Kenya and East Africa chief executive Lamin Majang during the signing of a loan agreement at Stima Plaza, Nairobi, on November 19, 2014. Mr Chumo said the drop in fuel price is due to the injection of geothermal power into the national grid. PHOTO | ANTHONY OMUYA |  ANTION MEDIA GROUP

In Summary

• The variable cost is dependent on the price and amount of diesel and heavy fuel oil used in power generation. It is Sh3.47 per unit of electricity, down from Sh4.79 in October. It was Sh7.22 in August.
• Domestic consumers using between 50 and 1,500 units a month were the biggest losers as the review saw the cost of their electricity increase by 17.73 per cent from Sh11.62 in June to Sh13.68 in July.

By IMMACULATE KARAMBU
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Electricity consumers got a reprieve this month through a 28 per cent decrease in the fuel cost on their bills.

However, this will not lead to a reduction in the overall bill as it includes other fixed and variable costs, data from Kenya Power indicate.

The variable cost is dependent on the price and amount of diesel and heavy fuel oil used in power generation. It is Sh3.47 per unit of electricity, down from Sh4.79 in October. It was Sh7.22 in August.

Kenya Power says the drop is due to the injection of geothermal power into the national grid which has reduced reliance on fuel-run generators.

“The fuel levy is a pass-through cost to the consumer. In some instances, it is higher than the cost of electricity. This cost has come down by 52 per cent this month,” said Kenya Power Managing Director Ben Chumo.

Overall, the total bill is estimated to have come down by about 48 per cent. And, depending on the number of units consumed, Kenya Power says the actual reduction could even be less.

“Customers want to see a uniform drop in the bill without comparing their usage over different months. We have been upgrading our network, and this means that customers now use more units than they have been consuming in the past where there have been frequent outages,” said Mr Chumo.

RENEWABLE SOURCES
The monthly bill includes foreign exchange and inflation adjustment costs, value added tax, rural electrification levy, Energy Regulatory Commission levy, fixed meter charge and water resources management levy.

It also includes the tariff which dictates the cost per unit of electricity, depending on the category of consumer.

Domestic consumers using between 50 and 1,500 units a month were the biggest losers as the review saw the cost of their electricity increase by 17.73 per cent from Sh11.62 in June to Sh13.68 in July.

The energy commission introduced a new tariff in July that increased the unit cost of electricity for consumers using above 50 units a month — the rate of the increment is dependent on different domestic and industrial consumers categories.

With its plan to increase the country’s installed power generation capacity by 5,000 megawatts by the end of 2016, the government aims to halve the cost of electricity bills.

This is expected to be driven by investment in inexpensive and renewable sources of power such as geothermal, coal, wind and natural gas, among others, to replace thermal generators.

HEAVY PENALTIES
But two weeks ago, Energy and Petroleum Principal Secretary Davis Chirchir ruled out the possibility of terminating the contracts of expensive private thermal generators before they expire. Some of them have contracts of 25 years.

This means consumers will wait longer before enjoying the full benefits of geothermal and other resources.

Mr Chirchir claimed that ending such contracts before term could mean the State could incur heavy penalties for breach of contract, which would likely be passed on to consumers.

The switch to geothermal electricity was expected to cut the cost of fuel by 80 per cent, from Sh18 to Sh3.60 per unit of electricity.