How power bills have turned into a silent driver of inflation

The increase in pump prices appears to have overshadowed power bills, yet for many families, largely low-income earners, the high cost of electricity is silently ravaging their purchasing power.

In the October Consumer Price Index (CPI), a cost of living index, the price of 50-kilowatt electricity rose by 44.13 percent year-on-year to an average of Sh1,388.99, data from the Kenya National Bureau of Statistics (KNBS) shows.

Read: Middle class electricity bills up 30pc in a year

In October last year, consumers paid an average of Sh963.73 for the same unit of electricity, revealing the highest cost of power.

This was the highest increase among the consumer items sampled by the statistics agency.

A 200-kilowatt power increased by 30.3 percent with middle-class households paying an average of Sh6,686 up from Sh5,133.06 in October last year.

Higher power bills will translate to less disposable income for other goods and services, said Ken Gichinga, an economist.

Several factors have contributed to the high energy costs, including shocks such as drought, high fuels and currency devaluation, says Beatrice Nyabira, a Partner in charge of the Projects and Infrastructure practice at IKM, a law firm. The higher cost of energy has been aggravated by an extended drought, high fuel prices and the weakening of the shilling.

The Energy and Petroleum Regulatory Authority (Epra) last month raised the Fuel Energy Charge (FEC) to Sh4.94 per unit, an increase of 18.7 percent from Sh4.16 per unit in September.

The energy regulator also raised the foreign exchange rate fluctuation adjustment (Ferfa) from Sh1.38 per unit to Sh2.05, an increase of 48.5 percent due to the weakening of the shilling. This pushed up the cost of a unit of electricity to about Sh28 for an ordinary domestic customer, an increase of about 3.7 percent from about Sh27 per unit in September.

“KPLC has entered into dollar-denominated PPAs under which it purchases power in USD from KenGen and the IPPs. Its revenue, on the other hand, is in Kenya shillings,” adds Nyabira.

But there are long-running factors such as energy theft and under-investment in infrastructure that Kenya Power has never been able to address, adds Nyabira.

Kenya Power has failed to publish a breakdown of the cost components that have contributed to the inflated power bills.

A breakdown should show charges such as forex, fuel adjustment surcharge, VAT, Epra levy, inflation adjustment and water regulator fees.

Epra director-general Daniel Kiptoo said in April the regulator will reverse Kenya Power’s decision to stop a breakdown of electricity bills for pre-paid customers.

“Transparency is paramount. Reducing the information is an issue that we have a big problem with. We are going to write to them and, yes, the breakdown will be reinstated,” Mr Kiptoo said. It is yet to be effected.

The decision by President William Ruto to end a multi-billion-shilling subsidy programme at the end of last year set off the first notable rise in electricity prices.

Read: Auditor reveals how Kenya Power inflates electricity bills

As expected, the increase can be attributed to the painful measures prescribed by the IMF that wants Kenya Power to stop being a drag on the country’s dwindling revenues.

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