How Electricity Bills Became a Silent Engine of Inflation

A MyPower Android app user, Kenya Power. PICTURES | DIANA NGILA | NMG

Rising prices at the pump appear to have eclipsed electricity bills, but for many families, mostly low-income, the high cost of electricity is silently ravaging their purchasing power.

In October’s Consumer Price Index (CPI), an index of the cost of living, the price of 50 kilowatts of electricity rose 44.13 percent year-on-year to an average of 1,388 .99 shillings, according to data from the Kenya National Bureau of Statistics (KNBS). ) watch.

Read: Middle class electricity bills increased by 30% in one year

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

This was the largest increase among consumer goods sampled by the statistics agency.

Power of 200 kilowatts 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 electricity bills will result in less income available for other goods and services, said Ken Gichinga, an economist.

Several factors have contributed to high energy costs, including shocks such as drought, rising fuel prices and currency devaluation, says Beatrice Nyabira, partner in charge of the Projects and Infrastructure practice at IKM, a law office. Higher energy costs have been compounded by a prolonged drought, high fuel prices and a weakening shilling.

The Energy and Petroleum Regulatory Authority (Epra) last month increased the Fuel Energy Charge (FEC) to 4.94 shillings per unit, an increase of 18.7% from 4, 16 shillings per unit in September.

The energy regulator also increased the Foreign Exchange Rate Fluctuation Adjustment (Ferfa) from 1.38 shillings per unit to 2.05 shillings, an increase of 48.5 percent due to the weakening of the shilling. This pushed the cost of a unit of electricity to about 28 shillings for an ordinary household customer, an increase of about 3.7 percent from about 27 shillings per unit in September.

“KPLC has entered into dollar-denominated PPAs where it purchases electricity in USD from KenGen and the IPPs. His income, on the other hand, is in Kenyan shillings,” adds Nyabira.

But there are long-standing factors, such as power theft and underinvestment in infrastructure, that Kenya Power has never been able to address, Nyabira adds.

Kenya Power has failed to publish a breakdown of cost items that contributed to inflating electricity bills.

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

Epra chief executive Daniel Kiptoo said in April that the regulator would overturn Kenya Power’s decision to end prepaid customers’ electricity bill breakage.

“Transparency is essential. Information reduction is a big problem for us. We will write to them and, yes, the outage will be restored,” Mr Kiptoo said. This has not yet been achieved.

President William Ruto’s decision to end a multi-billion shilling subsidy program late last year triggered the first notable rise in electricity prices.

Read: Auditor reveals how Kenya Power inflates electricity bills

As expected, this increase is explained by the painful measures prescribed by the IMF, which wants Kenya Power to stop weighing on the country’s declining income.

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