A Review of the Nigerian Energy Industry

Kenya’s new power tariffs target high consumers, shield domestic users

Electricity transformer20 November 2013, Nairobi – Houseeholds consuming up to 50 units of power a month and small commercial customers using up to 424 units have been shielded from an average of 5.2 per cent increase announced yesterday by the Energy Regulatory Commission.

Under the new review which ends in June 2016, the two groups that jointly account for 69.4 per cent of all power consumers, will not experience any major price increases. Starting next month, they will pay 7.9 and 2.5 per cent less per kilowatt hour(kWh), respectively, compared to the prevailing Sh16.34 and Sh22.47.

Their new tariff will therefore be benchmarked at Sh15.06 and Sh21.91 a unit, respectively, although this will rise slightly to 15.11 and Sh22.60 by June next year. All the other power consumers will pay between three and 10.6 per cent over the prevailing average of Sh17.10 per unit starting December 1 to Sh17.99– an average 5.2 per cent rise. This will then jump to Sh18.11 by next June.

Starting next July, however , the average base cost of a unit of power will progressively fall by an average of 11.2 per cent to Sh16.09 in July 2014 and a further 6.4 per cent the following year to Sh15.06 in July 2015. “As we eliminate expensive fossil fuel powered plants in the mix under the 5,000MW+ programme, we will end up with power bills decreasing significantly,” said ERC acting managing director Fred Nyang.

Under the programme, the government is seeking to install an additional 5,400MW to the 1680 MW national grid by December 2016. The ambitious programme launched last September leverages on increasing power generated from geothermal, hydro, wind, co-generation and cheaper fossil fuel-powered coal and gas plants.

Over the time, the government hopes to completely eliminate expensive emergemce thermal power from the grid. “In August, we removed 90MW of power and the remaining 30MW will be eliminated sometimes next year when we install additional capacity from Olkaria geothermal plant,” Nyang said.

The new base tariffs, he said, were arrived at on Monday after considering all factors raised by stakeholders on and after February 25 when public forum was held at the Kenyatta International Conference Centre.

The tariffs are a major a major blow to Kenya Power’s two-year quest to have consumers shoulder some of its burgeoning operational costs through increased electricity bills. “We expect KPLC to pull up its socks and deliver quality services,” Nyang said. “The tariffs are prudent enough to meet infrastructure, distribution and transmission costs.”

The country, he said, needs an expanded installed capacity, improved quality in service and reduced tariffs that support business growth by attracting investors and creating wealth and jobs.

Kenya Power’s last proposal in February sought to significantly increase non-fuel tariffs by 21 per cent in March 2013, a further nine per cent in July 2013, four per cent in July 2014 and 11 per cent a year later in July 2015.

The fixed charge for using electricity would also have increased progressively to Sh300 in July 2015 from present Sh120 for domestic and small commercial customers, and from from Sh800 to Sh2500 for some large commercial and industrial consumers.

In the new structure, non-fuel cost excluding taxation will go up from current Sh10.32 a unit to Sh11.55 in July 2014 and Sh11.16 in July 2015.

Over the period, fuel cost is projected to drop from 15.59 a unit to Sh 15.51 by next June , then Sh13.44 the following month and Sh12.26 a year later in July 2015.

– The Star

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