Weakening shilling denies consumers cheap power

Weakening of the shilling has raised the foreign exchange charge in electricity bills to a 22-month high even as the regulator left the fuel cost charge unchanged, denying consumers cheaper bills.

The Energy and Petroleum Regulatory Authority (EPRA) on Friday raised foreign exchange rate fluctuation adjustment (Ferfa) to Sh0.24, the highest since July 2018 when it was at Sh1.22 to reflect the weakening shilling.

“Pursuant to clause 2 of part III of the Schedule of Tariffs 2018, notice is given that all prices of electrical energy specified in part II of the said schedule will be liable to Ferfa of plus 23.56 Kenyan cents per kilowatt hour for all metre readings to be taken in April,” said EPRA director-general Pavel Oimeke in a gazette notice.

This marked a departure from February and March when the charge was negative Sh0.01 and negative Sh0.11 respectively on a stronger shilling.

Ferfa is one of the key determinants of what consumers pay in bills alongside fuel cost charge (FCC), inflation adjustment, water charge, value added tax and other levies.

Commercial banks quoted the shilling exchanging at 106.20 units per dollar on Thursday last week, a weaker position from 100.40 units in February, driven by reduced dollar inflows and thin trading activity in the wake of coronavirus pandemic.

EPRA held the fuel cost charge, which is influenced by the share of electricity from fuel diesel generators, at Sh2.50.

This is the same level it has been since a reduction from Sh2.65 in January.

FCC has been retained despite the share of thermal power in the national grid reducing on account of increased green energy sources at a time global oil prices have also dropped sharply.

Murban crude oil was quoted at Sh2,374 ($22.40) on April 2, continuing the 18 year-lows record that is supposed to benefit consumers in oil-importing countries like Kenya.

The share of expensive thermal power plant in the national grid had reduced to 13.4 percent by January, the lowest in three years as government turned to hydropower, geothermal, wind and solar sources.

Thermal power had a share of 26.46 percent in the national grid in 2017 before falling to 16.5 percent in 2018.

It was at a high of 34.49 percent in 2014 owing to erratic rains that hurt hydropower supply.