FACTSHEET: The cost of electricity in Kenya

With a general election in August, the record of the ruling party in improving the lives of Kenyans is under sharp scrutiny. The price of electricity has not been spared.

The rising cost of living in Kenya has been a recurrent campaign talking point as the country heads to the polls on 8 August 2017.

The price of electricity as measured by the national statistics agency is one cited indicator. Kenyans are reportedly paying more for electricity now than under the previous government, going against the current administration’s pledge to cut the cost of power during its term, which started in 2013.

Data from the Kenya National Bureau of Statistics appears to support higher prices. Kenyan households consuming 200 kilowatt hours (kWh) of electricity paid an average of KSh3,400 in March 2017, compared to KSh3,042 in February 2013, the last full month the previous government was in office.

Is the assertion of higher prices thus an open and shut case? Not so fast, an analyst told Africa Check.

Most electricity generated from renewable energy

Electricity in Kenya is transmitted and sold by a monopoly firm, Kenya Power. The government controls 50.1% of the utility’s shares, with private investors holding the rest.

The firm had 4.9 million customers as at June 2016, its most recent annual report shows. To supply them, it buys bulk power mainly from electricity generating company KenGen and independent power producers. It also procures electricity from state power firms in Uganda and Tanzania.

Last year, KenGen – which has a generation market share of 69% using 32 power plants – provided 80% of the power used by the country.

Renewable energy – largely from hydropower and geothermal plants – accounts for 87% of the total electricity generated annually, while fuel-powered thermal plants provide back-up and support remote areas.

The country’s installed capacity in June 2016 was 2,341 MW, against a demand of 1,586 MW.

Monthly averages can provide indication

It is “very difficult to give a straight answer” on whether prices have increased or not, director of consultancy firm Regulus Limited, Samir Shah, told Africa Check.

Regulus tracks the cost of power in Kenya. It computes monthly power costs per kilowatt hour from actual bills and using official power tariffs.

The reason that electricity cost increases are difficult to judge is that prices fluctuate according to thermal generation costs and other variables.

However, an average of the monthly cost per year will give a fairly good picture of whether there has been an increase or a decrease, Shah added.

Three bands of power consumers

The total amount payable depends on the kilowatt hours consumed, with three discernible bands in Kenya.

Users are broadly categorised into:

  • Lifeline consumers who use less than 50 kWh per month;
  • Domestic consumers who use at least 200 kWh and
  • Industrial or commercial consumers who exceed 1,500 kWh.

A number of levies, many of which vary periodically, are then added to the power bill to arrive at the final monthly amount.

Using Regulus’ data, the average monthly cost for domestic consumers of a kilowatt-hour was KSh18.11 in 2012; KSh17.68 in 2013; KSh22.20 in 2014; KSh20.23 in 2015 and KSh19.65 in 2016.

A closer analysis of the monthly variations shows the swing in average prices. In January 2012, the average cost of power for those using 200 kWh was KSh3,730 before falling to KSh3,038 in January 2013.

Individual elements of bill not static

The movement in the individual components of a typical electricity bill underlies the price shifts.

* Fixed charge

The fixed charge, which is among the more stable items of the bill, caters for the cost of billing or vending prepaid tokens. In January 2014, the Energy Regulatory Commission raised this charge for domestic users from KSh120 to KSh150.

* Fuel cost charge

The fuel cost charge foots the bill for the generation of electricity from thermal power plants. It varies every month depending on how much electricity the plants generated and the final cost of the fuel used to do so.  

A January brief by energy minister Charles Keter stated that the fuel cost charge when President Uhuru Kenyatta took office April 2013 was KSh6.21 per kWh. This fell to KSh4.34 kWh before rising to KSh7.22 per kWh in June 2014 due to decreased hydropower.

In Kenyatta’s term it reached a low of KSh2.31/kWh, first in June 2015 and then the first 10 months of 2016, and in December 2016 was at KSh2.85/kWh. (Note: Independent data tracking this charge from November 2008 can be found here.)

* Other costs

Inflation adjustments are made every six months. In March 2017, inflation was 10.28%, compared to 6.45% in March 2016.

A levy of 0.05 cents per kilowatt hour for hydropower generation of 1 megawatt and above is passed on to the Water Resource Management Authority (WARMA).  

The Energy Regulatory Commission gets 0.3c per kWh to cover its operational costs while another agency, the Rural Electrification Authority (REA), gets 5% of the units consumed.

Forex adjustment is meant to cater for foreign exchange movements that could affect the repayment of international debt, such as money borrowed for power projects.

A 16% Value Added Tax is then placed on the fixed charge, consumption, fuel cost charge and forex adjustment. (Note: Before September 2013, VAT was at 14%.)

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