According to a press release from the Energy & Petroleum Regulatory Authority (EPRA), Kenya Power (KP) made a Retail Tariff Application (RTA) to the regulator that will see the cost of electricity increase. If approved, the RTA would be applicable for the tariff period 2022/23 to 2025/26. The application has made new proposals that will increase the price of electricity and introduce new bands that consumers will be placed in based on their consumption. Following the RTA submission by KP, EPRA will conduct stakeholder consultation workshops from 31st January 2023 to 10th February 2023, as highlighted in this public notice.
Kenya Power has given the following reasons for the RTA:
- Meet power purchase obligations for KenGen and IPPs for existing and committed power plants in the next 3 years;
- Enable continuous system expansion, refurbishment and improvement to provide quality and reliable power;
- Support Government objective on universal electricity access;
- Meet increased transmission and distribution costs to operate and maintain the expanding electricity network owned by Kenya Power, Kenya Electricity Transmission Company (KETRACO) and Rural Electrification Schemes.
Kenya’s Energy Sources
Kenya Power states that as of June 2022, the installed generation capacity was 3,078 MW, and the total interconnected capacity was 2,925 MW. The highest system demand in the 2021/2022 fiscal year was 2,057 MW, recorded in June 2022. For the 2021/2022 fiscal year, the total energy purchased increased by 4.57% to 12,652 GWh, compared to the 12,101 GWh purchased in 2020/2021. The figure below shows the proportion of energy purchased in the fiscal year 21/22:
Hydro and geothermal were the most purchased at a combined 66%. The combined contribution of renewable energy sources, i.e., hydro, geothermal, solar and wind, was 84%.
Effect on Households
The effect of the RTA on households is expected to be negative. The rate approved in 2018/19 was KES 10/kWh up to 100 kWh per month and KES 15.8/kWh for consumption above 100 kWh during the month. In the RTA, Kenya Power first proposes that the maximum monthly consumption for lifeline consumers, currently at 100 kWh, be reduced to 30 kWh. A “lifeline consumer” is a term used in the electricity sector to refer to low-income households or individuals eligible for special tariffs or subsidies to help make electricity more affordable. The lifeline consumer program aims to provide access to basic electricity services for those who may otherwise not be able to afford it. The proposed tariff is KES 14.00/kWh up to 30 kWh per month and KES 21.48/kWh for consumption above 30 kWh. The sensitivity table below illustrates the effect of the proposed changes:
*Prices not inclusive of other charges and levies
However, it is worth noting that the above costs do not include other charges that Kenya Power includes when consumers purchase electricity tokens. The other charges include Fuel Energy Cost, Foreign Exchange Rate Fluctuation Adjustment, inflation adjustment (varies annually or bi-annually), Water Levy (WARMA, which varies monthly), Value Added Tax (currently at 16%), Rural Electrification Program (REP) Levy among other costs. This means that the cost of electricity is set to become even higher than illustrated above.
Kenya Power expects the RTA to become effective on 1st April 2023. The analysis above shows that households can expect their cost of electricity to increase by a minimum of 40%. This will be an additional burden on households that already have to contend with high costs caused by inflation and a depreciating currency. Households will have to brace themselves for the economic shockwaves if the RTA is approved later this year.
Disclaimer: The information contained in this document has been obtained from sources available in the public domain, and InVhestia does not take responsibility /accept any liability with regard to any errors, omissions or opinions contained in this document. This publication is meant for general information and should not be used to make investment decisions.
By Valentine Wahome, Analyst InVhestia Africa