The cost of electricity will rise this month after the Energy and Petroleum Regulatory Authority (Epra) yesterday increased the foreign currency component of the electricity bill.

The adjustment for exchange rate fluctuations rose in the review announced on Friday to 1.16 shillings per unit of electricity consumers will buy this month.

This is the highest level since July 2018, when consumers paid Sh1.22 per unit for the forex component.

The new per kilowatt-hour rate means exchange fees have risen 52% from 77 cents in June of this year.

The component is reviewed monthly and aims to protect investors in the power sector from the volatility of the Kenyan shilling against major global currencies.

It usually rises whenever the shilling weakens against currencies such as the US dollar.

The weakening of the local currency could result in high costs for the local power industry when, for example, servicing loans, with a substantial portion of their debts denominated in foreign currencies, including the US dollar and Japanese yen.

Yesterday’s increase, however, appears to challenge the recent strengthening of the local currency, which has been making gains against the US dollar for several months now.

The shilling was trading around 107.85 per dollar last week, strengthening above 109 in April and hitting Sh110 earlier in the year.

“Notice is given that all electric power prices specified in Part II of the (2018 Rate Schedule) will be subject to a foreign fluctuation adjustment of over 116.12 cents per kilowatt hour (kWh) for all readings of meter carried out in July 2021 ”declared Epra in an opinion of the gazette yesterday.

Cost of life

The rising cost of electricity comes at a time when Kenyans are still grappling with the challenges of the Covid-19 pandemic, which has eroded their income while driving up the cost of living.

Foreign exchange fees fell sharply in August 2018 when Epra announced new electricity tariffs to five cents from Sh1.22 in July, a drop of 95%.

At the time, Epra said it rebased the component to align with exchange rates.

Exchange fees have since remained low, sometimes to a point where they were negative, as was the case in March 2020 when they were negative by 0.01 Sh per unit of electricity.

Being in the negative meant that electricity consumers were credited with a few free power units when purchasing tokens.

However, it has been steadily increasing for a year.

The Forex adjustment is one of the electricity bill variables that are reviewed monthly. Others include the fuel cost adjustment, which fell slightly for July electricity prices to Sh3.30 per unit from Sh3.63 in June. Prior to that, it had risen sharply from Sh2.92 in May.

Also a passed-on cost, the fuel cost adjustment compensates thermal electricity producers for the acquisition of heavy fuel oil that they use in their power stations to produce electricity.

The Water Resources Management Authority tax is also revised monthly, while the inflation adjustment is revised every six months.

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