The Kenyan government is set to hike electricity tariffs by 21 percent, which will com into force on July 1, after the power firm approved new charges, a move which is expected to fuel the run away inflation.
The new tariff structure released by Energy Regulatory Commission (ERC) and received here Friday showed the new tariff would be categorized in five main groups, all of which would include four main levies including energy, demand and fixed and fuel cost charges.
But the 33 percent of power users who consume less than 50 units per month will continue to enjoy a small subsidy.
The subsidies, which amounted to more than 40 percent of the true cost of a unit of electricity, had been identified as one of the factors that were hurting the country's ability to secure its future energy needs.
"These changes are necessary to ensure improvements in the quality of supply and to attract investments in new power generation, transmission and distributions in a sustainable manner," ERC director general Kaburu Mwirichia said.
"For the consumer category, there will be an energy charge rate and a fixed charge. In addition, the demand charge (DC) will be applicable to commercial consumers," said Mwirichia.
"The DC will be applicable to domestic consumers metered at 240 Volts (V), or 415V and whose energy consumption does not exceed 15,000 kilowatt per hour (kWh) per month," he said.
In Kenya, East Africa's biggest economy, demand for power and generation capacity is at par, also leading to load-shedding and supply cuts.
A World Bank survey released on Monday showed Kenya's supply interruptions hurt its ability to attract and nurture investments.
Power outages accounted for the highest component of indirect costs to firms at 8 percent, the bank said.
But Mwirichia said the tariffs will be reviewed after three years save for periodic adjustments on fuel cost, foreign exchange and inflation that will be passed to the end user.
Retail tariffs have remained unchanged since 1999 despite three tariff studies having been conducted over the period, a move that analysts blame for the low investments in the sector at a time when the country is facing a power crisis.
Analysts also said the price raise will affect over 1 million consumers, most of whom have lost their purchasing power because of escalating food, fuel and transport expenses.
Latest figures from the Kenya National Bureau of Statistics showed that inflation rose to 31.5 percent in May from 26.6 percent in April, allowing high food prices to eat deep into consumer pockets.
Mwirichia said there would be a new formula for working out fuel costs per unit of consumption per month.
"This is the cost of all the fuel used to generate electricity in a given month divided by all units consumed in that month," he said.
Kenya has the highest power tariffs in East and Central Africa. Energy costs in Kenya are nearly four times higher than the prevailing rates in South Africa and Egypt.
However, the price raise is of such high significance to the extent that if investments in new power plants are not made now, Kenya will be unable to meet the demand for power in the next few years.
This will reduce the potential of the economy to generate employment at a time when the country is reeling from high unemployment levels, notably among the youth.
However, the move to hike the power tariff was immediately opposed by leading industrialists who termed the hike "extremely wrong".
The chairperson of the Kenya Association of Hotel Keepers and Caterers, Lucy Karume, described the new move as "extremely wrong".
"We are just coming out of hardships and this will cripple the tourism industry," she said.
Kenya Association of Manufacturers chairman Steven Smith said manufacturers were now staring at a more difficult operating environment.
"It is going to be a difficult situation when you look at what is going on in Kenya and globally in terms of fuel prices. This price is above our expectation," Smith said.
The increase, he said, would greatly hurt Kenya's competitiveness in the international market because even the earlier tariffs were way above those paid in other countries.
Kenya manufacturers were paying between 10 shillings (about 16 U.S. cents) and 14 shillings (22 U.S. cents) per kilowatt.
Source: Xinhua
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