Cost of power drops thanks to rains and strong shilling

By: VINCENT ACHUKA

It is an early Christmas present for electricity consumers as the price of power is set to go down marginally for the first time since July courtesy of a strengthening shilling, falling fuel prices and the El Nino rains which have reduced dependence on diesel generators.

In a new gazette notice published by the Energy Regulatory Commission (ERC), the Forex Exchange Fluctuation Adjustment, which is a critical component of one’s power bill, has been reduced by 6 per cent to Sh1 per Kilo Watt Hour (kWh) while the Fuel Cost Charge (FCC) remains the same at Sh2.51 per kWh.

Both charges are determined by the exchange rate of the Kenyan Shilling against the dollar and international oil prices.

But while the price of oil has been falling for the last 14 months in the international market due to a production surplus, a strengthening US dollar has made the Kenyan Shilling to tumble, leading to a back to back increase in the cost of power due to over reliance on expensive diesel generated electricity.

“There has been a general increase in the dam levels as a result of the ongoing rains plus the shilling has been steadily stabilising against the dollar so naturally we have to pass on these benefits to Kenyans,” ERC Director General Joseph Ng’ang’a told the Sunday Nation on Saturday.

“We do not expect the dam levels to reduce soon but geothermal electricity is still the largest contributor in the power mix as we try to conserve water in our reservoirs to reach the next rainy season,” he said.

Electricity generator KenGen last week said that all the dams in its Seven Forks scheme have reached spilling levels, which has forced Kenya Power to purchase more electricity from it instead of Independent Power Producers (IPPs).

Currently, water generated hydro contributes 38.1 per of Kenya’s total power mix while diesel-powered plants and wind contribute 14.8 and 0.4 per cent.

According to the gazette notice, a total of 298 million kWh of electricity were consumed in October out of which 104 million was from 20 active thermal producers.

Kenya Power has 24 long term contracts with such IPPs.

A “Take or Pay” tariff agreement ensures that they are paid even when not producing electricity.

This cost of purchasing power from these thermal producers is transferred to a customer’s bill as fuel cost charge. It is tied to the strength of the shilling as Kenya is an oil importer.

SOURCE: DAILY NATION