How new tariffs increase cost of electricity by 35%

By MUNGAI KIHANYA

The Sunday Nation

Nairobi,

05 August 2018

The Energy Regulatory Commission (ERC) has published the new electricity tariffs that take effect with bills dated 1^st August 2018 onwards. Even though in its announcement the ERC claimed that the new rates would reduce the overall cost of power this claim is not true.

Indeed, the statement from ERC is self-contradictory: in one paragraph the commission says that it “has approved an increase in the revenue requirement from KSh120 billion to KSh131 billion” and in another one it claims “the overall unit cost of power reduces from KSh17.87/kWh to KSh16.64/kWh”.

No explanation is given as to why revenue for Kenya Power will increase while unit costs are reducing. There is no mention of projected volumes of electricity or number of consumers.

To verify this claim, I carried out two checks. In the first one. I used my June bill in which I had consumed 351 units. With the old tariffs, the cost of energy plus fixed charge (before levies adjustments and taxes) was Sh4,113. When I apply the new rates, the new amount comes to Sh5,508. This is a 38% increment.

I my second check, I scrolled down the entire list of tariffs comparing the old rates to the new ones. I found that not a single consumer category has a lower rate than before! Not even the so-called “life-line category” – their rate increases from Sh2.50 to Sh12.00 and the cut-off consumption is lowered from 50kWh to 10kWh.

The only reduction in the new tariff is the removal of the “fixed charge” – I suspect that Kenya Power was not able to give any viable justification for its existence! However, this subtraction is overcompensated by the increments in the energy costs.

Still, the removal of the fixed charge has reduced the bill for some people. I did a comparison between the new and old tariffs for bills with 1kWh, 2kWh, 3kWh and so on looking out for the point at which the new rates are more expensive.

The tipping point is at 14kWh. Anyone consuming more than this will see an increment in their overall unit cost. In fact, the worst-hit will be those with 50kWh. Their energy cost will jump from Sh275 to Sh477: a 73% increment – almost double!

The next natural question is: what type of consumer stays below 14kWh? Well; 14kWh is 14,000Wh; that is they are consuming less than 467Wh per day.

Now, one 60W bulb switched on for four hours per day (say, 6pm to 10pm) will consume 60W x 4h = 240Wh. Two similar bulbs over the same duration will go above the cut-off at 480Wh.

ERC claims that there are 3.6 million consumers falling in this category. I doubt this figure. I think it is incorrectly evaluated.

Finally: will the removal of the fixed charge simplify the billing structure? As explained in these columns two weeks ago, there is still a long way to go on that front.