How to work out the average cost of electricity

By MUNGAI KIHANYA

The Sunday Nation

Nairobi,

13 May 2018

How would you work out the average cost of electricity? By getting all electricity bills and punching the numbers into the calculator? Well, there is a much quicker and more elegant method of doing it.

You get the total annual revenue of the electricity supplier and divide that by the number of units supplied during the period. Doing this captures all the customers and yields a result that contains data from a whole year. The question is: is this data available?

The Kenya Power and Lighting Company’s annual report has all that information (and more!). In the 2016/17 financial year (It ended on 30 June 2017), Kenya Power recorded a total of Sh121 billion in sales. This comprised of actual consumption charges plus the fuel and foreign exchange adjustments (Sh6.7bn and Sh22bn, respectively).

In that financial year, the company supplied a total of 7,700GWh of electrical energy. Now before saying what GWh means, let me highlight an interesting fact: Kenya power purchased a total of 9,500GWh from the power generating companies. In other words, 1,800GWh (or 19%) was lost in the system! System losses are a whole chapter on their own, so I will go into that.

GWh stands for giga-watt-hours. One GWh is equivalent to 1,000,000kWh; and the kWh (kilo-watt-hour) is the basic unit used to sell electricity to consumers. Thus, in 2016/17, Kenya Power sold 7.7bn kWh (= 7,700 x 1,000,000) for a total of Sh121bn.

This works out to Sh15.71 per kWh. This is a good average for it takes care of both large-scale industrial consumers and small-scale domestic customers. However, it does not include government levies and taxes. In total, these come to about 20% of the cost calculated above. Thus, the average price is about Sh18.86 per kWh.

With this average cost, the next question, naturally, is: how does it compare with other countries in the world? For some inexplicable reason, Kenyans like to compare their cost of electricity with Ethiopia’s. Unfortunately, I can’t find the annual reports of the Ethiopian Electricity Utility Company anywhere on the internet.

But I did find those of the South African power utility, ESKOM. In 2017, they sold 214,000GWh (pause and reflect – that’s 28 times our figure!) for 175 billion Rands (ZAR). Thus electricity costs ZAR1.22 per kWh in South Africa. That is, about Sh9.90.

However; this Sh9.90 does not include taxes and levies. So, we should compare it to our “base rate” of Sh15.71. It turns out that our electricity is about 60% higher than that of South Africa.

Using similar data from Nampower of Namibia, I found that the cost there is Sh10.82 per kWh – slightly higher than that of South Africa.

So it is true: we have quite a long way to go. Indeed; the Kenya Power report shows that, over the last six years, the average cost of electricity has not change significantly. It has remained at about Sh15 per kWh.