Electricity has been a hot topic in Kenya recently. There has been a long drought and it’s impact on hydro-electric power output caused a severe shortfall in electricity, resulting in widespread rationing across the country. Several media articles claim that electricity bills (domestic and industrial) have risen by over 60% since March 2009, blaming increased fossil fuel imports for the rise. I took to investigating whether this was true.
It isn’t.
But first let’s set out the way electricity is charged in Kenya. Electricity is supplied exclusively by the Kenya Power and Lighting Company (KPLC), on behalf of the Kenya Electricity Generating Company (KenGen), under a range of different monthly tariffs. The tariffs were last adjusted in July 2008. Each tariff has a base rate of electricity per kWh. Additionally, a set of surcharges are applied to all tariffs. These are:
- A fixed charge equivalent to meter rent, and, for industrial customers, a demand charge based on average power requirement.
- Fuel Cost Charge (FCS) — based on the cost of fuel purchased by KenGen during the month of billing. Applied per kWh of consumption.
- Foreign Exchange Rate Fluctuation Adjustment — a somewhat obscure measure based on the “foreign currency costs incurred by KenGen in the calendar month immediately preceding the month of the billing period”. Applied per kWh of consumption.
- Inflation Adjustment — another obscure measure based on national inflation measures (such as the Consumer Price Index), as well as (for reasons I don’t fully appreciate) inflation measures for the USA. Applied per kWh of consumption.
- Energy Regulatory Commission (ERC) Levy — fixed at 3 Kenya cents/kWh
- Rural Electrification Programme (REP) Levy — fixed at 5% of the base rate
- VAT — applied on the base rate and all previous surcharges at 12% (down from 16% since November 2008).
The base rate for domestic electricity is 2 KES/kWh for the first 50kWh, 8.10 KES/kWh for 50 – 1 500 kWh, and KES 18.57/kWh for usage above 1 500 kWh. I have used the mid-range rate for my calculations. Here is a graph then of how the total cost of electricity for domestic use has changed since October 2008. The fixed charge of KES 120/month is not included, as it is constant and independent of consumption.
Variation in the total cost of electricity per kWh for the domestic tariff (source data)
The maximum percentage increase in cost over this period was between March 2009 (when the total price was 14.7 KES/kWh) and November 2009 (19.5 KES/kWh): an increase of 33%. The increase between January 2009 and January 2010 was 28%, and over the whole sample period just 6%.
I did the same analysis for the industrial tariff with the lowest base rate (and hence the once subject to the greatest percentage fluctuation):
Variation in the total cost of electricity per kWh for one industrial tariff (source data)
The maximum percentage increase in cost was again between March 2009 (10.3 KES/kWh) and November 2009 (15.3 KES/kWh): an increase of 49%. The increase between January 2009 and January 2010 was 40%, and over the whole sample period just 13%.
So, while there has been an overall increase in the price of electricity in 2009, it is quite evident that the price hasn’t changed by “over 60%”. Indeed, the price fell over the first half of the year. I suspect that the media reports have considered only the Fuel Cost Charge (which has varied considerably over the year) in their figure of 60%. It is a pretty liberal use abuse of statistics to extrapolate this to the total cost of electricity.
In the light of new investment in renewable energy projects to meet the energy shortage, the cost of fuel imports should decline over the next few years. With any luck this will translate into lower electricity costs for the consumer. Even though the cost of electricity hasn’t risen exorbitantly this year, it is still far higher than in other countries in the region.