This archive report was first published on 14 July 2019.
Kenya's power bills are set to rise again due to the weakening shilling against the US dollar. The Energy and Petroleum Regulatory Authority (EPRA) has announced that power consumers will pay 4.52 cents per kilowatt-hour (KWh) in foreign exchange costs this month, the highest level since August last year.
According to EPRA, the foreign exchange fluctuation adjustment (FERFA) component on the power bill is a pass-through cost that cushions power sector players from currency volatility. This means that whenever the Kenyan shilling weakens against currencies like the US dollar, borrowers in the power sector use more of the local currency to repay debts, which are then passed on to consumers.
EPRA has indicated that power consumers will pay 4.52 cents per kilowatt-hour (KWh) in foreign exchange costs this month, which is the highest level since August last year when consumers paid 5 cents per unit of power. This is due to the weakening shilling, which has dropped to a low of Sh102.92 to the US Dollar on Friday from the mean exchange rate of Sh101.28 at the beginning of June.
There is a push to increase the amount of shilling-denominated debt to the power sector as well as shift to base the Power Purchase Agreements (PPAs) signed between electricity generators and Kenya Power in local currency. This would cushion power consumers from currency volatility. However, this plan is long-term and would not affect PPAs that power producers currently have with Kenya Power and financial obligations to lenders would not be affected.
Other charges such as the fuel cost charge (FCC) will also be affected. The FCC will be at Sh3.67 per unit in July, which is similar to levels in June. It has been climbing since August last year when it stood at Sh2.50.
