Why is your Kenya Power bill about to shoot up dramatically? If you’ve read the news recently, you’ll have seen that Kenya Power intends to backdate taxes that should have been paid last year onto the consumer. This article aims to address why this has happened. Part 1 of this article can be found here.
According to a recent article in the Business Daily, “Electricity consumers face Kshs 8.1 billion backdated bills as Kenya Power moves to recover costs incurred on diesel generators last year but were not factored in monthly charges while the government sought to keep a lid on utilities in an election year… Kenya Power absorbed the fuel costs in the months leading up to the August 8 elections, building up the arrears over the period”.
Kenya Power’s revealed this cost in its annual financial statement.
What are these fuel costs?
And why are we as consumers having them passed on to us? Kenya Power publishes the Fuel Cost Charge, or FCC in the Kenya Gazette on a monthly basis. FCC is a variable rate per kWh. This means that you pay more for consuming more electricity. FCC is reflective of the cost (to Kenya Power) of generating electricity during the previous month.
At this point, it is important to note that Kenya generates energy in the following ways: 52.1% from hydro, 32.5% from fossil fuels, 13.2% geothermal, 1.8% from bio-gas co-generation and 0.4% from wind.
As you can see, Kenya is reliant on hydro-electric power. Due to the on-going drought, however, Kenya Power has had to incorporate more fossil fuels into the energy mix.
Where does Kenya Power find fossil fuels to use when hydro-power is not enough to supply the needs of the country?
Kenya Power signs Power Purchase Agreements (PPAs) with electricity generators to supply electricity. Kenya Power then pays the generators for being on standby and for the amounts that they sell to Kenya Power based on demand.
Since the cost of generating power using fossil fuels is more expensive than, say, hydro, Kenya Power transfers this cost to consumers as the Fuel Cost Charge. Therefore, consumer has always had the Fuel Cost Charge passed on to them. The only difference is that it was artificially kept low for an extended period.
And now the chicken have come home to roost.
This article first appeared here.