Why the New Electricity Charges are Exorbitant and Ridiculous

The public outcry over the increased cost of electricity for domestic users was certainly answered with a billing system that stirred many heads. According to an announcement made by the Energy Regulatory Commission (ERC) on July 30, 2018, the new billing system would lower the amount households spent on buying tokens. Here is how everything is ridiculous.

For one, the new billing process scrapped off the standing charges of 150 shillings a month, which was ideally what Kenyans wanted. Then it got worse. Contrary to what consumers hoped would be a reduction in bills after the exemption of the charges, they now pay more!

Customers who bought tokens from August 1st were left with frustration after receiving an unrealistically negligible number of units for the same amount of money as before.

The fixed charge might have been exempted, but the cost of each unit increased tremendously. For a consumption of up to 10kW, the price of one unit rose from 2.50 shillings to 12 shillings! As if that isn’t enough, the price of 10kW to 50kW increased from 2.50 shillings to 15.80 shillings.

Let’s do a little illustration using someone who bought tokens on two different occasions.

The first purchase he made was in March 3rd, 2018 and with 500 shillings, the number of tokens or units he received was 32.1. Then, there was no breakdown of the other charges on the message but the new change details how the billing process works. This amount was after he had paid the standing charges of 150 shillings.

In his second purchase, which was on August 8, for 500 shillings, he received 22.53 units. Here is why:

The table shows how the 22.53 units were arrived at. Apparently, the tokens are considerably less compared to the 32.1 he got before! Even if he still added the 150 shillings paid before as standing charges, he still would have gotten lesser units.

The change, based on the 10kW to 50kW process is as depicted below:

Key

REP – This is a 5% levy on the cost of the units of power consumed by a customer. Mostly, the levy is passed on to the Rural Electrification Authority (REA) for implementation of the rural electrification projects.

WARMA – This is the levy of energy purchased from hydropower plants.

ERC – It is passed on to the Energy Regulatory Commission (ERC), the regulatory arm of the energy sector.

FUEL COST CHARGE (FCC) – This charge is the added cost or rebates to the consumers as a result of fluctuations in world prices as well as fluctuations in the quantity of oil consumed by electricity generation. The fuel cost charge lags one month behind the actual the actual price of the fuel. This money is collected by KPLC and all of it is passed on directly to electricity generation companies, who in turn pay fuel suppliers.

FOREX ADJUSTMENT (FOREX) – The foreign exchange component is related to the fluctuation of hard currencies against the Kenya Shilling for expenditure related to the power sector such as project loan repayments.

INFLATION ADJUSTMENT – These are the real prices that show the trends in the commodity price after removing the effect of general inflation.

TAX – This statutory levy of the total amount that is passed on to the Kenya Revenue Authority (KRA).

The billing process might seem comprehensive now, but it certainly isn’t as friendly as Kenyans wanted it to be. In fact, some of the concerns raised were that the KPLC and ERC have no constitutional mandate to review the tariff. Nonetheless, one thing remains clear for consumers, the charges are high.