The Energy Regulatory Commission (ERC) will be forced to make a tough call as President Uhuru Kenyatta on Tuesday gave a directive that electricity bills should be reduced within a month to accommodate to SMEs and reduce the cost doing business in the country.
Both the ERC and the Ministry of energy will have a hard time restructuring power pricing considering the Treasury had already penciled in revenues from the sector.
Currently, much of what consumers pay goes to levies with taxes leading with 39.78 shillings if one buys, say tokens of 300 shillings. The amount going to the fuel index stands at 33.79 for the same number of tokens followed by 10.68 shillings for the Rural Electrification Program (REP).
Moreover, other deductions included in the tokens that consumers buy are the Water Resources Management Authority, Energy Regulatory Commission, Forex adjustment, and inflation adjustment. For the 300-shilling token, levies for these items stand at 0.35, 0.4, and 0.67 shillings for the last two respectively.
From the example, it is conspicuous that levies account for about 30 percent of the total cost and if the price reduction occurs, this could be the areas that the two bodies will consider revising.
The move is a cause for celebration for the already oppressed citizen but it is too early to celebrate since the levy is exactly what the government relies on to achieve the Big 4 Agenda. On the contrary, the move is set to boost the manufacturing industry as it favors production.
According to the president, SMEs are the source of employment for over 75 percent of the labor force and finding ways of financing them is mandatory and if their infrastructure is to be improved, the cost of electricity comes first.
President Kenyatta made the announcement yesterday during the Round Table forum for SMEs at Strathmore University after refusing to read a written speech saying it would only embarrass him in regards to the matters raised. He said that reading policy matters wouldn’t help much.
“Within a month, we must come back here with solutions, that is why I do not want to embarrass myself reading this written speech,” said the President.
If the initiative comes to pass, the reduction in power prices will enhance and accelerate growth in various industries, and it is one move that the government should have seen from before.
Achieving the Big 4 agenda is not possible without the manufacturing sector. It is what the state banks on to spur the economic growth since it is expected to account for 15 percent of the Gross Domestic Product by the year 2022 as opposed to the current value at 8.37 percent.