Kenya Power loses Sh3.7bn in unrecovered fuel cost charge

Kenya Power employees replace a transformer on Moi Avenue in Mombasa. FILE PHOTO | NMG

Utility firm Kenya Power lost Sh3.7 billion from the freeze on surcharges including the fuel cost charge and the foreign exchange rate fluctuation adjustment across six months to last June.

The additional losses for the electricity distributor reveal the financial burden the firm faces in supporting the government’s 15 percent reduction in electricity costs last year.

According to the audit of the utility’s books in the year ended June 2022, Kenya Power had revenues of Sh7.3 billion and Sh24.4 billion in relation to foreign cost adjustment and fuel cost charge respectively.

The revenues were, however, against corresponding foreign exchange costs and fuel costs amounting to Sh9.1 billion and Sh26.4 billion.

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“The foreign exchange costs and fuel costs are passed to the customers, hence expected to match. Management has indicated that the variance was due to actual recovery rates approved by the Energy and Petroleum Regulatory Authority for billing to customers, being lower than the actual rates applied at the point of purchasing power from the producers,” noted the Auditor-General.

Surcharges on customer billings remained unchanged between December 2021 and last August at Sh4.63 per unit and 73 cents respectively, anchoring the State-backed subsidy on electricity bills.

The surcharges are reflective of the costs of generating electricity from thermal sources and foreign currency costs incurred by Kenya Power during electricity purchases.

Both levies were unchanged in the nine months despite notable changes in the cost of fuel and a weaker Kenya shilling against major currencies in the period including the US dollar.

The pause of adjustments to the charges served to keep electricity costs unchanged for the average domestic user at Sh21.87 per unit.

Gains for consumers were, however, losses for Kenya Power, which lost a further Sh2.2 billion as related agencies including KenGen, the Kenya Electricity Transmission Company Limited and the Geothermal Development Company Limited failed to contribute to their share of the cost reduction.

KenGen for instance denied Kenya Power a Sh1.75 billion discount on its billing, leaving the utility to shoulder the burden of implanting the tariff cut on its own.

Adjustments to the FCC and FERFA charges have however since been reinstated as of September last year, preceding the end of subsidies on electricity prices.

The government indicated it would end subsidies on electricity at the end of last year as it seeks to lift the burden on Kenya Power which has shouldered the full weight of the rebates on electricity bills in the past year.

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EPRA is however yet to publish new electricity tariffs for domestic and industrial consumers which would mark the termination of the subsidy program.

The energy sector regulator had published new tariffs in January last year, bringing to effect the government’s low power cost initiative.

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