6th January 2017

REDUCTION IN FUEL COST CHARGE AND ITS IMPACT ON RETAIL ELECTRICITY TARIFFS

The electricity supply industry in Kenya has witnessed significant gains since the launch of a programme to increase capacity in September 2013 aimed at adding cheaper generation. One of the key milestones achieved to date has been on the reduction of the Fuel Cost Charge, leading to a reduction in overall retail electricity tariffs.

As a result of this development, electricity bills have declined significantly in the period between July 2014 to December 2016. This has been driven by a reduction in the fuel cost charges from KShs 7.22/kWh in July 2014 to KShs 2.85/kWh in December 2016, a cumulative decrease of 60.5%. This was a consequence of addition of new, cheaper geothermal generation capacity and sustained dispatch of cheaper hydropower plants.

On average, consumers under the Lifeline Consumer tariff, which is charged to low income consumers, have witnessed the highest decrease at 27.6%. During the same time, Domestic Customers’ (DC) unit cost reduced by 22.2%, while Commercial/Industrial Customers (CI5) unit cost decreased by 24.4%, compared to the cost that applied in July 2014.

The average retail tariffs increased slightly in the month of December 2016 due to an increase in the Fuel Cost Charge occasioned by an increase of petrol thermal power in the energy mix by 3.0%. This was mainly due to low water levels at Sondu-Miriu and Seven Forks hence necessitating the running of petrol based thermal powerplants to cover the shortfall.

As has been the case previously, there will be continued attention on enhancement of the quality, adequacy and sustained overall reduction in the cost of power in the country.

We undertake to educate the public regularly on the status of retail electricity tariffs, quality of supply and other public interest developments in the electricity supply subsector.

Corporate Communications
Energy Regulatory Commission