Section 6(i) of the Energy Act 2006 states that the commission shall “Set, review and adjust electric power tariffs and tariff structures, and investigate tariff charges, whether or not a specific application has been made for a tariff adjustment”
Under the Energy Act 2006 section 6 (j), the commission is mandated to approve electric power purchase and network service contracts for all persons engaging in electric power undertakings.
Tariff review is a systematic process involving the following steps:
- Demand forecasting for the bulk and retail markets informed by an understanding of the social, economic, and political environment and their impact on the key parameters driving demand
- Generation and transmission planning to meet the forecast demand: This involves long range planning of the mix of generating capacity in terms of technology, and preferred developer: whether Public or Private Sector. It also involves planning for the transmission and distribution network development in order to enable the conveyance of the power generated to the final consumer. The outcome of this process is the 20-year rolling Least Cost Power Development Plan.
- Determination of the sector revenue requirements based on forecasts of costs likely to be incurred for generation, transmission, distribution and supply of power.
- Determination of marginal costs of generation, transmission, distribution and retailing; based on approved pricing periods.
- Allocation of total revenue requirement among approved customer classes on the basis of the marginal costs and price sensitivity
- Computation of initial retail tariff proposals
- Sensitivity analysis of the proposed retail tariffs in order to fine-tune the proposed retail tariffs.
- Public exposure of the proposed tariffs, leading to public debate and hearing
- Determination of the final retail tariffs
The schedule of Tariff 2013, establishes cost items that incorporates the retail tariff charged by Kenya Power. The current applicable tariffs is as follows;
Table 1: Current Applicable Schedule of Tariffs
|Fixed charge||Energy charge (per kWh)||Demand charge (per kVA)|
|DC (Domestic, 240 V)||150||First 50kWh: 2.50||n/a|
|50 to 1 500kWh: 12.75|
|SC (Small Commercial, 240 V)||150||13.5||n/a|
|CI1 (Commercial, 415 V)||2 500||Peak: 9.20||800|
|CI2 (Commercial, 11 kV)||4 500||Peak: 8.00||520|
|CI3 (Commercial, 33 kV)||5 500||Peak: 7.50||270|
|CI4 (Commercial, 66 kV)||6 500||Peak: 7.30||220|
|CI5 (Commercial, 132 kV)||17 000||Peak: 7.10||220|
|IT (Domestic water heating)||150||13.5||N/a|
The surcharges applied on all tariff categories are as follows:
- ERC LEVY: It is currently set at 3 cents per kilowatt-hour.
- REP LEVY: This is 5% levy on the cost of the units of power consumed by a customer. It is passed on to the Rural Electrification Authority (REA) for implementation of the rural electrification projects.
- FUEL COST CHARGE (FCC): Variable rate per kWh, published monthly in the Kenya Gazette It is reflective of the cost (to KPLC) of generating electricity from thermal sources during the previous month. This money is collected by KPLC and all of it is passed on directly to electricity generation companies, who in turn pay fuel suppliers.
- WARMA Levy: Water Resources Management Authority Levy. Variable rate per kWh. Passed on to WARMA.
- INFLATION ADJUSTMENT: Variable rate per kWh, with the consumer price index as the underlying factor
- FOREIGN EXCHANGE RATE FLUCTUATION ADJUSTMENT (FERFA): This component is related to the fluctuation of hard currencies against the Kenya Shilling for expenditure related to the power purchasing agreement between Kenya Power and the Power Producers.
- VAT: 16% on total bill incurred.
FCC, WARMA and FERFA are varied monthly, and the cost components published on the Kenya Gazette.