Forex charge on consumer power bills hits a record high
Kenyans will no longer be given a detailed breakdown of their power bills after Kenya Power stopped giving customers details of individual pass-through costs.
The energy regulator has raised the foreign exchange pass-through cost in the prices of electricity to a record high, underlining the impact of the weak shilling on the cost of living.
In its monthly review of electricity prices for December, the Energy and Petroleum Regulatory Authority (Epra) has raised the foreign exchange rate adjustment (Ferfa) to Sh3.17 per unit.
It is the highest forex pass-through on record, and a steep increase from Sh0.80 per unit last month.
This comes at a time when the Kenya shilling has been on a steep decline against the US dollar for about two years now, which has elevated the cost of living as Kenya is a net importer of goods.
The Central Bank of Kenya (CBK) showed the shilling was trading against the greenback at an average of Sh153.77 on Monday, a decline of 25 per cent from just 12 months ago.
On the other hand, Epra indicated the market rate for the shilling was an average of Sh157.52 against the US dollar in November 2023, highlighting the widespread between the official and market rates of the local currency.
The effect is that Kenyans are now shouldering a heavier burden of power costs due to the weakening shilling.
The last time the forex adjustment was nearly as high was in October 2011 during the weak shilling crisis that led to the then Central Bank of Kenya governor Njuguna Ndung’u being nearly kicked out of office by MPs.
In that month, Kenyans parted with Sh2.74 per unit to cater for the forex blow, a record that had stood for 12 years until this month.
Although rare, Kenyans also benefit in the instances when the shilling strengthens against the US dollar. The last time this happened was in March 2020 at the onset of the Covid-19 pandemic when the cost of power was lower by 11 cents on account of a stronger currency.
Before that, it was in June 2019 when Kenyans got a credit of 7 cents.
Ferfa is a pass-through cost that enables Kenya Power to offset part of its huge monthly forex requirements.
The utility pays independent power producers in in foreign currency, especially US dollars despite electricity being billed to consumers in Kenya shillings.
Kenya Power sunk into a loss of Sh3.19 billion in the financial year 2022/23, which it attributed to a major hit from forex leading to a sharp spike in its finance costs.
