Kenya’s power distributor seeks to triple tariffs by 2015

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Kenya Power, the country’s sole electricity distributor, has proposed annual increments that would triple its tariffs over the next three years, pending approval by the Energy Regulatory Commission (ERC).

The new prices, if approved, would have a significant impact on the rate of inflation in east Africa’s biggest economy. Inflation rose for the first time in 13 months in January, to 3.67 percent from 3.2 percent in December.

According to a statement from the ERC, the power firm is proposing to raise commercial rates charged to manufacturers by about 213 percent per unit of electricity to 2,500 shillings per month by June 2015.

The proposal will also see its domestic retail tariffs rise by 150 percent to 300 shillings over three years, from the current 120 shillings per month, the statement said.

The increases are likely to cause a ripple effect of price increases by manufacturers, and will be debated by power users at a public forum on Monday. This would be the second time the tariffs were reviewed after a previous one in June 2008.

The review, which is supposed to be done every three years, was put on hold in June 2011 after the ERC declined to approve a 25 percent increase in the charges proposed by Kenya Power, in an attempt to cushion consumers from rising prices then.

Kenya’s inflation had soared to peak at nearly 20 percent in November 2011 due to high global oil prices and a drought that caused food prices to jump. The rate has since fallen, after policymakers adopted a tight monetary policy.

Kenya Power supplies 1,250 megawatts of power to over 2 million customers connected on the national grid, against a demand of 1,700 megawatts, with most of the fuel generated from hydro power stations by KenGen.

Kenya Power also supplies fuel-based electricity, for which it charges extra depending on the fluctuation of international oil prices, as well as a further surcharge to cover itself against foreign exchange movements.

The firm has said it plans to spend $210 million on an electricity expansion project, $530 million on other distribution projects and acquiring support equipment and $200 million on improving its transmission system over the next few years.

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