ERC makes U-turn in bid to abolish power subsidy

Sunday March 11 2018

A beneficiary of the Last Mile project in Uasin Gishu. file photo | nmg

A beneficiary of the Last Mile project in Uasin Gishu. file photo | nmg 

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The Energy Regulatory Commission (ERC) has made a U-turn in its plan to abolish electricity subsidies for low-income households, meaning bottom power users will continue paying lower tariffs.

The ERC had in January said it would create a new tariff from next month that will have uniform charges for domestic customers, eliminating a subsidy that has for long helped to keep power bills for small consumers low. 

Low power consumers — using 50 units and below per month — enjoy subsidised rates under ‘lifeline tariff,’ which is a government policy tool to cushion the poor from high costs.

“Lifeline tariff for bottom-end consumers will remain,” ERC director-general Pavel Oimeke said on Friday.

Kenya’s tariff set up is where the rich pay steeply for poor homes to enjoy the subsidy.

In January, the ERC said the current model is unsustainable and amounts to punishing large domestic consumers, which runs the risk of discouraging more use of the utility.

Asked why the change of plan to retain the subsidy, Mr Oimeke said: “It’s common practice to support the economically disadvantaged amongst us in the electricity subsector.”

Bottom consumers (50 units and below) currently pay up to Sh13.65 per kilowatt hour (kWh) of power they use, inclusive of taxes, fixed charge and pass through-costs.

This is nearly Sh7 lower than the maximum cost paid by homes consuming between 51-1,500 units monthly at Sh20.34 per unit, inclusive of all charges.

Those consuming above 1,500 units pay at least Sh22.28 per unit or nearly Sh9 more than the poor.

The last time the energy regulator reviewed power tariffs was in July 2015.

The ERC adjusts pass-through charges monthly that consumers pay for in their power bills to cover costs incurred by power producers in generating electricity.
The main ones are forex levy and fuel cost charge.

Currently, homes that consume 200-kilowatt hours per month, mostly middle class, pay Sh4,068.

Low-income earners who consume 50 units monthly are paying Sh682, according to ERC data.