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Electricity bills for poor homes to rise from April as subsidy ends

Tuesday January 9 2018

By NEVILLE OTUKI
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Electricity bills for low-income households could rise from April while charges for middle-income homes are set to drop with the expected coming to an end of subsidies for small consumers.

The Energy Regulatory Commission (ERC) on Monday said it will implement a new tariff that will have uniform charges for domestic customers, eliminating a subsidy that has for long helped to keep power bills for small consumers low. 

HIGH COSTS

The largest domestic power consumers currently pay eight times more compared to low users in a tariff plan where the rich pay steeply for poor homes to enjoy the subsidy.

Low power consumers (using 50 units and below per month) currently pay Sh2.50 per kilowatt hour (kWh), known as lifeline tariff, which is a long-running government policy tool to cushion the poor from high costs.

Households consuming between 51-1,500 units pay Sh12.75 per unit, or five times more than the poor, while those consuming above 1,500 units pay Sh20.57 per unit, eight times more.

This categorisation comes with a setback since customers who buy tokens in the 0-50 band in a given month are charged lower at Sh2.50 per unit, but should they load tokens above 51 units another time, they pay higher at Sh12.75 per unit.

It is this fluctuations that a new billing system seeks to smooth out and enable consumers track their power consumption with ease. 

The ERC reckons that the model is unsustainable and amounts to punishing large domestic consumers, which runs the risk of discouraging more use of the utility.

The new billing plan is also structured to ensure customers on pre-paid meters are spared the uncertainty of experiencing wild fluctuations when they top up cash for electricity tokens at different times of the month.

“The new plan is to make people pay the true cost of electricity at a time when the government is working to bring down the overall cost of power,” said ERC director-general Pavel Oimeke.

“We don’t have a situation where people with small cars and fuel tanks pay less for petrol since their demand is low, so why should we have that disparity in electricity?” he added.

Additionally, from April, the fixed monthly charge of Sh150, which is deducted immediately tokens are loaded, will not be charged separately but will be factored in the uniform tariff.

The new billing will only affect domestic consumers, and not commercial and industrial customers, whose tariff categorisation based on their power usage will continue.

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

In the new billing, the only monthly fluctuations, albeit by cents or a shilling, will be as a result of the movements of the pass-through charges 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 which are adjusted every month by the energy regulator.