Electricity consumers face Sh8.1 billion backdated bills as Kenya Power moves to recover costs incurred on diesel generators last year but which were not factored in monthly charges while the government sought to keep a lid on utilities in an election year.
Kenya Power revealed the hefty bill in its annual financial statement, explaining that it arose from severe drought last year, which necessitated a surge in the uptake of expensive diesel-generated electricity that compensated for a sharp dip in hydropower production.
The bill is part of the Sh10.1 billion identified as unrecovered power fuel costs in the State-owned Kenya Power’s annual statement for the year ended June 2017.
About Sh2 billion has been recovered so far, leaving Sh8.1 billion that will be passed on to consumers in monthly invoices.
Kenya Power was made to absorb the fuel costs in the months leading up to the August 8 elections, building up the arrears over the period.
“There were delayed fuel cost recoveries for the year ended June 2017 (partial fuel cost recovery) in support of the government’s goal of stabilising electricity costs,” Kenya Power responded to our queries, adding that the recovery of the funds has already started.
“The drought experience in the period led to reduced output from hydropower and the consequent increase in dispatch of thermal power plants.” Consumers pay a fuel cost charge through their monthly bills, which is linked to the amount of diesel-generated power on the grid.
The fuel cost levy is supposed to go up when thermal power intake increases. The levy, however, got stuck at Sh2.85 per kilowatt hour (kWh) over the four months to June despite the share of thermal power intake rising past that of hydropower in the period, indicating the government’s intervention ahead of the elections.
But the surcharge has been rising since September, hitting a three-year high of Sh4.35 per unit in December and piling pressure on homes and businesses. Kenya Power says customers owe it the unrecovered cash since the firm had paid the pass-through charges to power producers, including KenGen, in full but had only passed a fraction of the burden to the consumers.
“This was owed to Kenya Power by customers. Kenya Power already paid fully all the fuel cost invoices for this amount,” the company said.
The Energy Regulatory Commission (ERC) adjusts the fuel surcharge monthly to reflect the costs incurred to generate electricity using imported heavy fuel oils.
Kenya Power does not benefit from the monthly adjustment of the pass-through costs since it only collects the revenues from customers for onward remission to power producers, leaving a neutral impact on its revenues.
“There is always a one-month lag in recovery of pass-through costs as they are computed and approved for recovery after the end of every month,” the utility firm said.
The deferment of higher fuel costs in the period to June saw the ERC set up a mitigation fund “to be passed on a later date upon approval”.
This story was first published in the Business Daily