Kenyans to usher in the New year 2023 with an increase of electricity prices by 15% as President William Ruto stops the subsidy.
Business Daily reports that the Energy and Petroleum Regulatory Authority (Epra) director-general Daniel Kiptoo said the 15 percent discount would not be extended beyond its expiry date of December 31, setting the stage for costly electricity and pressure on the sky-high inflation.
President Ruto has been against subsidies imposed by Mr Kenyatta on items like petrol and staple maize food, terming them unsustainable.
Some of the key challenges the new president faces include bringing down the high cost of fuel and food that have pushed inflation to a five-year high, while grappling with subsidy measures that policymakers warn could empty the country’s coffers.
“When the new government came in, it withdrew the support (subsidy) in August, and thus after the end of December, we will revert to the rates that were in place before January,” Mr Kiptoo said.
The subsidy, whose cost will hit Sh26 billion, was meant to ease the cost of living crisis and boost economic growth by making energy costs competitive compared with other African nations such as Ethiopia, South Africa and Egypt.
Kenyan government has been trying to boost investment in the power-hungry manufacturing sector in recent years. The 15 percent cut implemented in January saw the cost of buying 200 per kilowatt hour (kWh) of electricity a month drop from Sh5,185 in December to Sh4,373 in January.
Those consuming 50 units a month and who are subsidised by the State saw the cost drop to Sh796 in January from Sh945 in December, representing a 15.7 percent decline. But the 15 percent discount has since been wiped out by the increase in the foreign exchange and fuel adjustment surcharges on electricity bills.
A wobbly shilling and heavy reliance on diesel-powered generators to produce electricity, due to low water levels in the country’s hydroelectric dams, have been blamed for the rise in fuel surcharge and forex adjustment costs.
A weak shilling means fuel import costs have been rising.
In November, those consuming 50 units a month paid Sh940 while homes and business that used 200 units parted with Sh4,948. This means consumers using 50 units a month will pay about Sh140 more while those on 200 kWh will need an extra Sh740 for their January power bills.
The increase in the cost of electricity will unleash pricing pressure across the economy as producers of services and goods factor in the higher cost of energy.
This will be a blow to consumers who are also grappling with historic high prices for fuel and food amid the worst drought in 40 years.
Inflation eased by 9.4 per cent last month after the drought drove up food prices and higher energy costs.
The Story was First Featured on Business Daily of Nation Media Group