Kenya Power and Lighting Company’s (KPLC) bid to review electricity tariffs could result in a 38% hike in the cost of electricity for manufacturers, leading to higher prices for consumer goods.
The Kenya Association of Manufacturers (KAM) has expressed concern, stating that this increase will cause manufacturers’ electricity costs to rise between KES 3.5 and KES 5 per unit, depending on their specific tariffs and usage levels. KAM argues that it will undo the progress made from the 15% decrease in the cost of power in 2021 and make Kenya’s manufacturing sector less competitive.
Kenya has one of the highest electricity tariffs compared to other major African exporting nations, averaging $0.16 (KES 20.02) per kilowatt hour. This is roughly seven times more expensive than the average tariffs in South Africa and Egypt, which are $0.03 per kWh (KES 3.75).
Tariff review that pushes up the cost of electricity will drive production cost even higher for local industries, rendering the manufacturing sector uncompetitive.
KAM chairman – Rajan Shah
Over the years, manufacturers have raised concerns over the high cost of electricity in Kenya and its impact on the cost of production. This high cost is due to various factors such as expensive Purchase Power Agreements (PPAs), increased fuel costs, taxes and levies imposed on electricity bills, foreign exchange, VAT, Fuel Cost Adjustment, and depressed demand growth, among others.
Despite investments in renewable energy resources, such as geothermal, Kenya’s competitiveness in electricity has been eroded. The country still struggles to attract investment and industrialize without affordable, reliable, quality, and sustainable electricity for the manufacturing industry.
The manufacturers’ association calls for the government to lower electricity costs to below KES 10 per kilowatt hour, stabilize and make power readily available to industrial users, and promote local and regional manufacturing competitiveness. The manufacturers also argue that the customers should not bear the inefficiencies in transmission and distribution.
Last week, Kenya Power defended the proposed higher tariffs, stating that they are based on the resources required for the sector’s sustainability. The management said that they considered the entire value chain, including power generation, purchase, distribution, and retail, which is why the new tariffs cover the revenues required by all players.
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