Electricity Prices Rise in August as Fuel Cost Charge Increases, Pressuring Kenyan Households

Electricity prices are going up in August, and this time its all down to changes in two key pricing components, piling even more pressure on Kenyan families and businesses who are already struggling to cope with high prices on pretty much everything.

Reduced Buying Power

Taking a closer look at the current pricing makes for grim reading. Sh1,000 now only buys you 38.8 kilowatt-hours (kWh) in August - that's down from 40.2kWh in July. The same is true if you get paid Sh500 - you can now only get 19.4kWh, compared to 19.5kWh last month, so Kenyans are really starting to see their electricity buying power shrink.

Fuel Cost Charge is the Main Culprit

The main reason prices are going up is the Fuel Cost Charge (FCC). This has now gone up to Sh3.51 for every kWh, compared to Sh3.20 in July. And to make matters worse, the part of the price that gets affected by currency fluctuations has actually fallen, down to Sh1.177 per kWh, from Sh1.484 last month. So, it looks like fuel costs are the main driver of this price hike and not currency swings.

Wider Economic Pressures are Mounting

It's not just electricity prices that are causing problems. Petrol and diesel prices are also going up, and with it the cost of transport and goods. This is creating a really tough economic environment where more and more things are costing more money at the same time - all of which is stretching household budgets across Kenya.

Inflation is Still a Concern

Inflation, which is a key measure of how high prices are, actually fell a tiny bit to 6.4 percent last month compared to 6.5 percent in June - mainly because of the high prices of fuel. However, all of this will be undone if electricity prices keep going up - and they probably will, because they have a big impact on the overall cost of living.

What are Electricity Prices Made Up Of

There are a few key things that make up the price of electricity. The two biggest ones are the forex and the FCC - both of which can fluctuate a lot from month to month. But the biggest single component is the base price, which doesn't change that often. It's reviewed every three years, and it varies depending on how much electricity you use.

The FCC is basically the cost of using things like heavy fuel oil and diesel to generate electricity in power plants. The forex adjustments are for the power purchase agreements and loans that the electricity companies have to pay back in hard currency like US dollars - all of which are affected by the ups and downs of the currency markets.

Other Costs Get Passed On

In addition to the FCC and forex adjustments, there are a few other costs that get passed on to electricity consumers. There are charges to cover inflation, energy regulatory levies, contributions to the Rural Electrification Authority, water regulatory agency levies, and Value Added Tax - all of which are affected by lots of different economic factors and make the whole pricing structure really complicated.

Lots of Politics at Play

Electricity prices have become a real headache for the government. They are already dealing with high petrol and diesel prices that are hurting consumers and businesses, and now they have to worry about electricity prices as well. It's a really delicate situation, and the government has already had to freeze a planned price increase because they were worried about sparking public anger - especially ahead of the elections.