In a Gazatte notice that was released on Friday, January 13, the Energy and Petroleum Regulatory Authority (EPRA) raised the inflation adjustment cost to 85 cents per kilowatt-hour (kWh) from 67 cents per unit due to high inflation.
The component that is normally adjusted after every six months, represents 18 cents increase in the prevailing inflation standing.
EPRA Director-General Daniel Kiptoo noted that the energy regulator marginally raised the cost of power ahead of a planned comprehensive review of electricity tariffs by the government within three months.
“Pursuant to Clause 3 of Part III of the Schedule of Tariffs 2018, notice is given that all prices for electrical energy specified in Part II of the said Schedule will be liable to an inflation adjustment of plus 85 cents per kWh for all meter readings taken in January—June 2023,” noted Epra Director-General Daniel Kiptoo published in the Gazette notice.
Epra's decision to raise the adjustment cost came against the backdrop of high annual inflation that hit 9.06 per cent in December 2022.
The high annual inflation was occasioned by the high cost of fuel, food, cooking gas and electricity, as explained by Economist Churchill Oguttu.
"Obviously the adjustments will have a negative net effect on basic commodities since fuel prices will, with time, go up. It will be a tight balancing act for the government," Economist Oguttu explained.
Consumers will end up getting fewer electricity units for the same amount when compared to the previous months. The high cost of living is, therefore, set to rise due to adjustments in prices for both basic and luxury goods.
"A significant increase in the inflation adjustment cost will lead to an increase in prices of other goods, which will then be passed to consumers," he added.
EPRA took into account other factors of the economy, including, the fact that KenGen recently incurred an extra cost of Ksh753.99 million in the six months to December 2022 due to inflation.
At the same time, the authority noted that independent power producers (IPPs) incurred Ksh1.14 billion and Kenya Power Ksh2.27 billion during the same period.
"If you look at a sector like Agriculture, electricity cost makes around 30 per cent of their input calculations. A near 20 per cent increase in Inflation Adjustment Cost will significantly raise the cost of agricultural production in the country," Economist Oguttu explained.
On Friday, January 13, Energy Principal Secretary Alex Wachira announced a possible drop in the cost of electricity after completing a deal to import power from Ethiopia.
PS Wachira noted that Kenya had already received the first 75 megawatts from Ethiopia and the ministry was working to expedite the construction of two power substations.
