Kenya has frozen a planned increase in electricity prices from July 1 amid fears of sparking outrage ahead of the elections, dealing a blow to Kenya Power’s search for extra revenues to enable it to undertake a network upgrade.
Energy and Petroleum Cabinet Secretary Opiyo Wandayi said on Wednesday that Kenya Power had withdrawn its application for new tariffs, ending a public participation drive that was to start on June 15.
The withdrawal of the tariffs comes in a period when a rise in fuel prices, linked to the Iran war, has sparked deadly protests, which forced the State to cut diesel prices to defuse the outrage.
The economic fallout from the Iran war also pushed inflation to a 27-month high of 6.7 percent.
The indefinite suspension of the new electricity prices looks set to derail the quest for additional billions that Kenya Power requires to upgrade transmission lines and transformers.
The new tariffs were expected to be in force until June 2029 in line with the law, which demands that electricity prices are increased after every three years to factor inflation.
The State is also fretful about increased power costs piling pressure on inflation just months to the August 2027 General Election.
‘Following consultations within government and engagement with key stakeholders in the sector, the retail electricity tariff review application that was submitted on March 31, this year by Kenya Power on behalf of the sector has been withdrawn,’ Mr Wandayi said on Wednesday afternoon.
‘This decision reflects the need to buttress a sustainable energy sector while protecting households, businesses and industries from possible cost escalation.’
Electricity bills have two main components: a fixed tariff whose proceeds go directly to Kenya Power and variable costs such as fuel and forex surcharges that change monthly and mainly used to compensate generators. While the fixed tariff has remained unchanged, the monthly fuel and foreign exchange surcharges have changed slightly.
Kenya last increased electricity tariffs in April 2023 in a review that boosted Kenya Power’s profits, provided resources for network upgrades and cash to other utilities like Kenya Electricity Transmission Company (Ketraco) -which builds high-voltage lines.
Kenya Power has in recent years found itself at the centre of a delicate balancing act in its quest to raise more revenues for the energy sector and freeze tariff review.
The 2023 review saw Kenya Power get an increase in tariff in the first year and cut in the second year, which together with lower forex and fuel surcharges have helped reduce household electricity costs.
Electricity prices have declined over the three-year tariff cycle, with 200kWh retailing at Sh5,656.88 in April compared to Sh6,349.80 in the same period of 2023, according to official data.
The utility firm has recently defended the push for higher tariffs, saying that it needs more money to upgrade the aging network and meet the increased demand for connections.
Kenya Power currently has over 10.2 million customers and the growth has strained the network, underscoring the need for cash to revamp the system and ensure a reliable supply of electricity.
The firm has repeatedly warned that the transmission and distribution network is constrained, adding that the burden has triggered countrywide outages due to a sudden surge in demand.
The tariffs adjustment was expected to put more upward pressure on the economy where the year-on-year inflation has hit record high on high energy prices in the wake of the Iran war.
Housing, water, electricity, gas and other fuels carry an 18.30 percent weighting in the basket of goods used to measure inflation.
Two-day strike
Public transporters staged a two-day strike last month against the rise in fuel prices in the wake of the Iran war.
That brought economic activity in Nairobi to a standstill and degenerated into clashes between protesters and police that left ?four people dead and about 30 injured.
Diesel prices rose 23.5 percent to Sh242.92 a litre for the May-June pricing cycle but were reduced by Sh10 on May 18 in response to the strike.
Higher electricity prices following costly fuel would have triggered consumer complaints.
Kenya’s inflation accelerated for the second month running in May, hitting its highest in more than two years, largely due to fuel price hikes linked to the Iran war, hurting workers’ disposable income.