Kenya has the highest household electricity prices in the East African and Central region, the office that advises members of Parliament on budget planning has said, underscoring the impact of the power purchase agreements and pricing formula that determine the retail charges.
A report by the Parliamentary Budget Office (PBO) shows that households in Kenya are paying an average of $0.26 (Sh 33.60) per unit of electricity, compared to the $0.006 (Sh0.77) paid by households in Ethiopia, $0.09 (Sh11.63) in Tanzania and $0.17 (Sh21.97) in Uganda for a unit of power.
The PBO did not, however, disclose the reasons behind the disparity in electricity prices in the region.
“Despite these efforts, the cost of energy remains significantly high for the majority of Kenyans and also in comparison to the region. For instance, the average residential electricity price per kWh in Kenya is $0.26, Uganda is $0.17, Tanzania is $0.09, South Africa is $0.12, and Ethiopia is $0.006,” PBO says.
The disclosures come amid increased scrutiny on the electricity purchase agreements that Kenya Power signed with Independent producers and also the electricity pricing components that are approved by Parliament and gazetted by the sector regulator.
Electricity prices in Kenya have dipped in recent months, but the prices are still high compared to the region. For example, consumers paid Sh1,255.06 for 50 units of electricity in February compared to Sh1,406 for the same quantity a year ago.
Besides cheaper electricity, households in Ethiopia and Uganda also enjoy a more reliable supply of electricity largely due to a smaller network compared to Kenya and a vast generation from dams.
The costly electricity in Kenya has largely been blamed on the PPAs that Kenya Power inked with generators years ago, with the steep wholesale prices making it difficult to lower retail prices without exposing the utility to losses.
Besides the PPAs, Kenya charges four taxes in addition to a forex charge, fuel surcharge, and consumption charge, further driving up the prices. All these taxes and fees are slapped on every unit of electricity that a household consumes.
Kenya had in 2022 vowed to compel power producers to lower the wholesale prices at which they sell electricity to Kenya Power, in what was to allow the electricity distributor to lower consumer prices without sinking into losses.
But power producers (the majority of which are backed by foreign investors) flatly rejected the push, dashing any hopes that Kenya Power had of lowering electricity prices.
Parliament is currently pushing a raft of measures that target power producers in the hope of lowering electricity prices and easing the burden on households and businesses.
But despite enjoying cheaper electricity, households in some of these economies notably in South Africa and Tanzania grapple with persistent blackouts. The outages largely negate the impact of the cheap electricity.
Cheaper electricity in Ethiopia and Uganda is also attributed to the dominance of hydro-power which is cheaper and State-owned firms that supply the bulk of electricity.
Ethiopia has the second biggest hydropower potential in Africa and supplies a bulk of this power to Kenya, Djibouti and Sudan.
Uganda mainly depends on hydropower given its vast potential. The country also exports part of its electricity to Kenya in an electricity exchange deal.
