The Managing Director and Chief Executive Officer for the Kenya Electricity Transmission Company (KETRACO) John Mativo has explained why electricity prices change or increase every month.
Mativo has explained that the variations in token prices are driven by ‘Pass-through Costs’.
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Pass-through costs are variable expenses charged directly to the consumer incurred in the process of generating, transmitting, and distributing electricity to customers.
On the other hand, Base Tariffs are the fixed component of an electricity bill.
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Also Read: How to Trade Extra Power for Token Discounts with KPLC
Pass-through Costs Explained
Pass-through Costs fluctuate based on real-time economic conditions.
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One of the primary contributors to pass-through costs is the volume and cost of Heavy Fuel Oil (HFO) used in thermal power plants. Therefore, when global oil prices rise and fall, the cost of generating electricity is affected as well.
More expensive oil leads to higher electricity costs.
In addition, the fluctuations in exchange rates affect the pass-through cost. When the Kenyan shilling weakens against the dollar or other major currencies, the cost of importing fuel and power generation equipment increases.
Consequently, these additional expenses are directly passed on to the consumer, contributing to the final cost of electricity.
The Consumer Price Index (CPI), the measure of the average change in prices for goods and services over time also affects power prices.
When inflation rises, the costs associated with generating and delivering electricity increase as well.
These can include the cost of raw materials, maintenance, or labor. Also, these increased expenses are added to the monthly bills of electricity consumers.
Also Read: Kenya Power List of Everyday Appliances that Save Electricity
Lastly, pass-through costs are affected by the cost of new power generation infrastructure.
When new power plants are brought online, the costs incurred in their construction and operation are not immediately reflected in the base tariff.
However, they are passed through to consumers as additional costs. This applies to plants run by companies such as KenGen and Independent Power Producers (IPPs), with the expenses coming into effect as the infrastructure begins to generate electricity.
Kenya Power Allows Kenyans to Trade Power
In June, the Ministry of Energy gazetted the Energy (Net-Metering) Regulations, 2024, allowing individuals under the metering system who generate their own electricity and are also connected to the national power grid to sell their surplus power.
A net-metered system involves installing renewable energy sources, such as solar panels or wind turbines, at a home or business.
The property is connected to the national power grid, allowing it to both draw electricity from and feed electricity back into the grid.
Kenyans can trade the extra electricity produced from renewable energy sources by depositing it into the national grid instead of investing in expensive battery storage systems.
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