The Energy Regulatory Commission has adjusted prices to reflect new macro-economic changes. Photo/FILE
By MUTHOKI MUMO mumumo@ke.nationmedia.com
Posted Thursday, January 5 2012 at 00:00
Posted Thursday, January 5 2012 at 00:00
Escalating energy bills raised Mrs Apondi Nyang’aya’s ire so much that she vowed to develop her own wind and solar power system at her home in Ongata Rongai.
“I practically live in the village. There was no reason for me to be spending Sh4,000 on electricity,” she said.
She is not the only one contemplating drastic cost-cutting measures after a year that saw the cost of utilities shoot through the roof.
However, experts across various industries are predicting better times. Bills in 2012 may just provide your wallet a much-needed break.
Fuel prices
Petroleum-based fuels are the lifeblood of the economy. Any fluctuation in their prices is felt across the board.
According to the energy consulting organisation, Petroleum Focus, fuel prices were high due to Arab insurrections and a deteriorating shilling.
The Arab world is gradually stabilising and the shilling has also been on an upward trend, trading at an average Sh85 to the dollar in the last week of 2011.
“Because of the strengthening shilling, there will be a one-time drop of pump prices,” said Petroleum Focus director George Wachira.
The Energy Regulatory Commission has already adjusted prices to reflect these macro-economic changes. Last month, the cost of fuel fell by an average Sh3-5.
The trend, according to Mr Wachira, will continue into 2012 if geo-political stability is maintained.
“Many geopolitical factors still hang over the world and these may keep global oil prices high... there are many uncertainties, especially in Iran and Iraq, which could badly upset supplies and prices,” he said.
Notwithstanding the potential instabilities of the Middle East, falling oil prices have already had a positive impact on another of Kenya’s energy mainstay — electricity.
Electricity
Mr Eric Wanyoike, an economist, lives in Kileleshwa, Nairobi, with two housemates in an effort to cut costs.
At the beginning of December 2011, households that consumed 120 units of electricity per month were paying Sh2,580.30, up from Sh1,564 in January 2011.
Scarce hydroelectricity obliged KPLC to turn to expensive, petroleum fueled thermal energy. However, it seems that things are looking up.
KPLC has already reduced electricity bills by Sh1.50 per unit, while, last week, the Kenya Electricity Generating Company (KenGen) predicted lower electricity costs due to high rainfall.
“We are now able to generate 75 per cent of electricity through the relatively cheaper hydro generation,” said KenGen MD Eddy Njoroge.
This will have KPLC shun expensive thermal energy and rely more on hydroelectricity.
The punishing fuel surcharge on electricity bills could fall by Sh3 to Sh5 per unit of power. For most of 2011, it had been in excess of Sh8 per unit of power.
Estimates indicate that when all these price reductions are considered, the family that had been paying Sh2,580.30 at the beginning of December could pay as little as Sh1,400 in 2012.
LPG
However, this will only be possible if KPLC continues to meet an ever-increasing demand for electricity as the nation undertakes an aggressive rural electrification programme.
For Mr Wanyoike, the most extortionist prices he experienced this year were for liquefied petroleum gas (LPG). “At some point, it just became painful,” he said.
Gas prices have dramatically risen to highs of Sh4,200 for 13kg cylinders. The prices have been attributed to lack of storage capacity at the Mombasa Port and a shortage of imported LPG.
However, there are developments in the sector that might help consumers save a penny or two.
A new storage facility built by African Gas and Oil will be completed by mid 2012 while the National Oil Corporation (NOCK) is investing in infrastructure that will make it easier for big vessels to offload gas cargo at the port.
NOCK is also planning to sell gas in smaller kilogramme-sized quantities for Sh200 per refill and Hashi Energy is working on piping gas into homes at prices that are 30 per cent lower than the costs consumers currently pay.
According to the corporation, prices should drop to Sh2,500 for the 13-kg cylinder before too long.
“We see gas prices dropping, not just for the short term, but also for the long-term,” said NOCK’s corporate affairs manager Joram Temesi.
Transport
Falling fuel prices will have an impact on matatu fare prices, offering a boon to millions of Kenyans who commute daily.
The Matatu Owners Association has indicated its intention to lower fares in Mombasa by about 30 per cent while negotiations are ongoing to effect similar policies across the country.
“We are trying to engage matatu owners to reduce fare prices starting next week as the price of diesel has fallen,” said Matatu Drivers and Conductors Welfare Association chairman Samson Wainaina.
Telecommunications
While last year was characterised by rock-bottom call rates fuelled by a dragged-out price war among service providers, experts are warning consumers not to expect the same in 2012.
“If they want to survive, they will have to raise tariffs,” said Mr Muriuki Mureithi, the CEO of telecommunications consulting firm, Summit Strategies.
When Safaricom raised its call rates by about 30 per cent, this was symptomatic of a trend that is going to dominate the telecommunications industry in 2012.
The average user spends about Sh360 on voice calls per month and this will increase in 2012.
“Some of the firms may raise call rates by 100 per cent, as we’ve seen with MTN Uganda,” said telecommunications analyst Tom Makau.
In July, the President’s order to freeze reductions in termination rates between mobile service providers could lead to the start of a new price war.
Although unfortunate for the firms, the war could see the cost of making calls lower significantly.
Value-added services are also in danger of price increases as has already been witnessed with Safaricom’s Bonga Point system.
Internet users will have an easier time as experts predict constant rates, or sometimes cost reductions.
Kenya is planning to migrate television broadcasters from the analog system to the digital system. This will free up the broadband spectrum, making the service cheaper.
Mr Makau added that prices could go further down because fibre-capacity is sold to mobile firms and Internet service providers at throw-away prices.
“You will get bigger bundles for your money. Where you were spending Sh1,000 for 1.5 gigabytes, you will get 2 gigabytes for the same price,” he said.
Mrs Nyang’aya runs her office from her house and is constantly online. These price cuts could mean savings amounting to thousands of shillings every month.
Digital television
Although it will have positive repercussions on broadband, the planned digital migration might see Kenyans gain one more bill to pay.
The good news is that the government has zero-rated taxes on these gadgets.
Consumers will have to purchase equipment that converts analogue television signals to digital television signals at a retail price of between Sh3,000 and Sh10,000.
Additionally, a number of industry players, including CCK director general Francis Wangusi, are increasingly skeptical of the possibility of a nation-wide digital migration this year.
Rent
Mr Wanyoike and his two roommates moved into the new apartment barely two months ago. They were looking for more space and value for their money.
“We have more space and each of us is paying less than we did before in rent,” he said.
They now inhabit a Sh60,000 apartment in Kileleshwa, Nairobi.
He expects the trends to continue in 2012, given a harsh banking climate and the looming uncertainty of an election year.
“For 2012, we are seeing interest rates as a big issue... this will mean increased supply pressure at the bottom end of the market,” he said.
Despite these seemingly positive trends, economists are warning of their temporary nature.
They are the results of stop-gap measures instituted to deal with deeper crises affecting the country and the globe, they say.
“If Europe is falling into an economic mire and we have our climate change problems, the cost of living will continue to rise. It might drop for a moment, but the general trend is upwards,” said Mr Wanyoike.
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