Kenya: Consumer Group Slams 25% Increase in Electricity Prices

The Consumer Federation of Kenya (Cofek) has warned that the Kenya Power and Lightening Company (KPLC) proposal to increase the cost of power to the consumer by 25 percent is ill – timed.

Cofek has said this will translate to an average increase of about Sh 400 to monthly consumer bills.

“While Cofek appreciates that KPLC is within its legal mandate to seek an increase in tariffs from the Electricity Regulatory Commission (ERC) every three years, we nonetheless seek to raise some concern,” Cofek, Secretary General, Stephen Mutoro said.

Mutoro said that with the many shocks that have hit the Kenyan economy in the last 9 months, any increase in the cost of power is ill-timed, ill-advised and totally unacceptable.

He pointed out that given the high inflation rates now standing at 12.95 percent the proposed increase in tariffs will undoubtedly escalate the cost of living.

“Given that power is a key factor of production, this will further increases the cost of basic products such as unga [flour] – yet at a time when the government and other stakeholders are seeking strategies to stem the prices of basic commodities,” Mutoro said.

Cofek argues that for a public company like KPLC that made Sh 5.6 billion pretax profits in the last financial year and was able to pay generous dividends of Sh 8 per share, it is possible for the company to indefinitely delay this review to more appropriate time.

“The proposed increase will add to inflation, intensify economic hardships and possibly lead to political instability,” the secretary general said.

They pointed out that the revenues KPLC is intending to raise from the increased tariffs could easily be made by making its current operation more lean, efficient and cut down on obvious wastages such as gifts hampers at AGMs and other expenses.

According to Cofek, the increase will slow down economic activity and therefore runs counter to the aspiration of Vision 2030. “This latest increase is an affront to the new constitution and the bill of rights that accords Kenyans a right to decent living.”

They requested the new Chief Justice, Dr Willy Mutunga to fast track their petition number 88 of 2011 coming up on 14th July before Justice Daniel Musinga.

In regard to the increase of interest rates and “poor regulation of banking and financial services sector,” Cofek said it “will occasion an immediate and significant negative impact on Kenya’s economic prospects.”

“This has slowed down consumption, investments and exports which are the key drivers of economic growth,” Mutoro said in a press conference at Nairobi in which he was accompanied by former MP Joe Donde and Cofek CEO, Edwin Wanjara.

They took issue with Central Bank of Kenya (CBK) that it has been “infective, unwilling or unable to undertake its statutory objective of controlling interest rates and should show cause why.”

“The CBK seems to indefinitely wait on the shilling to stabilize,” they argued, adding that “if they need to see a difference, then the Governor should adopt a different and proactive strategy.”

“We take great exception that CBK has acknowledged existence of saboteur banks on the deflated shilling value against hard currencies but has not had the courage to name and shame them so that consumers of their services can equally shun them. This is contrary to provisions of Article 35 of the constitution.”

They also registered displeasure with the “prohibitive Sh 1,640 cheque truncation system (CTS) cheque books and lack of sufficient consumer education on the CTS.”

The organization said the “spread between lending and borrowing rates amount to national shame of daylight robbery from these institutions.” Because of this they have engaged a consultant in Mr Joe Donde to investigate the issue.

They are contemplating to move to the Supreme Court to reinstate the original Donde Bill of 2000 which sought a maximum 4 percent over and above the CBK base lending rate.

Cofek has registered a sister organization called Monetary Institutions Watch (Miwa) to be launched soon to inform the public on financial matters on a regular basis.

Additionally, they cautioned banks from reckless issuing of loans and mortgages to developers who have no regard for the Physical Planning Act, leading to collapsing buildings.

In This Story: Kenya

Kenya is a country in East Africa with coastline on the Indian Ocean. It encompasses savannah, lakelands, the dramatic Great Rift Valley and mountain highlands. It’s also home to wildlife like lions, elephants and rhinos. From Nairobi, the capital, safaris visit the Maasai Mara Reserve, known for its annual wildebeest migrations, and Amboseli National Park, offering views of Tanzania’s 5,895m Mt. Kilimanjaro.

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