Energy Ministry in talks with Treasury to review electricity taxes


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In Summary

  • In the current system, consumers pay a fuel cost charge of two shillings fifty cents and a levy of five cents per kilowatt for hydro power, which is passed on to the Water Resource Management Authority (WARMA).
  • A three cents charge per kilowatt hour goes to finance Rural Electrification Authority projects.
  • The rest include inflation and forex adjustments as well as the recently imposed sixteen percent VAT charge placed on all the above components.

Energy Cabinet Secretary Charles Keter says he has begun talks with his National Treasury counterpart Henry Rotich to review taxes charged on electricity.

The cost of electricity which has been the bane of many households in Kenya in the last one year has largely been attributed to opaque billing system and charges that the government now says needs a review.

In the current system, consumers pay a fuel cost charge of two shillings fifty cents and a levy of five cents per kilowatt for hydro power, which is passed on to the Water Resource Management Authority (WARMA).

A three cents charge per kilowatt hour goes to finance Rural Electrification Authority projects.

The rest include inflation and forex adjustments as well as the recently imposed sixteen percent VAT charge placed on all the above components.

Keter who was speaking after receiving a taskforce report reviewing independent power producers in the country indicated that the charges amount to double taxation.

“…Under the cost of power if you see breakdown on traffics, start with one unit , what constitutes it, capacity charge, energy charge, this much, VAT , this much, rural electrification, there is FCC alone as an item then there is VAT on FCC,” noted CS Keter.

“… And that is why we are working with Treasury to remove that element having in mind that already fuel has been charged from the source,” added Keter.

The quest to lower electricity bill has been gathering pace with the Energy Regulatory Commission announcing recently a review of tariff.

This however favoured small and heavy users of power, leading to a hue and cry on the disparity manifested.

The report has recommended restructuring of the feed in traffic, revoking of expression of interest for some firms and lowering of tariffs for solar and wind projects.

“ All recommendations are working towards reducing the cost of power, timeline we will study and then I will give recommendations to the President,” said CS Keter.

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Story By Dennis Otieno
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