Kenyan small businesses are grappling with an unforeseen 11.6% surge in electricity bills effective January 2024, attributed to a revised tariff by the Energy and Petroleum Regulatory Authority (EPRA). The increase is mainly driven by a substantial rise in the Foreign Exchange Rate Fluctuation Adjustment (FERFA), doubling from Sh3.169/kWh in December 2023 to Sh6.46/kWh in January 2024. EPRA explains that this spike results from increased foreign currency payments by the Kenya Power and Lighting Company (KPLC) for power purchase costs and KenGen’s loan repayments. Despite KPLC deferring some foreign currency obligations since March 2023, they resumed payments in December, causing the FERFA surge.

This tariff adjustment has far-reaching consequences, particularly affecting small businesses, considered the backbone of Kenya’s economy. Prepaid token users now receive fewer units for the same amount, forcing small businesses to either pay more for current electricity usage or scale back consumption, impacting productivity and profitability. Manufacturers, major electricity consumers, are also concerned about rising tariffs affecting production costs and competitiveness. The volatility of electricity costs further complicates planning and budgeting for small businesses. The increased energy prices have cast a shadow over the Kenyan business landscape, prompting questions about how the economy will navigate this unexpected challenge and whether policymakers will address the concerns of critical sectors.