Kenya Power steps up switch to prepaid meters

Kenya Power plans to move all its customers to pre-paid metres by 2015 to cut the risk of consumer default.

The electricity distributor had installed 164,117 such meters by June and the shift of the billing system is expected to boost its cash flow and reduce the costs by eliminating meter readers. The installations represented 8.05 per cent of the 2.03 million customers it had by that time.

“The company aims to install 500,000 meters by 2013 and to complete the programme for existing customers by 2015,” said Kenya Power in its latest annual report.

“The firm is currently installing prepaid and automatic meters as strategies to minimise the risk of non-collection.”

READ: Kenya Power to add 520,000 pre-paid meters

According to the firm, prepaid metering gives customers convenience, flexibility and control over their electricity use, while at the same time improving revenue management for the company.

The firm said installing the half million meters will cost it about Sh5 billion, meaning that it will require an estimated Sh13 billion to move its current customers to pre-paid metering.

Kenya Power said it would raise the initial Sh5 billion needed to increase the prepaid meters to 694,810 from its reserves and fresh borrowings.

Consumers on prepaid meters use power they have paid for in advance, similar to mobile air time top-ups, helping Kenya Power to receive its revenues in full.

The new billing model is expected to seal the loopholes in the current postpaid system which consumers have exploited, leading to defaults worth billions of shillings.

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This is also expected to reduce the pressure on the company’s wage bill on reduced need for meter readers.

The company’s workforce rose to 10, 252 employees in the year ended June compared to 8,543 in 2011, a move that raised its wage bill to Sh9.77 billion from last year’s Sh8.77 billion and Sh7.9 billion in 2010.

The plan to hook half a million households to pre-paid meters by next year is set to create thousands of jobs as the power company taps agents. This will be akin to businesses run by mobile operators who have created more than 100,000 direct jobs.

Presently, the electricity distributor has 10 third party vendors and 12 Kenya Power vending units. It plans to recruit an additional 100 vendors and three ‘super vendors’ who will act as wholesalers.

Kenya Power’s unpaid bills dropped to Sh8.02 billion in the year to June compared to Sh9.28 billion in a similar period the previous year, meaning that the bad debt was nearly double the electricity distributor’s net profit of Sh4.61 per cent, which represented a 9.4 per cent rise.

Large power users, including manufacturers, lead the pack of defaulters at Sh4.4 billion from Sh6.2 billion, followed by ordinary customers whose debt stands at Sh2 billion from Sh1.5 billion.

Parastatals come in third with a bill of Sh1.18 billion, up from Sh1.14 million. The combined bill of ministries and local authorities increased to Sh281.3 million from Sh150.4 million.

Kenya Power says it connects 200,000 new customers annually under the Rural Electrification Programme, which seeks to boost access to electricity, which currently stands at 30 per cent of the population.