Electricity distributor Kenya Power plans to raise the number of pre-paid meters by 520,000 over the next nine months at a cost of Sh5 billion to cut the risk of consumer default.
The firm has since 2009 installed 174,810 such meters or 8.2 per cent of its 2.1 million customers and the deepening of the billing system is expected to boost its cashflow and lower cost on reduced need for meter readers.
The rollout of more prepaid meters is part of the company’s medium term plan to cover all consumers under the new system by next year and it will see Kenya Power deploy the pre-paid meters outside major urban zones of Nairobi, Mombasa, Kisumu and Nakuru.
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Chief executive Joseph Njoroge said the pre-paid model would eliminate the risk on non-payment of electricity charges and help consumers manage their bills.
“Prepaid metering eliminates bad debts because consumers pay upfront for power,” said Mr Njoroge, adding that it will reduce commercial losses and congestion in the banking halls.
Kenya Power's unpaid bills has risen to Sh7.4 billion in the year to June 2011 compared to Sh5.2 billion in a similar period the previous year, meaning that the additional bad debt was equivalent to 54 per cent of its Sh4.2 billion net profit. The power firm is yet to release figures running to June.
Kenya Power said it would raise the 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.
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 8,543 employees in the year ended June compared to 7,279 in 2011, a move that raised its wage bill by 14 per cent to Sh9 billion from Sh7.9 billion.
The plan to hook 520,000 households to pre-paid meters 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
Large power users, including manufacturers, lead the pack of defaulters at Sh4.3 billion from Sh3 billion, followed by ordinary customers whose debt stands at Sh1.5 billion from Sh1 billion.
Parastatals come in third with a bill of Sh1.4 billion, up from Sh805 million. The combined bill of ministries and local authorities, however, dropped marginally to Sh150.4 million from Sh178.7 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.