Legal dilemma offers relief for Kenya Power bills defaulters

Electricity bill defaulters can now breathe a sigh of relief after Kenya Power said it would not share customers’ payment information with credit reference bureaus, fearing the data could trigger lawsuits against it.

The State-owned utility firm, which was owed Sh12.4 billion in unpaid bills as at June 2016, said most power bills for post-paid customers are in the names of landlords and not the actual electricity consumers, making it difficult to trace the real defaulters.

Treasury secretary Henry Rotich through the Finance Act 2016 had set New Year’s Day as the effective date for new rules allowing utility firms (water and electricity) as well as Saccos to share information with credit bureaus.

“Kenya Power is not currently referring defaulters to credit reference bureaus. In most cases, electricity is supplied to property owners who may not necessarily be the actual users of the power,” the firm said in a statement.

Utility payments data was meant to increase the pool of information available to lenders for use in determining customers’ credit worthiness.

Defaulters are punished by either getting locked out from accessing loans or paying higher interest rates than good borrowers.

READ: Credit bureaus to list sacco loan defaulters as new law takes effect

“In the case of rental premises, the tenants are expected to pay the bills despite the fact that the bills are registered in the name of the property owners. As such, in the event of a default on payment by say a tenant, it will be unfair to refer the owner to credit bureaus for listing as a defaulter,” said Kenya Power.

Large power users - mostly manufacturers – top the list of defaulters with their unpaid bills standing at Sh7.6 billion, followed by households (Sh3.18 billion), parastatals (Sh1.2 billion), ministries (Sh86 million), and county governments that owe Kenya Power Sh27 million.

Kenya Power reckons that other cases of consumer defaults – especially large users - are linked to cases of faulty electricity meters, delayed meter readings, and bills contested in court; further compromising the quality of such data.

This will be the first time water and power companies are getting legal backing to share both positive and negative information on customers with credit agencies.

Credit unions, however, have been sharing information of borrowers, but have had no access to the records since the law allowed only banks to view such data.

Kenya Power’s move to snub credit reporting agencies comes as a big relief to thousands of defaulting households and industries whose negative listing would have designated them as risky borrowers.

Kenya has three credit reporting agencies licensed by Central Bank of Kenya. They are Creditinfo, Metropol, and Chicago-based TransUnion.

The Credit Information Sharing (CIS) Association of Kenya, a lobby bringing together credit bureaus, banks, credit unions, and non-bank lending institutions, called on Kenya Power to clean up its database and make it accurate.

“Data quality is primary in credit information sharing. This is because the supplier takes responsibility for the accuracy of data shared,” said Jared Getenga, chief executive of CIS Kenya.

“We encourage Kenya Power to look for all means to improve the quality of their data,” Mr Getenga said in an interview.

He challenged the utility firm to begin sharing positive information on consumers’ payment history as it cleans up data on defaulting customers.

About seven out of 10 Kenya Power customers are on pre-paid meters, according to official data.

Kenya Power added 637,434 new households and industries to the grid in the six months to December 2016, growing total customer base to 5.5 million.

The mounting pile of debt has forced the electricity retailer to switch defaulting customers to pre-paid meters from post-paid as a strategy to arrest defaults.

All new customers connected to the grid beginning June 2013 were put on pre-paid metering, which uses a pay-as-you-go model hence there is no risk of non-payment.

Consumers on pre-paid 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.

Metropol managing director Sam Omukoko said Kenya Power should find a legal way of sharing the customers’ information.

“They have to work round the clock and comply with the law,” said Mr Omukoko.

He called on Kenya Power to take a phased approach and begin sharing information of customers with bills in their own names.

The ballooning unpaid bills have forced Kenya Power to write off Sh4.24 billion or a third of the total outstanding bills. Provisions for electricity defaults was Sh4.20 billion in the year to June 2015.