Companies to wait longer for cheaper off-peak electricity

Introduction of cheaper off-peak tariff has again been delayed after the energy regulator said pricing study is required before the rollout aimed at lowering the cost of production for industrialists and drive manufacturers to overnight production.

The Energy ministry is looking for a consultant to conduct the tariff study in a process that could take at least nine months, pushing the introduction of night-tariff to next year.

The off-peak power plan, which would see industrialists enjoy a discount on the current tariffs between 11pm and 5am, was targeted for introduction in January.

Kenya Power and industrialists have failed to reach a deal on the discount to be offered on the off-peak tariff, delaying the introduction of the night tariff that was mooted in 2008.

“The study is necessary as it informs any decision on tariffs. We should be able to move (with the off-peak power plan) once the study is complete,” said Joseph Ng’ang’a, the Energy Regulatory Commission (ERC) director-general.

The consultant will study the cost of generating, transmitting and distributing power, setting the stage for the off-peak tariff and review of electricity prices from next year.

The cheaper off-peak tariff will encourage manufacturers to shift some of their production to the off-peak period in a move that would lower demand for power during peak hours as Kenya struggles to meet rising electricity needs of households and businesses.

Large commercial and industrial customers account for 40 per cent of the total power consumption, according to Kenya Power data.

READ: Kenya Power starts preparation for cheaper off-peak electricity tariff

Moving industrial production to night-time is one of several options the government is pursuing to lower the cost of production that would ultimately reduce the cost of consumer goods and make Kenyan products competitive in the international market.

Manufacturers have been demanding discounts of up to 50 per cent before shifting production to late night shifts, but Kenya Power maintained that such a cut could push it into loss.

Energy officials reckon the country consumes less than half the peak power demand between midnight and 5am.

The peak hours begin at 9am, with demand at its highest between 6pm and 9pm when Kenyans return home from work and switch on house lighting, cooking appliances and TVs.

Industrialists have welcomed the off-peak power plan, but say the discount must be adequate to compensate for the additional costs that come with operating during the night such as expensive labour, security and transport.

Industrialists have in recent months become sensitive to input cost increases, fearing they would hurt their competitiveness in the regional and global markets where pricing is a key factor for market share growth.

They, on average, pay about Sh15 per unit of power, which is higher compared to Sh2.60 for their Asian competitors.