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ERC loses Sh630m water row to KenGen

The Masinga  Power Station operated by KenGen. The power generator and the Energy Regulatory Commission have agreed to pass on a Sh630 million debt — on the cost of water used by Ken Gen — to consumers.  File
The Masinga Power Station operated by KenGen. The power generator and the Energy Regulatory Commission have agreed to pass on a Sh630 million debt — on the cost of water used by Ken Gen — to consumers. File 

Electricity consumers will starting this month pay extra to foot a Sh630 million bill owed by KenGen for the water it uses to generate electricity.

This is after the power generator won a legal dispute against the Energy Regulatory Commission (ERC), allowing it to recover the debt owed to the Water Resource Management Authority (WRMA) from consumers through a water charge on electricity bills.

The State-owned power generator has since 2008 declined  to pay WRMA five cents for every kilowatt hour (KhW) of power generated from its hydro power plants, leaving it with a bill of Sh522 million as at December 2011.

ERC refused to approve the recovery of the debt from consumers prompting KenGen to refer the matter to the Energy Tribunal.

In the June 28 Kenya Gazette notice, the tribunal noted that KenGen and ERC had agreed on an out-of-court settlement that will see the recovery of the four-year debt from power consumers.

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“We have agreed that the outstanding water use charges be passed on to consumers. It will be spread over three years,” ERC director general Kaburu Mwirichia told the Business Daily.

The electricity regulator allowed Kenya Power to introduce a water surcharge on consumer bills from January last year despite KenGen’s demand for the recovery to be backdated to 2007. 

The latest ruling means that consumers will pay an additional Sh17.5 million monthly for the next 36 months to WRMA for the Sh0.05 per kWh that Kenya Power has been recovering on behalf of the water agency.

The deal to transfer the burden to power consumers was reached in April and endorsed by the five-member Energy Tribunal in June.

The Sh630 million debt is equivalent to 6.1 per cent of KenGen’s operating expenses of Sh10.2 billion in the year to June last year and 22.3 per cent of its profits.

The decision by the ERC to allow Kenya Power to introduce a water surcharge is set to make electricity pricier in a market where consumers are shackled by a number of pass-through costs including inflation, fuel costs and forex adjustments.

Fuel costs charges are a varying item on the power bills and are linked to the amount of power on the national grid generated from thermal sources.

Forex adjustments are mainly based on foreign currency denominated loans held by Kenya Power, KenGen and independent electricity generators like Aggreko.

The dispute between KenGen and WRMA became public in November 2011 after the High Court granted the water firm orders to attach the power generator’s property, including vehicles and office equipment. The court had ruled that KenGen was wrong for refusing to pay the water charges as provided in legal notice 171 of September 2007 —which allowed WRMA to charge larger users of water from lakes.

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