Kenya Power starts preparation for cheaper off-peak electricity tariff

The Ministry of Energy is preparing cheaper off-peak electricity tariffs, which aim to lower the cost of production for industrialists and drive manufacturers to overnight production.

A team of experts from Kenya Power and the ministry are working on details of the lower off-peak tariffs, which will be presented to the Energy Regulatory Commission for approval this month.

Kenya Power chief executive Ben Chumo said the off-peak power plan would see industrialists enjoy a discount on the current tariffs between 11pm and 5am.

“The team of experts will present their report to the regulator in coming days. The introduction of the off-peak charges will be guided by how soon we get regulatory approvals,” Dr Chumo said on Friday, adding that was not authorised to provide pricing details .

Kenya Power plans to roll out the new power plan from January.

Energy secretary Davis Chirchir said earlier cheaper off-peak electricity tariffs would start in the first quarter of next year and that industrialists would enjoy a discount of 40 per cent between 11pm and 5am.

Commercial firms consuming up to 15,000 kWh pay an energy charge of Sh14 per kilowatt hour (kWh) while those above 15,000 kWh pay Sh8.70.

This excludes levies, fuel and forex surcharges as well as taxes that ultimately push the unit cost of electricity to Sh17.

READ: Industrialists to get cheap off-peak power

The cheaper off-peak tariff will encourage manufactures 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.

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.

The discount is expected to kick off the delayed introduction of the cheaper off-peak tariff, which was first mooted in 2008.

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.

Ministry of 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 Sh17 per unit of power, which is higher compared to Sh2.60 for their Asian competitors.

But the cost of electricity has further dropped this month after the injection of 210 megawatts of geothermal power cut the fuel adjustment surcharges levied on bills to a four-year low.

The fuel cost adjustment dropped to Sh3.47 per kWh for November from October’s Sh4.79 and Sh7.22 in August.