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Intrigues behind Kenya Power failure to cut bills

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Kenya Power workers carry out repair works along Haile Selassie Road, Mombasa on December 5, 2020. PHOTO | KEVIN ODIT | NMG

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Summary

  • The Epra failed to gazette the electricity price cut, blaming Kenya Power for failure to formally apply for a tariff review.
  • As Epra waited for Kenya Power to make the application, the electricity distributor was also waiting for a directive from the sector regulator given the matter was a presidential directive.
  • The law requires that Kenya Power first apply to the Epra before the regulator takes action.

The failure by Kenya Power #ticker:KPLC to submit a tariff review request to the energy regulator after its calculations revealed that it cannot afford a 15 percent cut set off a chain of reactions that embarrassed the President.

The Business Daily has established that various players in the sector have been caught up in a dilemma on how to implement President Uhuru Kenyatta’s Christmas power cut gift to Kenyans without breaking the law.

After a series of meetings and consultations, Kenya Power said it finally submitted the tariff review request to the Energy and Petroleum Regulatory Authority (Epra) on Thursday outlining what must be done before it can cut electricity prices by 15 percent.

“We have submitted to Epra the required inputs for the electricity cost reduction today (Thursday),” Kenya Power said in an emailed response to the Business Daily. It said that it cannot afford to bear all the costs alone.

“The revenue requirements for the tariff reduction is a sector matter and will not be borne by Kenya Power alone,” the power distribution monopoly said. Sources at Epra, however, said the agency was yet to receive any application from the utility firm in another intrigue surrounding the delays in the power cut promise.

The Epra failed to gazette the electricity price cut, blaming Kenya Power for failure to formally apply for a tariff review. The law requires that Kenya Power first apply to the Epra before the regulator takes action.

The Business Daily has also established that various agencies are now involved in a heated blame game on where the buck stops after failing to implement the directive in December.

As Epra waited for Kenya Power to make the application, the electricity distributor was also waiting for a directive from the sector regulator given the matter was a presidential directive.

The hiccup scuttled President Kenyatta’s promise to cut electricity prices by December 25 that has seen Kenyans continue to face high electricity costs as Kenya Power and the energy regulator haggle over the bureaucracy of implementing the pledge.

President Kenyatta initially promised in August to cut consumer electricity tariffs by 33 percent on the recommendation of a task force but reviewed it downwards to 15 percent, which was also not delivered.

The President on December 12 said homes and businesses will start enjoying a 15 percent dip in the cost of electricity last month to be achieved through reduction of power theft and leakages in Kenya Power’s transmission network.

Kenya Power is hoping to make savings from reducing system losses and passing the benefits to consumers.

The system losses through a confluence of power theft and leakages from the ageing transmission grid shot to 24.14 percent in the year to June or an equivalent of Sh20.1 billion.

The Business Daily was unable to establish how Kenya Power will reduce system losses, the share of electricity bought from generators such as KenGen that does not reach consumers within weeks despite battling for decades to cut power theft and leakages.

The combination of power theft and leakages from the ageing transmission grid, which stems from the long period of under-investment, has seen the system losses rise from 17.51 percent in 2015 to 24.14 percent for the year to June, well above the global benchmark of 15 percent.

The electricity distributor is adamant on cutting the cost of power below its buying price from power generators without assured savings and reduced power prices from its suppliers.

Kenya Power buys the bulk of its power, 70 percent from Kenya Generating Company (KenGen) at Sh5.3 per kilowatt-hour and sells the power at Sh15.66.

It is, however, tied to expensive contracts with Independent Power Producers (IPPs) some as high as Sh195 which makes electricity costly.

Kenya Power says all players have to chip in to attain the lower prices since it cannot bear the burden alone.

The government has limited options to force down energy prices after IPPs who are owned by powerful institutions like the World Bank opposed unilateral push to lower the cost at which they sell electricity to Kenya Power.

The IPPs opposed the reduction, arguing that Kenya has no unilateral right to alter the contracted capacity and payments, saying the State should protect PPAs that are inked over a period of 20 years.

They cited billions of shillings spent billions on building power plants through a combination of debt and shareholder funds that were sourced on the strength of the PPAs or wholesale electricity tariffs.

The IPPs that only produce 30 percent of Kenya Powers electricity earned a lucrative Sh56.3 billion in the year ended June 2021 for lower sales than KenGen which earned Sh44.8 billion.

The fear of a legal tussle with powerful foreign investors forced the State to retreat. President Kenyatta is, however, keen on attaining the entire 30 percent cut in power costs by March when the State is expected to reach a deal with the IPPs on high prices they charge Kenya Power.

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