KenGen denies Kenya Power Sh1.7 billion in tariff discount


Kenya Power personnel from the Live Line Team attend to a power issue at Pandya Hospital on November 10, 2022. PHOTO | WACHIRA MWANGI | NMG

Kenya Electricity Generating Company (KenGen) denied Kenya Power a discount of Sh1.75 billion, leaving the latter to shoulder a heavier burden of implementing a 15 percent tariff cut for consumers.

Auditor-General report on KenGen’s financial statements for the year ended June has revealed that the company was among the power sector players that were to reduce their billing to make the tariff cut a reality.

“The board of directors agreed to contribute an amount of Sh3.5 billion through fair reduction of invoices to Kenya Power who would, in turn, transfer the benefits to consumers,” the report reads in part.

“However, management of the company did not implement the cost reduction measures as per the commitments, which implies that the reported revenues are overstated by Sh1.75 billion which would have been the company’s contribution due to Kenya Power, which has already implemented the full reduction on behalf of other energy sector players.”

The Auditor-General added that this amounts to a breach of the agreement.

This opens the possibility of Kenya Power claiming the amount from the electricity producer.

Failure to collect the amount will see Kenya Power suffer a loss from the policy that was designed to offer financial relief to consumers, which it implemented under the previous administration.

Other State-controlled entities that were required to make contributions to the electricity tariff cuts include Kenya Electricity Transmission Company Limited and the Geothermal Development Company Limited.

The Sh1.75 billion discount withheld by KenGen has exposed Kenya Power to a wider liquidity gap with the utility liquidity position deteriorating in the period to June 2022.

The January tariff cut, for instance, resulted in an annual loss in revenue of Sh26.3 billion leaving Kenya Power with a negative working capital of Sh47.8 billion at the end of June 2022, albeit an improvement from Sh69 billion in June 2021.

In the six months to June 2022, the government only partially covered the liquidity gap by providing support in the order of Sh7.1 billion.

Given the revenue hit from the subsidy on electricity tariffs, the government ended the initiative at the end of December 2022 on the recommendation of the International Monetary Fund (IMF).

“The tariff cut is set to expire at the end of December 2022, and if implemented, Kenya Power’s liquidity situation will drastically improve to a point where government support may no longer be necessary,” the IMF said in a report published in mid-December.

On January 7 last year, the Energy and Petroleum Regulatory Authority gazetted new non-fuel tariffs for electricity supplied by Kenya Power to reflect the 15 percent tariff cut.

The tariff reduction brought down the billing for customers in the life-line category represented by consumption of fewer than 100 units to Sh7.70 per unit from Sh10 previously.

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