Kenya Power will be cushioned from compensating businesses that incur financial losses due to electricity outages if MPs adopt proposed changes to the law.
The changes to the Energy Act could see Kenya Power start compensating consumers upon upgrading its ageing transmission network to a level where it has back-up connections to ensure reliable supply.
Supply shortfalls from the electricity utility’s aging infrastructure have forced most businesses and wealthy customers to have standby generators.
Currently, Kenya Power offers compensation for injuries and damaged kits but does not pay domestic and business customers for financial loss resulting from being left without electricity.
Now, Kenya seeks to adopt the model in most European countries that demand utilities compensate users whose homes and businesses are cut off from power for prolonged periods.
“These proposals (changes to the Energy Act) include subjecting the making of regulations to the attainment by the grid of the quality and reliability of supply and service prescribed by Epra [the Energy and Petroleum Regulatory Authority] to allow for compensation of consumers for power outages when the country achieves G-1 Grid Reliability status,” says the Bill.
An N-1 Grid Reliability status allows for an alternative power supply path, removing power load from the main lines in a bid to minimise the impact of failure and disruptions on either line.
The changes to the Act will allow the energy regulator to provide a transitional period when the blackout compensation rules will kick in
This will ease pressure on Kenya Power, which is struggling with losses and mounting debt that has seen it default on supplier dues, especially electricity generators such as KenGen.
Kenya Power, which was once considered a blue chip on the Nairobi bourse, has slid into the red in recent years on the back of the system losses and other forms of mismanagement.
It requires billions of shillings to upgrade and expand its network in the coming years and build redundancy to meet the N-1 Grid Reliability status.
The revamp of the dilapidated transmission network is needed to enable it to keep up with growing demand.
The listed utility has instead had to contend with increasing customer connections, particularly in rural areas. It has more than doubled its customers from the 3.7 million it had by the end of June 2015.
The growing shift to solar power systems by heavy-consuming industrialists seeking reliable and cheaper supply has rattled the electricity distributor amid thinning revenues.
The utility firm said some of its industrial customers — who account for over half of its sales revenues — are gradually shifting to own-generated solar power, dealing it a further blow.
Several companies, universities and factories have turned to solar photovoltaic grid-tied systems to supply power for internal use to ensure reliable supply and reduce operational costs.
The proposed regulations that seek to compel the power utility to compensate consumers for financial losses after blackouts are intended to spur a faster response from the power utility in the event of outages.
Business leaders say the blackouts are stifling economic growth.
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In 2015, the government rejected a Bill that required Kenya Power to compensate businesses whose power is cut off for more than three hours within a day.
Kenya Power would have been required to include the compensation in electricity bills and use it to offset future bills under the proposed law that had been sponsored by Mvita MP Abdulswamad Nassir.
Epra is preparing regulations that will specify the number of hours consumers must be without electricity for Kenya Power to offer compensation.
Affected customers will automatically lose their right to seek compensation from Kenya Power in cases where they have tapped power illegally and when third parties like vandals, falling trees, cars or planes interfere with electricity networks.
A declaration of force majeure due to disasters like earthquakes will excuse the company from contractual agreements.
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Kenya Power will also be cushioned from making compensations where it’s the fault of the affected persons or if they fail to report the breach in 30 days.
According to the proposed regulations, a claim for compensation shall be lodged in writing with Kenya Power by the affected business within 12 months after they suffer a breach.