Kenya Power now bets on goodwill for dollar electricity bill paymentsTuesday March 21 2023
Kenya Power has abandoned a plan to bill customers in dollars and euros after the sector regulator said it would not approve the move.
The utility says that though it will continue billing in Kenyan shillings, it will negotiate with large consumers who wish to settle the bills in dollars on a one-on-one basis to help replenish its forex reserves.
The State-owned firm says it has opened bank accounts of the currencies and will start talks with big power consumers in a month, setting the stage for payments using the greenback.
It reckons it does not need the permission of the regulator — the Energy and Petroleum Regulatory Authority (Epra) — to accept payment in dollars.
“In the next month, we will start engaging with some of our customers who have huge dollar inflows because this will boost our dollar reserves. Remember we need dollars to pay our dollar-denominated loans and pay independent power producers,” Kenya Power's General Manager, Finance, Stephen Vikiru, said Monday.
“We will continue billing in Kenya shillings but we will now give customers an option to pay in dollars or euros. We have now opened accounts for these two."
The utility is grappling with an acute shortage of the forex and high rates that crossed the 145-mark last week, ballooning its dollar-denominated loans besides fuelling the likelihood of defaulting on monthly payments for power supplies.
The shilling dropped to a fresh low of 130 units against the greenback yesterday, further increasing the cost of servicing dollar-denominated loans besides making imports costlier.
The forex crisis has ballooned the debt portfolio of Kenya Power’s dollar-denominated loans besides heightening the risk of defaulting on timely payments to Independent Power Producers for electricity supplied.
Receiving payments in dollars and euros will help Kenya Power avoid exchange losses for wholesale electricity it buys from generators that are based on hard currencies.
It will also help cover the additional costs in repayments for loans, the majority of which are denominated in dollars and euros.
Kenya Power has not defaulted on paying IPPs whose power purchase deals are dollar-denominated, but Mr Vikiru said the risk of being unable to make timely payments is significantly rising due to the worsening forex crisis.
Kenya Power’s quest to receive payments in foreign currencies comes weeks after Epra said that it would not allow the utility to start billing customers in dollars and euros.
Epra said that allowing Kenya Power to bill customers in dollars and euros will amount to double compensation for exchange rate losses.
The regulator says that Kenya Power is currently compensated every month for fluctuations in hard currencies through the foreign exchange surcharge.
The foreign exchange fluctuation adjustment rose to Sh1.85 per kilowatt hour (kWh) in February electricity bills, from Sh0.73 in August last year, highlighting the impact of the weakening shilling.
Mr Vikiru said that, unlike billing customers in foreign currencies, Kenya Power does not need to get regulatory approval to receive payments in dollars and euros.
“The engagement with Epra is just for information, not really approval considering the billing remains in Kenyan shilling,” he said yesterday.
The preference for dollar payments points to the increased dollarisation of the economy, with firms and traders who are paid in dollars being the biggest beneficiaries.
The utility’s finance costs—related to loan repayments— increased to Sh7.39 billion in the six months to December last year compared to Sh6.8 billion in a similar period a year earlier on the back of a weakening shilling.
Kenya Power says that the continued weakening of the shilling against major currencies is hurting its financial performance through exchange rate losses.