Kenya Power revenues hit as rural homes use Sh3.34 daily

Kenya Power

Kenya Power Managing Director Bernard Ngugi during an operation to curb illegal connections and theft of electricity in Huruma, Nairobi on March 15, 2021. PHOTO | DIANA | NGILA | NMG

Millions of Kenya Power #ticker:KPLC rural customers are spending a paltry Sh3.34 daily on electricity in what has failed to lift the sales of the utility firm in tandem with the sharp increase in connections to the national power grid.

The average monthly electricity consumption of rural households connected to the national grid is a six-kilowatt hour (kWh) that is currently valued at Sh100.45 or Sh3.34 a day, Kenya Power shareholder disclosures show.

Homes that use six-kilowatt hours (kWh) of electricity or less every month indicate that a majority of them use electricity for charging phones and controlled lighting.

They are likely not to plugged gadgets like fridges, TV, cookers, microwaves and electric heaters, key drivers of power use in homes.

This reveals the low living standards among a majority of Kenyan households, especially in the rural areas and urban slums that have recently been connected.

The utility says the rural consumers have failed to lift its sales with the firm relying on industrial consumers and wealthy urban dwellers to power revenues.

Power sales have increased 39.3 percent since 2012 when the number of those connected to the grid jumped 271.7 percent.

"[A] majority of the new connections are for domestic rural customers under the last mile programme. The consumption of these customers is on average about six units per month, which explains the low revenues," Kenya Power told investors via its digital shareholder question and answer session.

"The company is undertaking customer awareness and education to promote the use of electricity aimed at driving demand."

Kenya has expanded electricity penetration across the country, particularly in rural areas, over the past decade under the Last Mile Connectivity Project.

This scheme connected homes living close to Kenya Power transformers at a subsidised cost of Sh15,000.

The project, which is funded by donors such as the African Development Bank, also brought transformers and power lines to zones that had little economic value for Kenya Power to commit billions of shillings for grid development.

Poor homes got connected without paying an advance fee, with charges recovered monthly over a period of 36 months.

The low-cost project has been a key plank of the Jubilee government’s energy policy in expanding power access.

The government says the Last Mile project removed a major hurdle to the acceleration of rural electrification and spurred village economies as residents open businesses such as welding, barbershops, eateries and cyber cafés.

Kenya Power says sales from this region have been sluggish and is now shifting focus to connecting what it calls quality customers like schools, hospitals and pubs.

"The company will intensify sales growth through increased connectivity targeting premium customers by offering deferred payment arrangements and accelerated connection times."

Kenya Power data shows the rural households have cut the average consumption per customer by nearly a third over the past decade.

On average, Kenya Power received Sh1,565 per customer in the year to June last year, down from Sh3,910 in 2012.

The government subsidy boosted electrification and removed darkness from many villages.

This has increased Kenya Power’s customer base from about 2.03 million in 2012 to 7.57 million in the year to last June.

Most are, however, in remote areas and slums with low consumption levels since their power use is limited to lighting and charging phones, and playing small electronic appliances.

Kenya Power has also struggled to recover the connection fees, which is supposed to be repaid monthly over three years when paying bills.

Some homes have switched to solar or reverted to kerosene lamps to avoid paying the connection fees, further cutting the average consumption per home.

The power distributor’s low voltage network has increased from 73,594 kilometres to 243,207 kilometres over the past seven years tied to rural electrification. An expanded network has come with increased costs, especially maintenance fees.

Lower than expected consumption from rural Kenya has also left Kenya Power with excess electricity from generators like KenGen and many other independent power producers.

Under the typical power purchase agreement, a power producer gets paid for electricity produced, even if it is impossible for Kenya Power to sell it to consumers due to excess capacity and other reasons.

This has in part pushed Kenya Power into losses with the utility having made a pretax loss of Sh7.04 billion for the year ended last June.

President Uhuru Kenyatta has set up a team to review power purchase agreements signed over the years by Kenya Power in efforts to keep the firm profitable.