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Kenya Power withdraws 20pc tariff rise bid

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Energy Cabinet Secretary Charles Keter (right) and Kenya Electrical Trades and Allied Workers’ Union (Ketawu) Secretary-General Ernest Nadome at Ministry of Energy's offices in Nairobi on September 21, 2021. PHOTO | EVANS HABIL | NMG

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Summary

  • Energy Cabinet Secretary Charles Keter said on Wednesday that the utility firm had recalled the application that was submitted to EPRA in 2019.
  • This marks a U-turn by Kenya Power that has since 2018 been pushing for an increase in electricity prices by up to a fifth, a relief to consumers who often complain of erratic and expensive supply.

Kenya Power #ticker:KPLC has formally withdrawn an application to increase bills by up to a fifth, shifting its focus to lowering costs, curbing electricity theft and recovery of unpaid bills amounting to over Sh27 billion.

Energy Cabinet Secretary Charles Keter said on Wednesday that the utility firm had recalled the application that was submitted to the Energy and Petroleum Regulatory Authority (EPRA) in 2019.

This marks a U-turn by Kenya Power that has since 2018 been pushing for an increase in electricity prices by up to a fifth, a relief to consumers who often complain of erratic and expensive supply.

Mr Keter said the shift was prompted by the new directors appointed last year preferring cost cutting, sales growth and reduction of power bought from generators that does not reach home and businesses, technically known as system losses, to tariff increases.

The new board has identified a reduction of capacity charges – paid to power firms regardless of generation – as one of the key actions that will pull Kenya Power out of deep losses and bring down electricity bills.

The company also plans to step up crackdowns on illegal connections to the national grid that are depriving it of revenue and recover billions of shillings in unpaid bills from individuals and institutions to improve its future earnings.

“Currently as we speak there is no application for a tariff review. The last one was withdrawn because Kenya Power had a new board and they wanted to review some of the issues and they have not come back with it,” Mr Keter told the Business Daily in an interview Wednesday.

Kenya Power had sought to increase the consumption charge for usage of less than 100 kilowatts per month to Sh12.50 a unit, up from the current Sh10.

The charge for consuming above 100 units was to rise to Sh19.53 a unit from the current Sh15.80.

The utility firm held that that the higher tariffs were justified because the present electricity prices lapsed in 2019.

The law provides that electricity tariffs be reviewed every three years, but the timetable has been erratic as the regulator has often delayed or amended the rates, partly due to the government seeking to ease inflationary pressure on households and industries.

The change of tune months after President Uhuru Kenyatta set up a team to review power purchase agreements signed over the years by Kenya Power.

Electricity consumers in Kenya often complain of high bills, with some of the costs being attributed to idle capacity charges to compensate power generators for units produced but ultimately not used.

The review team will complete its six-month review this month.

Kenya Power posted a Sh939 million net loss for the financial year ended June 2020 from a profit of Sh262 million in 2019 despite revenue rising to Sh133.2 billion.

“The company is undertaking a number of key strategic initiatives to improve financial results … going forward,” Kenya Power told investors.

“Our immediate focus areas are to grow electricity sales, improve revenue collection, reduce system losses and manage operational costs.”

Kenya Power is working on a deal with Safaricom to instal smart electricity meters that will curb power theft and leakages and fix weaknesses on the utility firm’s transmission network.

The Sh31 billion intelligent system will connect 330,300 meters to a central location and track electricity use, outages and load on transformers as well as read meters remotely.

This will help bring down system losses from 23.93 percent to eight percent, earning Kenya Power additional revenues of Sh71 billion in eight years.

The utility also hopes the reduced bill it will pay generators will offer it room to cut electricity prices while making returns to its shareholders.

It buys power from 20 generators, but KenGen, OrPower and Lake Turkana Wind Power account for 79 percent of the firm’s bulk electricity purchase costs.

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

Kenya Power reckons that time has come for the generators to cut their appetite for higher profits.

A cut in electricity prices is set to boost Kenya’s quest to make energy costs competitive compared with other African nations like Ethiopia, South Africa and Egypt.

The cost of power is a key determinant of new investments.

Reduced bills will ease pressure on household budgets given that electricity is among services whose costs have jumped the most under President Uhuru Kenyatta’s administration since 2013.

Power bills hit a 38-month high in August following an increase in the fuel surcharge levied on electricity tariffs, adding pain to consumers already smarting from high cost of petrol, diesel, kerosene, and cooking gas.