The Energy and Petroleum Regulatory Authority (Epra) recently reviewed electricity tariffs, for the first time including a bulk tariff for a three-year period effective April 1, 2023.
The tariff will allow big consumers to buy electricity in wholesale from Kenya Power at discounted price and resell it to end-users, including tenants at a profit.
Here is how the deal to buy and sell power will work.
What is the motivation behind the bulk power tariff?
The tariff is meant to improve efficiency in power distribution and relieve the burden on Kenya Power in pursuing defaulters.
Bulk power purchasers will pay Kenya Power upfront, meaning that the State electricity distributor will protect every shilling from power sold under this arrangement. The bulk power purchaser will be left with the task of following up on payments from the consumer.
Which band of consumers are eligible for the bulk tariff?
The tariff is applicable to big electricity consumers, mainly businesses such as shopping malls and owners of vast residential areas. Domestic consumers do not qualify.
These are customers in the C12, C13, C14, C15, C16 and C17 consumption bands who use upwards of 15,000 kilowatts per hour a month.
What will it take for one to buy power in bulk from Kenya Power and resell?
Consumers wishing to buy power in bulk from Kenya Power are required to get retailer licences from the energy regulator. This licence will allow them to resell electricity to their customers.
They also must apply for a power purchase agreement with the electricity distributor.
How does the cost of bulk power compare with that of other consumer bands?
The cost per unit in the bulk tariff is lower compared to the unit cost in the domestic tariff. For example, the bulk tariff is set at Sh12.12 per unit compared to Sh20.97 per unit for domestic consumers in the first year of the new tariffs that took effect from the start of this month.
What are the factors that Epra uses to determine the price at which the end users buy the power?
The energy regulator primarily considers two things; the cost of the total units that customers buy in bulk from Kenya Power and the cost of setting up the alternative power source, mainly solar or a hybrid of diesel and solar.
Epra then uses the combined cost of the Kenya Power units and the ones generated from the internal power system to come up with the retail price for the end user.
The energy regulator reserves the right to approve or reject any application for a bulk tariff on a case-by-case basis.
A majority of the customers in the bulk power tariff have their internal power generation, mainly solar and biomass.
How big are the margins for the consumers who will buy power in bulk and resell it?
The energy regulator has an undisclosed cap on the margins. This is meant to ensure those buying electricity in bulk do not make unjustifiable profits.
The Energy Act allows for the private sector to participate in the distribution of electricity, why has it taken long to implement this provision?
This has been because the last review was done in 2018 and the inclusion of such a tariff can only be done in the overall tariff review. This is why Epra introduced it in the new tariffs that came into force on April 1, 2023 for a period of three financial years.
Are there companies already buying power in bulk and reselling to customers?
Currently, Great Wall Apartments in Mavoko and Tatu City are buying electricity in bulk from Kenya Power and re-selling to their residential and commercial tenants.
It is also widely expected that many investors setting up businesses mainly in real estate and who have an alternative power supply (mainly solar, biomass or hybrid) will go for the bulk tariff.
This is mainly due to the growing shift where a majority of investors, especially in real estate (residential, commercial and mixed), are keen to provide all basic amenities to their tenants.