Economy

Regulator agrees to Kenya Power 20pc electricity bill increase

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Securing finance for large-scale renewable energy projects in East Africa is a major obstacle. FILE PHOTO | NMG

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Summary

  • Sources at the Energy and Petroleum Regulatory Authority (EPRA) told the Business Daily that the regulator had agreed to offer the utility a tariff hike, more than one year after Kenya Power submitted its application.
  • The higher tariffs will be revealed in the coming weeks and subjected to public participation before they take effect through a Kenya Gazette announcement.
  • If implemented, the higher tariffs will aid Kenya Power’s turnaround efforts, but hurt household budgets and raise the already high cost of doing business in Kenya.

A technical team at the energy regulator has agreed to higher electricity prices in the wake of renewed push by Kenya Power to have the charges increased by at least 20 percent.

Sources at the Energy and Petroleum Regulatory Authority (EPRA) told the Business Daily that the regulator had agreed to offer the utility a tariff hike, more than one year after Kenya Power submitted its application.

The higher tariffs will be revealed in the coming weeks and subjected to public participation before they take effect through a Kenya Gazette announcement after final approval by EPRA.

If implemented, the higher tariffs will aid Kenya Power’s turnaround efforts, but hurt household budgets and raise the already high cost of doing business in Kenya.

"We have examined and approved the application by Kenya Power which will now be published for stakeholder consultations," said an EPRA source, who sought anonymity.

"The difference between what was applied for and what we have approved is not much. This could have been completed earlier but the surge in Covid-19 cases has slowed the progress recently."

Kenya Power wants 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 will rise to Sh19.53 a unit from the current Sh15.80 in the event that the regulator approves the proposed tariffs.

Kenya Power holds that that the higher tariffs are justified because the present electricity prices lapsed last year.

In 2018, EPRA reduced the retail prices of electricity after an order from President Uhuru Kenyatta in the wake of widespread complaints from domestic customers and small businesses over a costly tariff introduced last July.

The tariff almost doubled the monthly bills for higher-income households, triggering the complaints.

EPRA cut the tariff from November 2018 to July 2019 to Sh10 per kilowatt hour from Sh15.80 for customers who use below 100 kilowatts per month.

Kenya Power, citing the expiry of the temporary tariffs, has pushed for a review of the charges upwards and try to reverse its falling earnings, which has seen it issue a profit warning this year — the third one in a row.

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.

EPRA last month said that the utility firm had submitted fresh information to support its push for tariff adjustments concluding the long wait for tariff review.

"Kenya Power has submitted an addendum to reflect the current developments in the energy sector. EPRA is reviewing the application before it is submitted to the public for stakeholder comments," EPRA said in response to the Business Daily.

Kenya Power had earlier sent the Energy ministry a letter protesting delays by the energy regulator in reviewing electricity charges to increase prices by up to a fifth.

The listed utility firm has since last year been engaging EPRA on the application it made last September seeking a revision of tariffs to cushion it from losses and supplier defaults.

In the protest letter, Kenya Power sought the ministry’s help in ending the tariff stalemate, a review of bulk power purchase agreements and sharing of losses with other State firms in the sector such as the rural electrification agency and the one in charge of high voltage transmission.

The power distributor said it had lost sales of Sh37.3 billion in the year to June due to delays by EPRA in offering the utility higher tariffs, raising the prospect of the company dipping into losses.

The firm has consistently sought higher tariffs, arguing that it needs them to cover the costs of capital-intensive building and maintaining of the nationwide electricity distribution infrastructure.

It spends billions of shillings annually on power lines, transformers and labour operations.

Kenya Power this year issued its third profit warning in a row, citing reduced electricity consumption due to coronavirus control measures and rising cost of buying wholesale power from firms like KenGen.

The alert means the utility’s net earnings will decline by at least 25 percent of last year’s profit of Sh262 million — which was the worst in 16 years.

The utility firm also last paid a dividend in 2017.

Editor's note: This story has been updated to clarify that a technical team agreed to higher electricity prices pending public participation and final approval.