Market News

System losses cost Kenya Power Sh16bn revenue


Kenya Power workers repair a power supply line. FILE PHOTO | NMG

Kenya Power suffered Sh15.99 billion worth of system losses beyond what it is allowed to recover from consumers in the year ended June 2020, shining a spotlight on the burden of the expanded network and customer base on the utility’s revenue.

The firm’s system losses rose 23.46 per cent in the period, well beyond the 14.9 per cent that the regulator had allowed it to pass on to customers bills in 12 months.

Kenya Power disclosed in its annual report for the year ended June 30, 2020 that average yield on units sold in the review period was Sh16.30 per kilowatt hour (KwH), meaning that the total 2,689 gigawatt hours (GwH) that was marked as system losses was valued at Sh43.83 billion.

While the electricity distributor passed most of this cost (Sh27.84 billion) to consumers, some Sh15.99 billion was beyond the allowed loss and had to be absorbed internally.

The utility’s total revenue for the period stood at Sh133.26 billion. It had purchased a total of 11,462 GwH from the various power producers, and sold 8,773 GwH, with the remainder going down as system losses.

The Energy and Petroleum Regulatory Authority (Epra) last July raised the allowed system losses by five percentage points, which Kenya Power is counting on to cut its exposure to irrecoverable costs.

“Epra increased the allowable system losses from 14.9 per cent to 19.9 per cent with effect from July 2020. This will help in cushioning the company against the high system losses,” said Kenya Power in the latest report.

Kenya Power said the high system losses are due to technical and commercial factors arising from the expanded transmission and distribution network as well as increased electricity pilferages.

Technical losses occur when electrical energy is dissipated in the process of transmission and distribution while commercial losses are mainly attributed to pilferages, faulty meters and meter tampering.

Kenya Power hopes to cut its system losses to 19.9 percent by 2025, riding on a raft of measures such as riding on technology to curb electricity theft and reduce technical losses

“Improving system efficiency is a top priority as the rising system losses are of great concern. Reduced system losses would have immediate positive impact on our sales, revenue and business sustainability,” said the firm.

Kenya Power’s system losses have increased from 18.68 percent to the current level over a seven-year period on the back of the network expansion especially in the last mile programme.

Over the last seven years, the firm has increased its network by 56,611 kilometres to 84,681 kilometres while customer based jumped 3.3 times to 7.6 million.