Faulty meters spark costly war between KPLC and consumers

Energy sector regulator ERC has reported a sharp increase in the number of billing complaints filed against the power distributor, setting KPLC up for costly legal battles with customers.

The Energy Regulatory Commission (ERC) says it is currently receiving an average of two major complaints against the Kenya Power and Lighting Company every month – most of them linked to inaccurate billing associated with faulty meters.

“The majority of the cases revolve around over-billing of consumers,” said ERC director-general Kaburu Mwirichia.

The complaints, which are handled by the ERC’s tribunal, have cost KPLC more than Sh100 million this year alone in damages and refunds it has been ordered to pay the litigants.

In precedence-setting rulings that could open a floodgate of suits against KPLC, the power firm has been ordered to pay Sh106 million following two successful petitions on inflated billings.

The awards point to difficult times ahead for KPLC, which is grappling with the twin problems of ageing infrastructure and faulty electrical installations that are causing consumers huge losses in inaccurate or inflated billings.

Though Mr Mwirichia says rising consumer rights consciousness and greater freedom under the new Constitutional dispensation explains the increase in number of complaints, the recent surge in the cost of power is also seen to have forced consumers to pay more attention to their bills.

“Huge operational costs that came with more expensive power has ensured that people pay attention to their power bills,” Steven Smith, the managing director of Eveready East Africa, said.

KPLC has particularly been under intense scrutiny from industrial consumers who have opted for radical measures such as installing parallel meters in their premises to ensure proper billing. Huge variations between self-installed and KPLC’s meters often leads to the filing of complaints with ERC for reconciliation and arbitration.

“Energy forms a huge component of production costs and anyone seeking to remain competitive must pay attention to power bills. Any major fluctuations will definitely raise hairs,” said Anthony Weru, an analyst with the Kenya Private Sector Alliance (Kepsa).

KPLC is required to paySh106 million to the two litigants, including tax deductions remitted to the Kenya Revenue Authority (KRA) and other statutory remissions to the regulators as well as the Rural Electrification Authority (REA).

The ERC is currently hearing another case that could leave a huge financial obligation on KPLC. The regulator is said to be receiving an average of two disputes each month. KPLC lost Sh48 million in a meter reading dispute after the courts ruled that the responsibility of ensuring that the integrity of the meters lies with the power distributor. Consumer goods manufacturer Pegant Limited had complained of faulty readings in its meters in 2001, almost three years after the meter became faulty.

KPLC demanded Sh52.5 million from Pegant Limited in bills it claimed were not paid for the 35 months that the meter undercharged the manufacturer.

But Pegant insisted it could only pay Sh4.6 million, prompting the power distributor to go to court in 2003.

Pegant Limited was, however, ordered to pay KPLC Sh4.6 million for six months on the strength of the 2006 Energy laws.

KPLC had refused to settle the matter on the basis of the 2006 laws, arguing that the dispute happened before the laws came into force and that the law could not apply to the dispute “retrospectively.”

The 2006 law says that KPLC can only backdate payment on faulty meters for a maximum period of six months from the date the meter is established to be faulty. The rule, however, only applies if the fault has not arisen from action by a consumer or the power distributor.

Under the regulations, the power firm can only recover an underpayment for up to three months if the consumer reported the defect and KPLC failed to act on it.

In a second case that was concluded two weeks ago, KPLC suffered yet another knock on its revenues after ERC approved a Sh58 million refund to Chandaria Industrials Limited following a long running dispute with the utility firm over billings. Chandaria Industrials had on November 8, 2007 complained to the ERC that its power bills had abnormally shot-up since 1998 after KPLC replaced electromechanical meters with electronic ones at its premises in Nairobi’s Baba Dogo area.

Chandaria claimed that in the eight-year period between 1998 and 2006 KPLC over-billed it by between 15-24 per cent arising from erroneous installation of the meters.

KPLC billed the firm at an average rate of Sh5.5 million per month over a period of 8 years - a figure Chandaria disputed because the company’s own check meters installed in 2006 showed variations in consumption readings of up to 24 per cent.

The errors were rectified on October 30, 2006 allowing Chandaria’s check meters and KPLC’s to record similar readings. A dispute resolution panel (DRP) constituted by the ERC visited the factory premises and conducted investigations before handing over a report to the ERC on August 20 this year.

The DRP’s report says that an erroneous connection at the factory in Baba Dogo had resulted in KPLC over-billing Chandaria by a total of 57.6 million, including the Sh7.78 million in value added tax (VAT) as well as levies for the defunct Electricity Regulatory Board (ERB) and the Rural Electrification Programme (REP).

“Information supplied by both parties pointed to a mistake in the wiring of the meter and auxiliary current and voltage transformers,” the panel noted in its report, which also indicated that hard copy bills that KPLC sent Chandaria were scrutinised and discrepancies found.

“Test bench simulations established that the blue phase current supply into the meter had been reversed and voltage leads of the yellow and blue phases had interchanged,” the report said.

Based on the findings, the ERC ruled that KPLC shall refund a total of Sh49.83 million to Chandaria being the total over-billed amount exclusive of the Sh7.79 million VAT deductions that Chandaria shall claim directly from the Kenya Revenue Authority (KRA).”

KPLC was also ordered to recover Sh241,415 from ERC being ERB levy erroneously collected from Chandaria and remitted to ERC” the regulator stated.

Mr Mwirichia said the commission has responded to the sharp rise in the number of complaints with new guidelines to help expedite the dispute resolution process.

“We plan to publish new guidelines on the dispute resolution mechanism so that we are not bogged down by complaints,” he said. “We have cases that could be handled by KPLC’s internal dispute resolution mechanisms and do not have to come to us for resolution,” he said.

KPLC is also installing pre-paid meters to help consumers pay up-front for what they intend to consume in advance.