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Economy

Energy regulator cuts power costs for large users by 20 percent

Kenya Power
A Kenya Power technician. FILE PHOTO | NMG 

The energy watchdog has cut retail electricity prices for large manufacturers in a fresh bid to make power costs competitive compared with other African nations such as Ethiopia, South Africa and Egypt.

The Energy and Petroleum Regulatory Authority (EPRA) has lowered retail tariffs for big consumers to Sh7.99 per kilowatt hour (kWh) from Sh10.10 a unit, reflecting a 20.8 percent fall.

Manufacturers operating in Special Economic Zones close to the Naivasha standard gauge railway (SGR) station will pay Sh5 per kWh, from the current rate of Sh10.10 and Sh12.

Domestic, commercial and small industrialists have been exempted from the discount as Kenya Power #ticker:KPLC continues to push for higher tariffs.

The lower electricity prices for industrialists are meant to boost economic growth, entice investors and rev up job creation. The Kenyan government has been trying to boost investment in the power-hungry manufacturing sector in recent years, including the opening of light vehicle assembly plants by global firms like Peugeot and Volkswagen.

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Pavel Oimeke, EPRA Director-General, reckons that the discount will apply to larger manufacturers connected to the 220 kilovolt lines, arguing that the power cut will ease their production costs.

"The large industries will enjoy significant relief from this new revision given that they also have the cheaper time of use tariff and the ongoing rebates plan. We have also come up with a special tariff for the Special Economic Zones," Mr Oimeke said. The lower time of use tariff applies from 10pm to 6am every day to boost usage of electricity when most households and businesses have shut down.

The new prices are effective from January 30 and will apply to postpaid bills due at the end of February. Taxes and other levies account for about a third of electricity tariffs and manufacturers have been lobbying for these charges to be reduced.

During his second term inauguration, President Uhuru Kenyatta said he planned to increase the share of manufacturing to annual economic output to 15 percent from nine percent.

Kenya Power has consistently sought higher tariffs, arguing that it needs them to cover the capital-intensive nature of building and maintaining a nationwide electricity distribution infrastructure. The listed utility firm has made an application to increase electricity prices by up to a fifth in a review that if implemented will hurt household budgets and raise the already high cost of doing business in Kenya.

Kenya Power is seeking higher tariffs to reverse its reducing profitability and review the temporary reduction of power charges that expired in July. It wants to increase the consumption charge for those consuming less than 100 kilowatts per month to Sh12.50 a unit, up from the current Sh10.

This will apply to approximately 5.7 million customers who use below 100 kilowatt units per month. 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.

Kenya Power has hinged the recovery of its earnings on the new tariffs after issuing a profit warning for the second year in a row.

The firm in 2018 returned the worst performance in a decade as profits fell 63.7 percent to Sh1.92 billion, denying investors dividends.

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