Households to pay Sh6bn for electricity theft and leakages

Consumers will pay an additional Sh1.7 billion annually to Kenya Power #ticker:KPLC for electricity thefts and leakages from an ageing transmission network.

Kenya Power was this month given more room to bill consumers the additional losses it incurs for electricity bought from generators such as KenGen #ticker:KNGN that does not reach home and businesses, technically known as system losses.

The Energy and Petroleum Regulatory Authority (Epra) last Friday reviewed consumer tariffs and allowed Kenya Power to recover system losses equivalent to 19.9 per cent of power it buys from generators from users, up from 14.9 per cent.

The Ministry of Energy reckons that the regulatory move will increase consumer retail prices by Sh0.20 per kilowatt hours (kWh).

This will increase consumers’ annual payment to the utility firm by Sh1.77 billion based on the 8.84 billion kWh that homes and businesses consumed last year.

Consumers last year paid an estimated Sh4.24 billion on system losses at the earlier level of 14.9 per cent, meaning that the additional charges will push the burden to Sh6 billion.

"Epra has made amendments to Gazette No 8043 of 2018 in respect of the schedule of tariffs, charges, prices and rates to be charged by the Kenya Power Company to consumers of electrical energy," said Epra in the latest Kenya Gazette notice.

"Target system loss factor in transmission and distribution is amended from 14.9 per cent to 19.9 per cent effective July 1, 2020."

Kenya Power’s latest annual report puts the power losses at 20.5 per cent for the year to June 2018.

The extra losses translated to an annual loss of about Sh3.06 billion, which is more than 10 times the Sh262 million profit Kenya Power returned in the year to June 2019.

The Kenya National Bureau of Statistics (KNBS) placed the losses at 23 per cent for the year to December, and well above the global benchmark of about 15 per cent.

This means that losses above 19.9 per cent translates to lost revenues for Kenya Power given the firm shoulders revenue leakages above the regulatory limit.

The combination of power theft and leakages from the ageing transmission grid, which stems from the long period of under-investment, has continued to keep the system losses beyond the initial target of 14.9 per cent.

The inefficiency in the power flow system happens in high voltage wires, substations as well as low voltage lines connecting households and businesses.

High voltage wires, above 132 kilovolts, are managed by the Kenya Electricity Transmission Company, with Kenya Power handling lower voltage lines.

Meter tampering or outright theft of electricity have also dogged Kenya Power, which is also hurting from vandalism of lines and transformers.

The company in February said it had fired 110 workers in the past year due to fraud and illegal connections to the grid carried out by people suspected to be its employees.

In the seven months to February, 630 people had been arrested and prosecuted for various crimes relating to electricity theft and fraud, with 115 convicted.

Kenya Power has 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 its net earnings will decline by at least 25 per cent of last year’s profit of Sh262 million — which was the worst in 16 years.

The firm has also been pulled down by the rising cost of buying electricity from power generators that jumped by Sh18 billion last year, blunting the impact of an increase in sales.

Kenya Power had made an application to the regulator for an increase in electricity prices by up to a fifth, saying it is key to reversing its reducing profitability.

But the State has frozen the review, which combined with the flat sales, looks set to hurt the firm’s profits.