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Economy

KPC, energy agency clash over ‘low’ pipeline tariffs

Pavel Oimeke
Energy and Petroleum Regulatory Authority Director-General Pavel Oimeke. FILE PHOTO | NMG 

The Kenya Pipeline Company (KPC) has locked horns with the energy sector industry regulator over new pipeline tariffs aimed at cutting fuel prices in the domestic market and boosting oil re-exports.

The KPC has rejected the revised pipeline tariffs, saying the reduced rates that the Energy and Petroleum Regulatory Authority (EPRA) has gazetted could wreck its bottom line.

In the changes, the regulator has cut the tariff for fuel being exported through the KPC network by half to Sh3,089 ($30.89) per 1,000 litres, down from the previous Sh6,000.

The three-year tariff revision plan also envisages lower tariffs of Sh3,065 in 2020 and Sh2,907 in 2021.

KPC board Chairman John Ngumi said all the stakeholders had proposed higher tariffs “and it is unclear just why the regulator chose to push the rates down given the minimal net effect on the pump prices.”

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“We were involved in the tariff revision at the public participation level and all stakeholders agreed on a tariff. It is not clear why EPRA reduced it but we have already appealed because, at that rate, the revenues will only be sufficient to support KPC’s operations and maintenance and nothing else,” he said.

The KPC had proposed tariffs at Sh4,635 per 1,000 litres for the export market and various increases in all the local market tariffs in what would have resulted in even more expensive fuel throughout the country.

The EPRA, which confirmed having received the appeal from KPC said its revised rates had already handed the consumer relief of Sh0.50 per litre in the latest fuel price, effective up to mid-December.

The benefits were, however, swallowed by the upward revision of the import declaration fees and the railway development levy by the Finance Act 2019. EPRA Director-General Pavel Oimeke said the revision was necessary since Kenya was losing the Rwandan and Ugandan petroleum export markets to Dar es Salaam due to the high pipeline tariff.

He said the appeal by the KPC was returned for ‘restructuring.’

“We are waiting for the appeal. We have met them and advised them how to restructure the appeal. We will objectively look at it and advise them,” said Mr Oimeke.

The KPC also argues that Kenya has not been losing the export market for fuel but has lost the lubricating oils and grease market, which the parastatal does not handle.

The State agency remains one of the most cash-rich entities with a recent Sh5 billion ‘special dividend’ given to the National Treasury as a sign that the firm had significant spare money in its coffers.

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