Electricity distributor Kenya Power #ticker:KPLC is negotiating to exit the 15 firms, including banks, it contracted to sell prepaid meter tokens following the recent hiring of the four mobile phone operators to provide the service.
Kenya Power managing director Ken Tarus told Parliament that plans were underway to activate exit clauses in the contracts it signed with the vendors to avoid litigation.
“We are exploring exit clauses in the contracts to see how to disengage without being taken to court,” Dr Tarus told the National Assembly’s Energy Committee.
He said direct contracting of mobile phone operators will enable Kenya Power to control 98 per cent of electricity token vending business.
Kenya Power has signed direct tokens vending contracts with Safaricom #ticker:SCOM, Airtel, Telkom and Equitel, who will earn commissions from the business.
“We are now out to aggressively market our pay bill numbers following the signing of the contracts with mobile operators,” Dr Tarus said adding that the deal with Safaricom under the Mgao tariff allows customers to procure tokens, and have KPLC share the cost with the customer. Under the arrangement, the customer pays Sh33 while KPLC pays in Sh22 to meet the transaction cost.
Dr Tarus said customers buying tokens from the contracted vendors have to pay the entire Sh55 transaction cost.
Private vendors currently control 35 per cent of the tokens business while Kenya Power, through its branches and token services accounts for 65 per cent of the billing revenues.
Dr Tarus said introduction of tokens had enabled Kenya Power to stop posting monthly bills to the 4.5 million customers saving the company Sh1 billion.
Kenya power pays Sh75 million monthly commissions to the 15 vendors, who include banks, he said. Dr Tarus had been summoned to parliament to shed light on the sale of electricity tokens following persistent complains that the vendors were charging inflated bills.
He said Kenya Power pays the 15 vendors commission based on the percentage of business they transact on behalf of KPLC.
The 15 vendors divided into three categories, with each vendor earning a 2.5 per cent agency fee for the job.
Multiple agency vendors earn 3 per cent of what they collect while vendors categorised as aggregators are paid 3.5 per cent of amounts they collect.
“The vendors deposit money ahead of time, say Sh200m and as they vend, the amounts then fall as they sell until it hits Sh1 million when they are barred from vending until they top up,” Dr Tarus said.
The committee directed Kenya Power to relook at existing contracts with 15 vendors with a view to ensuring that the Kenyans are not subjected to high costs of purchasing electricity tokens.