•EPRA in a statement said that the revenue requirements of seven new power plants commissioned between the last tariff review and the current one were not initially factored into the Base Tariff.
•To sustain this reduction, the pass-through costs remained unchanged from January 2022 to August 2022.
Image: EPRA TWITTER
The Energy and Petroleum Regulatory Authority (EPRA) has denied claims that power costs were inflated, citing that the increased cost was due to subsidy changes.
EPRA in a statement said that the revenue requirements of seven new power plants commissioned between the last tariff review and the current one, were not initially factored into the base tariff.
According to EPRA Director General, Daniel Kiptoo, these costs were recovered through the pass-through mechanism, ensuring the financial viability of the power plants and maintaining the security of the power supply.
“The National Treasury honoured their commitment up to August 2022 and was unable to continue with the subsidy for the remaining four months on account of a shift in policy. This meant that Treasury’s share of the reduction had to be paid by consumers through the pass-through mechanism,” said Kiptoo.
To sustain this reduction, the pass-through costs remained unchanged from January 2022 to August 2022.
“The total revenue requirement to sustain this reduction was Sh26.3 billion. The sector entities combined committed to provide Sh12.2 billion and the balance was to be paid through a subsidy of Sh14.1 billion by the National Treasury,” added the DG.
Additionally, the authority says the implementation of a 15 per cent tariff reduction on end-user tariffs in January 2022, which was directed by a Presidential Taskforce to Review Power Purchase Agreements, played a role in the eventual cost of electricity.
The tariff review for the period 2023-2024, 2024-2025, and 2025-2026 now incorporates the costs of newly commissioned power plants and outstanding subsidy payments, ensuring transparency and financial integrity within the sector.
In a statement, EPRA maintained that by law, the total costs of providing generation, transmission and distribution are recovered from the customers through a tariff framework composed of three components; the base tariff; pass-through costs; and taxes and levies.
These are also in the tariff breakdown.
The base tariff encompasses the costs incurred by utilities such as Kenya Power, Kenya Electricity Generating Company (KenGen), Kenya Electricity Transmission Company (KETRACO), Rural Electrification and Renewable Energy Corporation (REREC), Geothermal Development Company (GDC), and Independent Power Producers (IPPs).
These costs are calculated based on existing contracts and associated financial considerations.
Pass-through costs, on the other hand, include additional variable expenses not covered by the base tariff, such as the volume and cost of Heavy Fuel Oil (HFO) for thermal power plants, exchange rate differentials, and additional generation costs for new power plants.