•Kenya Power wants electricity tariffs revised upwards to help cover costly wholesale purchases and maintenance of the national grid.
•Electricity tariffs cover the cost of generation, transmission and distribution.
The Energy and Petroleum Regulatory Authority (EPRA) now says it is reviewing the Kenya Power tariff application formula which will inform new adjustments in electricity billing in the country.
This follows a proposal by Kenya Power to revise electricity tariffs upwards by at least 20 per cent, to help cover costly wholesale electricity purchases from generators such as KenGen, and maintenance of the national grid.
The utility firm has blamed an increase in non-fuel power purchase costs for its recent 91.9 per cent drop in profit, where in the year ended June 30, 2019, net earnings fell to Sh262 million from Sh3.3 billion the previous year.
The costs went up by Sh18.1 billion to Sh70.9 billion, from Sh52.8 billion in a similar period in 2018, it notes in its audited financial results.
Kenya Power made an application for a review of tariffs last year, opening talks with the regulator.
Though it is not clear when the process will be completed, EPRA said it will engage stakeholders before coming up with a conclusive decision.
“The authority is currently reviewing the Kenya Power tariff application and as required by the Constitution, EPRA will engage stakeholders before making the final decision,” acting Director General Mueni Mutung’a told the Star.
Kenya Power has the blessings of the Energy ministry to boots its revenue stream to cushion it from costly power purchase agreements, which has seen it pay for unutilised energy.
The country has a generating capacity of over 2,800MW with a demand of about 1,926, the highest, recorded in February this year before Covid-19 interrupted the economy.
According to energy experts, the current capacity charge is 90 per cent of the tariff revenues, which leaves Kenya Power struggling, despite enjoying monopoly.
The utility firm wants to increase the consumption charge for usage of less than 100 kilowatts per month to Sh12.50 a unit, up from an average Sh10.
Consumers of above 100 units will part with an average Sh19.53 a unit from the current Sh15.80, if the proposal is adopted.
The move will hurt household budgets and raise the already high cost of doing business in the country, where manufacturers and businesses will be forced to recover increased costs from consumers.
EPRA has however affirmed its commitment to ensure reasonable tarrifs, despite noting that electricity tariffs must be cost reflective as per the National policy to cover the cost of generation, transmission and distribution.
“The Authority ensures that only prudently incurred costs are factored in electricity pricing. The Authority is ensuring that the sector has affordable and sustainable tariffs over time,” Mutung’a said.
The regulator has been keen to help bring down the cost of power in the country, mainly though intergration of cheaper sources into the energy mix.
So far, it has licensed over 13 mini-grid operators in various parts of the country, mainly marginalized and low-density areas in terms of population.
The Energy Act 2019 allows for other players in distribution of electricity in the country.
Section 136 (1) (c) of the Energy Act allows the transmission licensee to provide non-discriminatory open access to its transmission system for use by any licensee or eligible consumer on payment of fair and reasonable transmission or wheeling charges as shall be prescribed in regulations made under the Act.
To support cheaper energy in manufacturing, discussions are ongoing to have geothermal energy connected directly to industries.
“Discussions on this are still on going. In addition, an economic zone electricity tariff has been approved for the Olkaria Special Economic Zone,” Mutung’a said in an email response to the Star.
The regulator said its is also monitoring performance of the system to reduce outages by establishing reliability performance indices.
This, as connectivity in rural areas continues to be accelerated in the government programme to achieve universal access by the year 2022.
Meanwhile, Kenya Power has committed to continue implementing ongoing business turnaround strategy to improve efficiency and ensure financial sustainability.
The company is currently undertaking a number of initiatives aimed at enhancing revenue collection and protection, improving system efficiency , managing costs and pursuing diversification of revenue streams .