CLEAN-UP

State moves in to restore light at Kenya Power

President Uhuru Kenyatta has issued a 90 days deadline on bringing down the cost of power.

In Summary

•The country’s sole electricity distributor is losing billions every month in power theft amid huge debt from suppliers and creditors.

•It suffered Sh15.99 billion system losses in the year ended June 2020, its financial books indicate.

A customer in Loresho, Nairobi, keys in tokens in her meter box on April 25, 2018. /ENOS TECHE
A customer in Loresho, Nairobi, keys in tokens in her meter box on April 25, 2018. /ENOS TECHE

The government has called in the Directorate of Criminal Investigations among agencies to look into “alarming” system losses within Kenya Power.

This follows the Presidential taskforce recommendations on the country’s Power Purchase Agreements (PPAs) entered into by the utility firm, which is spending billions on Independent Power Producers (IPPs).

The John Ngumi led taskforce, which unveiled its report a week ago, called for a review and renegotiation of existing power deals.

There have been at least 22 power producers in Kenya Power's books which it paid a total of Sh93.9 billion last financial year, a cost expected to go down in reviewed terms.

The country’s sole electricity distributor is losing billions every month in power theft amid huge debt from suppliers and creditors.

It suffered Sh15.99 billion system losses in the year ended June 2020, its financial books indicate.

Yesterday, Interior Cabinet Secretary Fred Matiangi after a lengthy meeting with Kenya Power and key energy ministry officials, in Nairobi, declared the utility firm a special government project as the task-force recommendations begin to be implemented.

He said all negotiations on new PPAs have been suspended.

"We have taken certain tough decisions especially in relation to the PPAs. We are going to deal with PPAs we have in place,” Matiangi said.

A multi-agency team comprising of the DCI, Financial Reporting Center (FRC), Assets Recovery Authority and other investigative agencies are being assembled to investigate system losses within KPLC, the CS said.

The team will also look at procurements practices, insider trading, conflict of interests and suspect transactions involving KPLC staff.

“We are working together on an inter-ministerial level to reduce system losses we have suffered. The theft of power and so on, we want to ensure we address all the challenges in the sector that result to the costs that are being passed on to the consumers,” Matiangi said.

He termed the current power bills payable by consumers, both households and the industrial sector as “unsustainable”.

“We cannot continue this way,” Matiangi said adding that the billing system at Kenya Power will also be reviewed.

This will touch on Fuel Energy Charge, Forex Charge, EPRA(Energy and Petroleum Regulatory Authority) charge, Water Resources Management Authority (WARMA) charge, REP levy and VAT.

Power bills also include a consumption charge which Kenya Power uses to procure bulk power from electricity-generating companies.

Fuel Energy Charge is the added cost or rebates to the consumers as a result of fluctuations in world prices as well as fluctuations in the quantity of oil consumed by electricity generation.

The fuel cost charge lags one month behind the actual price of the fuel.

This money is collected by KPLC and all of it is passed on directly to electricity generation companies, who in turn pay fuel suppliers.

Forex adjustment is based on the fluctuation of hard currencies against the Kenya Shilling for expenditure related to the power sector, such as projects loan repayments.

REP levy is charged five per cent on the cost of the units of power consumed by a customer.

It is passed on to the Rural Electrification Authority (REA) for the implementation of rural electrification projects.

VAT is at 16 per cent of the total bill and is passed on to the Kenya Revenue Authority (KRA).

“The focus which we should not lose is to bring down our electricity bills and work has started now to deal with challenges in this sector with the aim of ensuring that we reduce the cost of power,”Matiangi said.

President Uhuru Kenyatta has issued a 90 days deadline on bringing down the cost of power by up to 34 per cent.

According to the presidency, cutting of expensive power producers will see a unit of electricity go for Sh16 starting December 31 from Sh24 which is two-thirds of the current tariff. 

This means a consumer spending Sh500 per month on electricity will pay Sh330, saving Sh170. 

“I am confident that working closely with colleagues, we will achieve the target that we were given by His Excellency the President. We are all concerned about the cost of power. Our bills are too high,” Matiangi said.