Energy ministry probes Kenya Power’s reasons for price hike

NAIROBI, KENYA: The Ministry of Energy will in the next month determine whether Kenya Poweris justified to increase its basic tariffs and costs of connecting new customers to the power grid.

Energy and Petroleum Cabinet Secretary Davis Chirchir

Energy and Petroleum Cabinet Secretary Davis Chirchir said the ministry is studying the different components of the power bill as well as the distribution infrastructure with the aim of establishing the “right” price for electricity in the Kenyan market.

Pricing structure

“We are doing a study to establish the element in pricing electricity,” he said at a briefing yesterday. “The study is already on and should be ready within a month or so, and from the findings we should be able to get the right price.”

Mr Chirchir said a new pricing structure would seek to give Kenya Power a fair margin while at the same time cushion the customer from bearing all the costs, some of which may have been incurred due to inefficiencies within the company’s systems. He, however, noted that at the current levels of about 18 US cents per unit, Kenyan consumers were paying a high amount, adding that lower pricing would be a priority for the ministry going forward.

Kenya Power last February approached the Energy Regulatory Commission (ERC) with a request to increase power tariffs, which have remained unchanged since 2004.

The firm is also fighting to have the cost of connecting new customers to the grid increased to Sh70,000 from the current Sh34,980.

Two weeks ago, Deputy President William Ruto issued a directive that the power firm should not increase the tariffs, but instead look for means to lower its costs of operation and find alternative sources of financing its infrastructure projects.

This did not appear to go down well with Kenya Power, with some sections of the media reporting that the firm has threatened to stop connecting new customers, saying it cannot meet the cost of doing so at the current prices.


Chirchir, however, said yesterday that Kenya Power had not frozen new connections.

The Cabinet Secretary added that in addition to finding out the true cost of electricity in the Kenyan market, he would in the coming years work to reduce its cost in a bid to attract investors.

He added that he would aim to double the amount of electricity produced, mostly using geothermal sources, over the next four years.

“My area of priority will be to make sure that we generate and distribute power costs effectively and that we are able to meet the requirements in the country,”€ he said.

Competitive

€œWe have to be competitive globally — not just in the region — if we are to attract foreign direct investments by getting multinationals to set up plants in the country. These companies are not going to come here to manufacture if the cost of production is not going to give them an advantage in the global market.

€œMany companies have shut down their operations in the country on account of high power prices, and the few that have been left are threatening to close down. We must get it right. We must look at where we are going wrong in pricing power, and getting the right quality and quantity.

By Macharia Kamau, The Standard

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