News Update: Millions to miss Uhuru’s 33pc cut on electricity bills

 More than half of Kenya Power’s domestic customers are set to miss out on President Uhuru Kenyatta’s Christmas gift of lower electricity prices.

The President issued a directive on Wednesday requiring the Ministry of Energy to reduce power tariffs by 33 percent to an average of Sh16 per kilowatt hour (kWh) from the current Sh24 a unit.

The cut to Sh16 a unit is set to benefit domestic consumers who use more than 100 kWh per month and do not enjoy the State subsidy.

© 2008 AFP File photo: A transformer field sits behind a fence at a geothermal plant near the central Kenyan town of Naivasha. ( ROBERTO SCHMIDT/AFP via Getty Images)

Nearly four million of Kenya Power domestic customers, who consume less than 100 units monthly, pay an average of Sh16 per kWh.

This means that the planned 33 percent cut in electricity prices will benefit homes that consume more than 100 units monthly, mainly middle class homes plugged to gadgets like cookers, water heaters and fridges, who on average pay the Sh24 a unit.

Under the current billing structure, homes in rural Kenya and low-income urban neighbourhoods, which consume less than 100 kWh monthly, enjoy a subsidy of Sh5.72 per unit.

The 33 percent cut implies that all homes will enjoy the subsidy irrespective of their monthly consumption levels.

A State House statement, announcing the handing in of the report of a taskforce appointed to review power purchase agreements, promised that the lower tariff will be implemented before end of December.

“The President has also examined and welcomed the recommendations of the Taskforce that establish a path towards the reduction of the cost of electricity by over 33 percent within four months,” said the statement.“

This cost reduction will be achieved through the reduction of the consumer tariffs from an average of Sh24 per kilowatt hour to Sh16 per kilowatt hour which is about two thirds of the current tariff.”

The bottom-end segment accounts for 55 percent of Kenya Power’s total customer base of 7.6 million.

Millions of homes have recently been hooked to the power grid under a government subsidy meant to speed up electrification. This has increased Kenya Power’s customer base from about two million in 2013.Most are, however, in remote areas and slums with low consumption levels since their electricity use is limited to lighting and charging phones, and powering small electronic appliances.

President Kenyatta also ordered the cancellation of all ongoing and incomplete power purchase agreements being negotiated with the State distributor Kenya Power.

The announcement came in a day when the head of State also replaced Charles Keter with Monica Juma as Cabinet Secretary for Energy. Dr Juma has been in charge of the Defence docket.

President Kenyatta set up the taskforce to review the power purchase agreements in March.

“The taskforce recommendations include: cancellation with immediate effect of all unconcluded negotiations of Power Purchase Agreements,” the State House statement said.

State House said that future power purchase agreements with the government will have to be in line with its Least Cost Power Development Plan, which emphasises the use of renewable energy sources.

Consumers often complain of steep bills, partially due to idle capacity charges that compensate power generators. for what is generated but never used.

Under a typical power purchase agreement, a power producer gets paid for any electricity produced, even if it is impossible for Kenya Power to sell it to consumers because of reasons including excess production.

State House said the taskforce found that there was a huge disparity between the tariffs charged by main power producer KenGen and independent power producers.

KenGen’s prices were much lower than those of the independent power producers. Kenya Power buys most of its electricity from State-controlled KenGen.“The President... notes ...the lack of proper demand forecasting and planning, leading to irreconcilable projections as against demand,” the statement said.

Kenya Power fell to a pretax loss of Sh7.04 billion for its financial year to the end of June 2020.Out of the Sh87.5 billion cost of sales incurred during the period, Sh47.5 billion, or 54 percent, was paid to power producers as capacity charges, officials said.