Why Kenya Power reels under Sh20b unpaid bills
Kenya Power is looking for debt collectors to recover upto Sh5 billion worth of unpaid bills from defaulters who have already been disconnected from the grid.
The utility’s total unpaid bills are well over Sh20 billion, but the Sh5 billion is debt that has accumulated over many years.
The firm has issued its third profit warning in a row, on reduced electricity consumption due to what it said was the rising cost of buying wholesale power and Coronavirus.
More than half a million customers, the company said, had failed to pay electricity bills in the three months to June. Data from globalpetrolprices.com gives one major reason why Kenyans are such high defaulters on their power bills.
Kenya’s household electricity prices are 23 times higher than that of Ethiopia and Angola and 80 times more than Sudan.
The power costs are double that of Tanzania and South Africa and nearly four times that of Ghana, DRC and Nigeria. It is 8 times higher than Egypt.
Kenya has the third highest household electricity prices in Africa according to globalpetrolprices.com putting Kenyans at an acute disadvantage interms of cost of living compared to their peers.
Power prices
“Kenya December 2019: the price of electricity is Sh21.7 per kWh for households and Sh16.7 for businesses which includes all components of the electricity bill such as the cost of power, distribution and taxes,” globalpetrolprices.com, which tracks power prices in 100 countries said in a statement on their website.
The world average price is Sh14 per kWh for household users and Sh13 per kWh for business users.
The prices for households are calculated using the average annual household electricity consumption per year.
This means that small businesses are paying more for power than in almost the rest of Africa.
Big power consumers enjoy relatively lower prices but small businesses cannot easily grow to join the big players due to exorbitant electricity prices.
Kenya’s power prices are only lower than Cape Verde and Mali on the entire continent, making it an uncompetitive business destination with manufacturers saying they are moving into the neighbouring countries.
“Electricity prices are a key determinant in the growth of small businesses, our power bills are so high it is difficult for startups to stay in business here in Kariobangi,” said Steve Biko, an entrepreneur in Kariobangi Light Industries.
Kenya boasts more than 70 per cent renewable energy but many wonder whether expensive renewable power is useful.
Kenya’s power market is riddled with corruption with Kenya Power facing scandal after another while power producers enjoy high tariffs prices signed with the Ministry of Energy.
Most of this expensive power purchase agreements last as long as 25 years.
The struggling has been in talks with the energy regulator since June to increase electricity prices by up to 25 per cent to cushion it from expensive electricity prices it is paying power producers.
The power utility’s full net profit sunk 92 per cent to Sh262 million in the financial year ended June 2019, showing the problems in the power monopoly.
African Development Bank is quoted as saying Kenya’s power costs are unjustifiable compared to other countries.”
Last month, Energy Cabinet Secretary Charles Keter’s statement advising consumers to cook their meals using electricity in order to lift Kenya Power’s sagging sales were met with angry rebukes from Kenyans on social media accusing him of living in a bubble.
Early this year, the company fired 110 employees over illegal power connections that it says contributes a lot to its 20 per cent system losses.
Most Kenyans cannot afford power, so they resort to illegal connections despite inherent danger.
Startup alternative energy companies have made Kenya their mainstay and attracted major funding from international investors due to the price differential they can offer.
Contractors who build urban residential prices have started installing solar powered security lamps to cut costs even as Kenyans in remote location fully switch to solar panels.
Solar energy
Major power consumers in Kenya are increasingly adopting solar energy as they seek to lower power costs determined by the country’s monopoly, Kenya Power.
By reducing their dependence on main grid electricity, projections show that these consumers will in the next decade disrupt the power sector players denying them substantial revenues.
Many solar power plants are relatively small generating less than one megawatt thus falling short of meeting their power needs. They, however, cannot be dismissed since they continue shifting from the main grid.
