Kenya Power and Lighting Company is promising consumer’s reduced bills as it looks to review its controversial contracts with power generating companies.
The firm wants fixed charges lowered in contracts signed with electricity generating companies. According to the Auditor General, the management has identified capacity charges among the costs it wants to reduce.
Kenya Power Managing Director Bernard Ngugi further confirmed that they expected the push to result in cheaper power for consumers.
The capacity charges, meant to help companies recoup their multi-billion shilling investments are recovered for consumers and have long been blamed for much of Kenya Power’s losses – as they are tied into long term Power Purchase Agreements (PPAs). Other costs weighing the firm down include infrastructure maintenance costs, remuneration and interest on loans.
“Management indicated that plans are underway to renegotiate downwards the capacity charges on the existing power purchase agreements (PPAs).
“These charges, which account for 54 per cent of the total cost of sales are significant and, considering their fixed nature, may have adversely affected the company’s performance resulting in losses,” the Auditor-General noted in its report on Kenya Power’s financial statements for the year ended June 2020.
Kengen, OrPower, Lake Turkana account for 79 percent of the firm’s bulk electricity purchase costs. The state-owned monopoly purchases power from up to 20 different generating companies.
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Ngugi noted that the firms would have to give up a piece of their profits pie for the larger good of the economy.
“It’s obvious that if the cost of electricity from generators comes down, the same will go to the economy or wananchi/customers by the regulator also reviewing the retail tariff downwards.
“It would be very good if the economy gets the benefit of cheaper power to spur growth through manufacturing that heavily relies on electricity rather than merely to think of electricity players making money,” he told Business Daily.
A previous push by Kenya Power to cut bulk electricity prices citing low demand following the onset of the Covid-19 pandemic was met with stiff resistance from generators including Iberafrica, Tsavo Power and Gulf Power.