Power tariff reviews to be inclusive

July 19, 2011
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, NAIROBI, Kenya, Jul 19 – The Energy Regulatory Commission (ERC) has announced that it will start engaging all stakeholders in reviewing the electricity tariff structure to determine the rate at which Kenyans will be paying for power over the next three years.

The tariff review process, ERC Director General Eng Kaburu Mwirichia on Tuesday pledged will be consultative as they seek to introduce into the new structure more aspects aimed at reducing the overall power supply cost.

One of these measures includes the ‘time of use’ tariff that is designed to encourage large consumers of electricity such as manufacturers to carry out their operations during off-peak at a lower cost.

“We will engage the industrial consumers and give them different tariffs for different periods within the day to encourage them to shift their load so that we can reduce the peak demand of the overall system,” Eng Mwirichia explained during a session with reporters.

The regulator is also mulling the development and use of ‘wheeling and distribution’ tariffs for those firms or power producers that may want to generate power in one area and use it in another.

These revelations come nearly three weeks after Kenya Power shelved the application for a tariff review that would have spelt higher bills for consumers and which was due to take effect in July 2011.

The utility firm cited the hard social and economic times that many Kenyans were grappling with and decided, in consultation with the ERC and their parent Ministry of Energy to suspend the review.

The suspension is however temporary but the Director General was quick to explain that the evaluation could either see a tariff increment or reduction.

Although a myriad of factors would be considered, Eng Mwirichia cited Kenya Power’s healthy balance sheet as one of the issues that could work in favour of a downward revision of the rates.

When the review was undertaken in 2008, the ERC had factored in the various ‘one-off cost’ projects that the utility firm would undertake in the course of the next three years and which largely contributed to the 24 percent increment in the cost of power.

“In terms of revenues, they (Kenya Power) are fine but when we are doing our review, we shall have to look at the efficiency gains that they are making. For instance, they should be improving on system losses and they have systems that are more efficient and so when we take into account all these, it is when we shall be able to know how to recalibrate the retail tariffs,” the director emphasised.

But even as the regulator is working on the retail tariff review, it is at the same time carrying out an exercise that will see Energy Act of 2006 amended by early 2012.

The rationale is to ensure that the Act and the supporting regulations are in conformity with the new Constitution.

“This is a sector-wide review and so we have formed a team of representatives from all the stakeholders that will first of all undertake a review of the policy, then the (Energy) Act so that it is aligned to the Constitution,” Eng Mwirichia stressed.

Besides replacing the titles ‘Minister’ with ‘Cabinet Secretary’, the adjustments will also have to factor in the energy requirements of all counties.

It is these changes and the enactment of additional legislations that will for instance see private companies that may wish to set up free electricity distribution facilities and thus end Kenya Power’s monopoly do so.

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