KenGen tariff about-turn saves power consumers higher bills

KenGen managing director Rebecca Miano and chairman Joshua Choge at the company’s AGM in Nairobi on November 22, 2017. PHOTO | DIANA NGILA  

By NEVILLE OTUKI

More by this Author

Summary

• KenGen had last year sought approval from the ERC to raise the tariffs for its major hydropower plants with a capacity of 765 megawatts or 47 per cent of the firm’s total power capacity.
• On Tuesday, KenGen executives said they had dropped the higher tariff bid after fresh talks with the ERC and Kenya Power — which had all along opposed it.

Power producer KenGen has abandoned its bid to raise the price at which it sells hydropower to Kenya Power, sparing homes and businesses steep power bills.

KenGen had last year sought approval from the Energy Regulatory Commission (ERC) to raise the tariffs for its major hydropower plants with a capacity of 765 megawatts or 47 per cent of the firm’s total power capacity.

This would have forced the electricity distributor to increase retail prices for homes and business to cover the additional cost of buying wholesale power from KenGen.

On Tuesday, KenGen executives said they had dropped the higher tariff bid after fresh talks with the ERC and Kenya Power — which had all along opposed it.

“We reached an understanding and abandoned the bid,” said KenGen director for corporate and regulatory affairs Simon Ngure on the sidelines of the firm’s annual general meeting.

The meeting saw the company announce that it has added plc (public limited company) at the end of its name in compliance with new company laws.

It also announced plans to create a subsidiary, KenGen Energy Services, which will handle non-generation business, as a way to diversify revenue streams.

READ: KenGen share of power sales drops to 37pc as drought bites

The push for higher tariffs was informed by the expansion of the plants’ capacity since 2009 when the firm signed a power purchase agreement (PPA) with Kenya Power but the tariffs remained unchanged.

The Nairobi bourse listed firm, which is 70 per cent owned by the government, was also keen to deliver returns to shareholders who have for the second year gone without dividend payouts despite KenGen making profit.

If sanctioned, the higher wholesale tariffs would have strengthened Kenya Power’s hand in its push to increase in electricity prices for homes and businesses to cover rising operating expenses.

“When we signed the PPA in 2009 there was a projection for capacity increase, giving room to revise the rates,” KenGen former managing director Albert Mugo said last year.