Kenya Power deserves a hearing on tariff review

Electricity distributor Kenya Power #ticker:KPLC is justified in protesting the Energy regulator’s delay in reviewing consumer prices.

The tariff review, which should by law be done every year, is long overdue.

The power firm, concerned about its deteriorating financial health, reckons that implementing a 20 percent increase in tariff will put it on the road to recovery.

While the pain of higher electricity bills cannot be ignored, it could be even much worse for the economy to let Kenya Power go the way of South Africa’s Eskom that has over the years struggled financially and is now seeking billions of rands in State bailout.

In addition to the regular tariff revisions, Kenya Power should explore other solutions to dig itself out of the financial hole.

First is a review of the consumption band that enjoys State subsidy. Currently it is applied to consumers of 50 to 100 units per month. The range is too wide, roping in some consumers who are not truly deserving of the cost cushion. Fifty units are adequate for a family that basically uses the electricity for lighting and powering a few electronic gadgets. The subsidy should be enjoyed by households that consume up to 50 units. Those using between this cutoff and 100 units should be moved to a higher tariff.

Second, Kenya Power should renegotiate the rigid long-term independent power producer contracts that put it at a disadvantage.

Most of these deals were struck with the understanding that the tariff would be reviewed upwards every year and therefore payment for bulk power supplied would not be problematic. That, needless to say, is not the case.

If the above options are not appealing, the State can directly subsidise the power distributor.

This option would save the already overburdened consumer from digging deeper into the pocket to get electricity while giving Kenya Power room to stabilise.

Whichever option the State prefers, the choice should be made quickly for we can’t afford to ignore the utility’s financial woes.

We need a stable Kenya Power. Turning a blind eye now could mean mass blackouts tomorrow, and that is bad for the economy.