Improve SME power plan

The proposal of a special off-peak electricity tariff for small- and medium-sized enterprises (SMEs) will not only reduce their electricity costs but also help to reduce power wastage by ensuring its optimum use.

Kenya Power wants, for the first time, to introduce a time-of-use (ToU) tariff for SMEs that consume more than 30 units of electricity per month on average. The special tariff will see the businesses pay just Sh10.54 per unit for electricity usage during off-peak hours, which is half the Sh21.08 per unit that they would pay for consumption during periods of high demand.

This is commendable. Countries with more developed off-peak tariff regimes compared to Kenya’s have enjoyed the benefits as customers shift their consumption habits, which has helped to balance their grids.

These tariffs were first introduced in Kenya on January 1, 2018, targeting mainly large industrial and commercial customers and have yielded mixed results in the five years since.

The main hindrance to the full enjoyment of the tariffs by consumers is that Kenya has put a high threshold that they have to meet before they start to enjoy the tariff. For instance, they must first use their full average monthly consumption before they start to enjoy the lower off-peak tariff.

To ensure that the targeted SMEs realise the benefits of the proposed ToU tariffs, the energy utility should cut the threshold that must be met before the tariff kicks in. This is because, in the current ToU regime, many eligible industrial customers may go an entire month without exceeding their average monthly use which would allow them to enjoy the lower electricity costs.

By lowering this threshold, more SMEs would qualify to enjoy the tariff, which will enable the utility to achieve its goal of having more customers use power during off-peak periods.