The Ministry of Energy is seeking to introduce multiple electricity tariff offers from which consumers would pick what works best for them in terms of pricing.
The idea is to roll out smart tariffs and high-tech meters to enable customers to track when electricity prices are at their cheapest. In this plan, there will be multiple tariff rates depending on the time of day to enable consumers to shift their consumption to off-peak times when electricity is cheaper.
This is a noble idea because consumers are highly inconvenienced by the present system where electricity is priced at a single unit rate.
Power users also suffer the downside of often being billed based on estimated readings and standardised profiles, which means the supplier guesses how one consumed power.
The ministry must, however, handle this plan cautiously to avoid challenges experienced in markets in Europe where some consumers did not fully embrace the concept.
A key mistake that happened in Europe is that authorities imposed aggressive critical peak or real-time prices without sufficient automation to enable consumers to track prices, triggering a backlash when users realised how much they had paid for power used during a peak period when their bills arrived. Comprehensive automation of the system must, therefore, be a priority for Kenya as it walks towards imposing smart tariffs.
The real benefits of dynamic power pricing must stand out to win the confidence of consumers because nobody would be willing to go through the nit-picky details of tracking how much their electricity costs and when it’s generated to maximise on the lowest pricing.
The ministry and energy sector regulators would have to deploy teamwork to convince consumers of the real benefits of these smart tariffs.