It’s now possible to buy, resell power for a profit

Daniel Kiptoo

Epra Director-General Daniel Kiptoo during an event in November last year.

Photo credit: File | Nation Media Group

Kenyans will from next week be able to buy electricity in bulk from Kenya Power at discounted prices and resell it to other customers at a profit, in a move aimed at enhancing power supply in the country.

The Energy and Petroleum Regulatory Authority (Epra) on Friday approved new power tariffs that take effect on April 1, including bulk tariffs.

The move will see Kenya Power gradually be relegated to serving large power consumers such as industrial customers with the retail distribution taken over by private firms that will be forced to be lean, efficient and effective in order to turn a profit from the power reselling business.

“We have also approved the bulk tariffs in furtherance of the provisions of Section 163 of the Energy Act, 2019. This will allow large consumers to buy power in bulk from Kenya Power and to retail the same to their end user customers,” said Epra.

In the new tariffs, large customers of category CI5 will buy power at a bulk base tariff of Sh12.12 per unit from next week, which will drop to Sh11.98 in 2023/24, Sh11.40 in 2024/25 and Sh11.16 in 2025/26. In comparison, unsubsidised domestic consumers will buy the same from Kenya Power at a base tariff of Sh20.97 from next week and Sh20.58, Sh19.08 and Sh18.57 per unit over the next three years, respectively.

The Energy Act introduced private participation in power distribution, which is currently monopolised by Kenya Power, but had not been actualised because the last tariff review was in July 2018 before the Act took effect.

This means that firms that want to cash in on the new tariffs regime can now enter into a deal with Kenya Power for the supply of bulk electricity, with Epra reserving the power to approve or reject such deals on a case-by-case basis.

“Every electricity supply agreement between a retailer and another licensee for the procurement of electrical energy by a retailer for resale to consumers shall be submitted to the Authority before execution,” states the Act.

“(It) shall include provisions on rights and obligations of the retailer and the licensee, schedule of tariffs and charges, processing of applications for connection to supply, responsibilities and procedures for handling interruptions of supply, bulk and retail metering, complaint handling and dispute resolution and termination and suspension,” it adds.

During his vetting last year, Energy Cabinet Secretary Davis Chirchir told MPs that power reselling will enhance efficiency and relieve Kenya Power of the tiring task of spending billions of shillings to pursue defaulters.

The regime will be similar to that used by telecommunications companies to sell airtime where resellers earn a commission on their sales but pay the telcos upfront for the airtime.

“We really need to think out of the box on how Kenya Power trades. Think about how Safaricom trades, they give you a zone to manage. For those of us who work for Safaricom, it is not owed any money because you prepay for the airtime and then distribute,” Mr Chirchir told the vetting team. “There is no reason why Kenya Power should not adopt such frameworks where a region is given to a business person, you buy in bulk at a discount and then they manage the customers.”

This shift might take years before a regime of reselling electricity from Kenya Power is actualised. The main impediment is the huge capital outlay that a private company would require to set up a distribution network, including building power lines and substations from scratch and acquiring wayleaves. There is however the possibility of Kenya Power leasing out or selling part of its distribution network to private investors in areas the utility might not want to continue serving.

The utility generates about 70 per cent of its revenues from its commercial and industrial customers and just 30 per cent from its domestic customers.