Suppliers hit as Kenya Power returns operations in-house

Last week Kenya Power opted not to renew the contracts of its third-party electricity token vendors, extending a trend in which the utility is gradually taking back services it had outsourced to third parties in a fresh strategy to cut costs.

The utility firm linked the decision to a quest to cut the costs paid in commissions paid to the vendors who process only about 10 percent of its total electricity bill payments.

Kenya Power has been working with 10 electricity token vending companies including PDSL, Cevens, Lexco One, Wawai, and Anchor. Others are Korandu, African Vending Systems, Adtel, Radix, Dynamo Digital, and Digital Leo.

Separately, the firm in June announced that it had scaled up maintenance of its high and medium-voltage transmission lines without switching off customers—effectively cutting off the services of outsourced firms that had been handling the assignment at an estimated cost of Sh36million annually.

Live line laboratory

The power utility on Wednesday, June 8, 2022, also opened a Sh340 million live line laboratory where it will test equipment including trucks, insulating blankets, link sticks, and a line hose tester.

Speaking when he launched the facility, Kenya Power acting managing director Geoffrey Muli said the laboratory is key to cutting the company’s revenue losses from planned and unscheduled outages and diversifying its income through selling services to neighbouring countries.

Live line maintenance allows a power utility to undertake repairs and other works without switching off customers, enhancing the reliability of the electricity supply.

Switching off customers

The State-owned firm has for years been forced to switch off customers for more than 10 hours a day to maintain its transmission lines, costing it millions of shillings in revenue.

By chopping the outsourced token vendors and live line maintenance teams, Kenya Power stays on a business reengineering path — similar to a growing number of firms globally that are keen on taming costs and regaining control of their businesses.

A global concern among corporates is that third-party vendors pose a risk of control and accountability –which exposes the contracting firms to operational and reputational risks, revenue losses, and even backlash by regulatory authorities.

Kenya Power is banking on its internal payment channels to dispense tokens to its customers to curb fraud and defend revenues given that banks and other third parties earned commissions for the purchases under the previous contracts.

Delayed remission of tokens

The utility has on numerous occasions come under fire by consumers over the delayed remission of tokens purchased. Part of this has been linked to unreliable services by third-party vendors--prompting to upgrade of its internal token dispensing system that uses the Paybill 888880.

The third-party vending window has also been fraught with claims of fraud after some crooks used a web of unidentified mobile numbers to target unsuspecting customers through social media platforms such as Facebook.

Barely three years ago, Kenya Power was at the centre of an investigation over suspected fraud in its electricity token generation.

In 2019, the Directorate of Criminal Investigations commenced investigations on top managers at Kenya Power Company over a suspected Sh35.28 million token scandal. In a report tabled by the Energy committee of the Senate, the scandal was linked to an irregular generation and sale of tokens to customers between January 2018 and February 2019.

Unofficial channels

The committee said the tokens were sent to customers through unofficial channels and personal lines. One such number had transacted close to Sh8 million. Kenya Power’s then chief executive officer, Jared Othieno linked some 23 officials of the company to the scandal.

Kenya Power is currently pressed for funds and is keen to maximise revenue and savings through shifts such as removal of avoidable outsourced services.

Kenya Power is set to take a hit of up to Sh26 billion in the current financial year due to the 15 percent cut on power tariffs, prompting the State’s intervention to reduce the impact of the cuts and keep the company on a profitability path.

Dilapidated transmission network

The utility also needs funds to revamp its dilapidated transmission network to keep up with the growing demand and is also bracing for cash buffers given the looming hit on its revenues due to the 15 percent reduction in the cost of electricity.

Kenya Power is also eyeing a review of electricity tariffs in the second quarter of the current financial year to enable it to collect higher revenues to sustain its operations amid fresh efforts to cut its costs. The firm will submit a new tariff application to the Energy and Petroleum Regulatory Authority (Epra) between October and December this year, even as the utility firm sought to climb out of a financial hole created by the January power prices cut.