26 February 2013

Kenya: Manufacturers Reject New KPLC Tariff Plan

Major electricity consumers want inefficiencies in the production, transmission and distribution of electricity addressed before any price increase is considered.

The Kenya Private Sector Alliance and Kenya Association of Manufacturers have strongly opposed a proposed review of the tariffs by Kenya Power.

Kepsa chairman, Patrick Obath yesterday said the proposed price hikes are meant to hide the inefficiencies in the power sector rather than address it.

"Why has the increased capacity been delayed? Are we producing the power we have at the best possible cost?" Obath, who also sits on the Kenya Power board, said.

Kenya Power is planning a major tariff hike from March to meet the cost of commissioning 1250MW power projects by 2015.It held a stakeholder presentation yesterday to defend the planned price increase.

KAM said Kenya Power has not fulfilled any of the tariff considerations given before the last review in 2008. It wants ERC to give preconditions that the distributer should fulfill before approving the price increases.

"Power profits should come from increases in new connections and sales rather than increase in prices," said KAM chief operations officer Mercy Achola.

"In any case which business makes a 40 per cent instant increase in its prices," she said.If the proposal is passed, small industries will from March pay 50 per cent more per unit used from Sh8.96 per kWh to Sh13.66. Large entreprises will pay 60-70 per cent more.

The two bodies said any further increase in cost of power will make Kenya an uncompetitive investment destination since the cost of power is already higher than other countries in the region at 18.8 US cents compared to Tanzania at 9.9 US cents and 5 US cents in Egypt.

In the past companies like Unilever and Colgate Palmolive have relocated their production to other African countries citing high operating expenses.

Kenya Power however said the price increase will not boost its revenues as the money will be reinvested.It predicts that its revenue will remain constant from the Sh111.7 billion in 2012, to Sh129 billion in 2013 and Sh109.8 billion in 2014.Energy PS Patrick Nyoike said supported the planned tariff review arguing that consumer should bear with it now since electricity power will go down by year 2020 when there will be a wider range of energy sources.

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