State to review terms of off-peak power tariff after dismal uptake

State to review terms of off-peak power tariff after dismal uptake

The government is set to review an electricity tariff that gives manufacturers power at discounted rates following low uptake by firms.

The Times of Use (ToU) tariff, which offers large power users a 50 per cent cut on their bills, but on meeting certain thresholds, is set to be revised during the next review of the electricity tariff by the Energy and Petroleum Regulatory Authority (Epra).

Hailed at its launch as among the initiatives to reboot the country’s manufacturing sector, the tariff has failed to excite industries, which say the thresholds set are too high and only a select number of companies can meet them.

Under the tariff announced in November 2017, industrial and commercial power users pay half the rate when they use power during the off-peak hours of between 10pm and 6am upon meeting certain thresholds.

On Saturdays and public holidays, the off-peak hours are from midnight to 8am and from 2pm to midnight, and the whole day on Sunday.

In a given month, power consumers only benefit if their usage is above their average consumption over the previous six months.

Epra acknowledged that the thresholds were high and it would revise them when undertaking the tariff review.

“Many commercial and industrial customers are already benefiting from the ToU tariff. Concerns regarding the threshold will be addressed in the next tariff review,” said Epra in response to questions by FS.

Large power users metered at between 450 volts and 11 kilovolts (kV) pay as low as Sh3.55 per unit of electricity consumed under the tariff.

Ordinarily, this cadre of customers pay between Sh9.20 and Sh7.10 per unit, with heavier users paying lower charges.

The cost is, however, also subject to other charges such as fuel cost, inflation and foreign exchange adjustment, which bring the average price that manufacturers pay to about Sh15 per unit.

Spur sector

The ToU tariff is among the government initiatives aimed at spurring the manufacturing sector that include tariffs specific to Special Economic Zones (SEZ).

Epra in February last year gazetted tariffs for industrial customers metered at 220kV, who would pay Sh7.99 per kilowatt hour (kWh).

It also gazetted a SEZ tariff for Olkaria SEZ, where firms operating from the Naivasha zone would pay Sh5 per kWh.

These, however, do not have the stiff conditions of the ToU tariff.

Kenya Association of Manufacturers (KAM) told FS that in addition to the high thresholds that were difficult to meet, Covid-19 and the subsequent impact it has had on the economy meant that fewer industries are benefiting from the ToU tariff.

“The ToU tariff is based on a threshold that facilities must achieve, beyond which they stand to benefit from the tariff,” KAM said.

“With the onset of Covid-19, several facilities ramped down their production, and therefore were not able to meet the set threshold. As such, most facilities have not been able to benefit from the tariff.”

The manufacturers’ lobby also added that communication around the tariff has not been clear, with many plant owners having initially thought it meant moving working hours to after dark.

“A key factor contributing to this is misinformation on the tariff. Initially, it was misinterpreted to mean merely shifting production to night time,” said KAM.

This saw several companies shift their production and still did not benefit from the tariff as they did not attain the energy consumption thresholds.

Kenya Power said a number of manufacturers have been able to benefit from the ToU tariff and saved more than Sh4 billion.

“So far, over 1,160 large industrial and commercial users per month have benefited, making savings of over Sh4.3 billion,” said the firm.

Kenya Power has more than 3,600 large commercial and industrial customers spending upwards of Sh60 billion per year on electricity, or about 50 per cent of its revenues.

The ToU tariff is among the many initiatives that the power retailer said it has undertaken to improve electricity supply to industries across the country.

“We continue to pay special focus on the manufacturing sector across the country in order to enable them to play their rightful role of driving economic growth,” it said.

“Kenya Power will continue to make investments to enhance quality and reliability power supply in manufacturing hubs in line with our sales growth strategy.”