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Newsunplug Kenya > Blog > Business > Tariff discounts costs Kenya Power Sh2 billion
Business

Tariff discounts costs Kenya Power Sh2 billion

new5nuke
Last updated: January 23, 2023 7:18 pm
new5nuke
3 years ago
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Kenya Power lost Sh2.1 billion in the 15 percent tariff discount implemented last year as other State-owned firms in the electricity sector refused to lower their charges as agreed with the government.

The revenue loss has been disclosed by the Auditor-General in its report on Kenya Power’s financial statements for the year ended June 2022.

Kenya Electricity Generation Company (KenGen), Kenya Electricity Transmission Company Limited (Ketraco) and the Geothermal Development Company Limited (GDC) were the companies that were to reduce their billing to make the tariff cut a reality.

Kenya power substation at Olkaria
A power substation at Olkaria

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They however did not keep their end of the bargain, leaving Kenya Power to implement the tariff cut while absorbing the loss.

“KPLC implemented the tariff reduction from January 2022 but the other agencies did not implement the cost reduction measures as per respective commitments which were estimated to translate to Sh2.1 billion,” the government auditor said.

The Sh2.1 billion discount withheld by the State-owned firms has exposed Kenya Power to a wider liquidity gap with the utility liquidity position deteriorating in the review period.

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Given the revenue hit from the subsidy on electricity tariffs, the government ended the initiative at the end of December 2022 on the recommendation of the International Monetary Fund (IMF).

The January tariff cut resulted in an annual loss in revenue of Sh26.3 billion leaving Kenya Power with a negative working capital of Sh47.8 billion at the end of June 2022, albeit an improvement from Sh69 billion in June 2021.

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