Kenya Power has warned that delay in implementing tariff reviews could increase the risk of defaulting on its contractual obligations. The power distributor has faulted the Energy and Petroleum and Regulatory Authority, EPRA for delaying tariff reviews, which it sought last year to tame its losses and growing debt.
A letter to the Ministry of Energy seen by Business Daily says that further delays in the reviews pose the “risk of Kenya Power defaulting on its contractual obligations if no timely and commensurate tariff is provided.”
Kenya Power says that the tariff reviews delays cost the distributor as much as KSh 37.3 billion in sales in 2020 H1. The firm’s call for reviews follows the expiry of temporary tariffs in July 2019, as well as the need to cover losses following high transmission, distribution and power purchasing costs. Last year, its purchasing costs rose by KSh 18 billion to KSh 70.9 billion.
Earlier, the utility firm announced plans to hike power prices by up to 20%, to KSh 12.5 per unit for consumers who use less than 100 kWh and Ksh 19.53 per unit for those consuming over 100 units a month.
The company is engaging the ministry of energy to solve the tariff stalemate and review bulk purchase agreements. In the letter, Kenya power is also seeking help in sharing losses with other parastatals in the energy sector, such as the rural electrification agency.
Kenya Power’s Growing Debt
Kenya Power’s debt is now approaching Ksh 48 billion. The company owes KenGen, its power supplier Ksh 23.7 billion. It also owes independent power suppliers Ksh 19.48 billion, and another Ksh 4.6 billion to the Kenya Electricity Transmission Company (KETRACO).
The company risks penalties for defaulting on its debts. In 2018, KenGen penalised Kenya Power KSh 1 billion as interest on late payment after the expiry of the 60-day window beyond which the debt begins earning interest.
Prospects of bridging the debt with revenues streams from consumers face a dim outlook, as the pandemic has dampened consumption.
Last month, the power distributor secured debt relief from 14 lenders.