Kenya Power losing billions from system inefficiency

Workers from Kenya Power. [Denish Ochieng/Standard]

Kenya Power is losing billions of shillings for keeping low electricity consumers on the grid as transmission costs mount.

Millions of customers enlisted under the Last Mile Connectivity Project are weighing down the power distributor as the amount of electricity lost during transmission from generation plants to consumers continues to rise.

System losses stood at 22.8 per cent over the half-year to December 2018, higher than 20.3 per cent recorded over a similar period in 2017, according to the company’s half-year financial report.

The losses are the difference between what the firm buys from power producers and what it sells to consumers. They are incurred due a mix of factors, the major ones being old transmission infrastructure and consumer theft through meter tampering.

“The system losses rose… largely attributed to the expanded grid. The master plan for the firm is to cut these losses into early teens in five year’s time. The current rise sends those plans into disarray, further negating the profit margins,” said Harrison Gitau, a senior research analyst at Apex Africa Capital.

This is even as the company partnered with the International Finance Corporation (IFC) in a three-year loss reduction initiative.

It is also against a reduction in the amount of system losses that Kenya Power can recover from customers following a review of electricity tariffs by the Energy Regulatory Commission.

The industry regulator reduced the amount that Kenya Power can recover from its customers to 14.9 per cent of system losses, down from 15.9. The firm would have to absorb system losses above 14.9 per cent.

The system losses appear to be getting worse by the year. In the financial year to June 2018, the company said the losses increased to 20.5 per cent from 18.9 per cent in 2017.

Kenya Power has in the recent past attributed the losses to growing customer numbers, particularly under its “rapid expansion at low voltage under the Last Mile and other connectivity programmes”.

“The extended network and growth in customer numbers has led to a consequent increase in system losses,” said Kenya Power in its annual report published in December 2018.

“To manage system losses, the company has developed a three-year Loss Reduction Initiative Programme. We are working closely with the IFC Advisory Services as the co-sponsor to implement the programme.”

At 14.9 per cent recovery for system losses, Kenya's rate is still high compared to the global average at 11 per cent. In addition to old and inefficient power transmission infrastructure and pilferage, other factors that lead to losses include the distance between the electricity generation source and the consumers.