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Kenya Power system losses rise to 23pc on meter tender disputes

Financial Standard

 

 Kenya Power Engineers install a transformer in Kiriguri village, Manyatta Constituency of Embu County. [Murithi Mugo, Standard]

Loss of electricity during the transmission and distribution process has increased to 23 per cent due to factors such as high rates of theft by customers and tender wars among suppliers of critical materials.

This has derailed the implementation of loss-reduction strategies. The losses are the difference between what Kenya Power buys from power producers and what it sells to its consumers.

This meant that for every 100 units of electricity that Kenya Power bought from electricity producers during the year to June 2023, it was only able to sell 77 units to consumers. 

Electricity system losses stood at 22.4 per cent a year earlier, having come down from a high of 24 per cent in 2021.

Kenya Power said the higher losses during the last financial year were due to a mix of factors that included delays in the implementation of loss reduction strategies, owing to tenders wars for the supply of critical materials such as meters and transformers. 

Other factors, Kenya Power said, included an expanded grid and customer base without a corresponding increase in resources as well as higher instances of theft by consumers.

current restructuring

While some of the losses are borne by Kenya Power, it recovers the larger portion of 19.5 per cent from consumers. The higher losses are despite a current restructuring of the company expected to reduce system losses to 14.4 per cent. 

“Despite the loss reduction initiatives (employed during the year), system efficiency declined by 0.56 per cent to 77 per cent during the year. This is mainly attributed to increased electricity pilferage, transmission and distribution capacity limitations and shortage of meters due to ongoing procurement related litigation which resulted in delays in procurement of meters,” said Kenya Power in its annual report.

The firm said among the high factors that have led to growth in system losses include the tenders wars among businesses that have been angling to supply it with meters.

These fights usually ended up in courts, with businesses disputing the award of tenders to rivals for the supply of meters to Kenya Power getting injunctions that delayed the supply of meters and other key materials.

Failure to meter customers already connected to electricity may have led to losses as some of the customers may have been unscrupulous and taken advantage of illegally completing the connections and accessing electricity without paying.

Kenya Power said it is addressing the challenge of procurement delays by putting in place framework contracts for the procurement of critical spares.

The firm also noted a rapid expansion of customers as well as the transmission and distribution has also made it difficult to police infrastructure.

Network constraints

Kenya Power said over the last decade, its customer base has grown 232 per cent to 9.21 million households and businesses. Its network has increased by 160,661 kilometres during the last 10 years.

“Despite the gains from the expansion, we experience electricity pilferage and resource and network constraints that have contributed to reduced system efficiency,” said the company.

“In the current financial year, the company is broadening the interventions for improved performance including delaying of transmission, sub-transmission and distribution lines through the commissioning of additional substations and alternative feeders…these works are expected to yield an annual loss reduction of approximately 0.5 per cent.”

The firm explained that the losses experienced comprise both technical and commercial losses. Kenya Power noted that technical losses, which are due to the infrastructure, are unavoidable but can be minimised through investments in the transmission and distribution infrastructure.

Commercial losses on the other hand have to do with theft of electricity by consumers, who are sometimes aided by electricity sector staff.

“The increase realised in the financial year was mostly an increase in technical losses, which are due to the inherent nature of the transmission and distribution network. “These losses require substantial capital investment to be addressed. In addition, they cannot technically be completely eradicated,” said Kenya Power.

“The commercial losses will continue to be addressed through smarting of the metering and increased inspections of installations. In addition, different models are being explored for electricity supply to high loss areas of slums across the country.” Kenya Power passes most of the costs associated with the system losses to consumers.

Epra has approved the recovery of 19.5 per cent of the losses from consumers in the monthly power bills, which is deemed an acceptable loss. 

The balance of 3.5 per cent above the allowed losses is deemed as inefficiency that is borne by the company, which the Auditor General noted is a strain on the company.

The Auditor General in an audit report of Kenya Power’s financial results said the losses should not be solely carried by Kenya and should be distributed across all sector entities.

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