Nairobi, Kenya | By Michael Wandati | Kenya is poised to authorize private companies entering the electricity distribution sector to import electricity from neighboring countries, a move that will compel power producers to lower wholesale tariffs.
The Energy and Petroleum Regulatory Authority (EPRA) has introduced this measure as part of its plan to liberalize the electricity distribution market. This initiative aims to introduce competition alongside Kenya Power and enhance service delivery to consumers.
By expanding the choices available to electricity distributors, the market is expected to witness heightened competition in wholesale tariffs. Consequently, this competition is anticipated to result in reductions in the overall cost of power for consumers.
The persistently high wholesale tariffs imposed by producers have presented challenges for Kenya Power in reducing electricity bills for consumers, as the utility cannot afford to sell electricity at a loss.
Presently, exclusive rights to sign electricity import agreements with foreign producers are held by Kenya Power. The company has existing agreements with Ethiopia Electric Power and the Uganda Electricity Transmission Company Limited (UETCL).
In the draft Energy Electric Power Undertaking Licensing Regulations, 2024, EPRA has proposed a license that would permit companies to import electricity for resale to consumers. Additionally, the license would allow entities generating power locally to export electricity to other countries.
“The Authority may, on receipt of an application, grant the applicant any of the following categories of licence; Electricity export/import licence, which shall entitle the holder to export or import electrical energy to or from another country,” the regulations say.
The proposed license will enable firms to not only import electricity for resale to consumers but also to export power to neighboring countries, thus providing them with a broader market. This move is expected to compel Kenya Power to offer more competitive rates to power producers.
Currently, Ethiopia and Uganda are the only countries with excess hydroelectricity that they are selling to Kenya.
However, these firms must obtain regulatory approval for the consumer tariffs they plan to charge, similar to Kenya Power, whose tariffs are subject to review and approval by EPRA.
The license for importing and exporting electricity is one of five licenses that the government is offering to new entrants in the electricity generation and distribution sector.
These licenses include permission to construct, operate, and maintain electricity generation systems, approval for building, operating, and maintaining transmission infrastructure, and retail supply licenses for selling, billing, and collecting revenue.
Additionally, firms will be able to obtain licenses to build infrastructure for transmitting electricity from generation stations at high voltage to load centers or to connect with other transmission systems, including that of Kenya Power.
The draft regulations follow the publication of the Energy (Electricity Market, Bulk Supply, and Open Access) Regulations, 2024, which aim to end Kenya Power’s monopoly.
Firms interested in entering the electricity distribution sector have been authorized to utilize the distribution and transmission networks of Ketraco and Kenya Power, estimated at 4,660 kilometers and 310,618 kilometers, respectively.
However, these new entrants will be required to pay wheeling charges to Kenya Power and Ketraco for using their transmission systems.
If the draft regulations are adopted by Parliament in their current form, firms will need to apply to EPRA for license renewals three years before the expiry of their current licenses.
Also Read: Uganda sets new electricity tariffs for 2024
“If the licensee wishes to renew this licence after its expiration date, the licensee shall submit to the Authority an application for renewal not later than thirty-six (36) months prior to the expiration of this Licence,” the draft regulations say.
As of June last year, Kenya Power served 9.2 million customers. However, these customers have often experienced blackouts, primarily due to an aging transmission line. The frequent outages, coupled with high electricity costs, have prompted many potential and existing customers to explore alternative electricity systems, such as solar and biomass.
Prominent companies like East African Breweries Plc (EABL), Bamburi Cement, Carbacid Investments, and Unga Group are among the major electricity consumers that have implemented alternative electricity sources, including solar power.
Moreover, affluent households are increasingly installing solar systems to reduce reliance on Kenya Power’s supply and lower their electricity bills.
