In East Africa, power distributor Kenya Power has asked for the bill proposing the introduction of competition in the distribution and retail of electricity to be put on hold until additional capacity is fed into the country’s electricity grid.
Kenya Power’s managing director Ben Chumo said that new entrants into the market would have detrimental effects on the power economy as a whole, local media The Star reported.
“While competition is a very healthy proposal in future, the 2,211MW in the grid now is too little for anybody to liberalise power distribution and retail,” said Chumo.
The Energy Bill 2015
The Star reported that the Energy Bill 2015 is currently under review by the Commission for the implementation of the Constitution and says it will be the duty of a distribution licensee to provide non-discriminatory open access to its distribution system for use by any licensee, retailer or eligible consumer at reasonable transmission or wheeling charges.
If the law is passed, Kenya Power will forfeit its reign of a monopoly in power distribution and retail, said the report.
The Star stated that the power distributor’s performance showed growth in revenue from $500 million in 2013 to $646 million in 2014 due to an increase in unit sales. Profit after tax rose to $62 million in 2014 up from $31 million in 2013.
Chumo said: “A law that undermines Kenya Power’s capability to distribute power will kill investor confidence in power generation business and it is the country that will lose in terms of growing the grid capacity.”
According to The Star, Chumo said that Kenya Power‘s ability to pay the power producers will also be limited if the “cherry pickers” are allowed into the business where large consumers, mainly manufacturers, take 60% of the grid’s power.
He added: “We have 24 power purchase agreements and are waiting to sign another 127 and this commitment will be lost if Kenya Power’s viability is eliminated.”
When competition is welcome
Chumo claims that when there is sufficient generation capacity feeding back into the grid, then the market will make room for more entrants, “because that’s when everybody will be able to make money and at a cheap cost to consumers.”
The report added that the Energy Regulatory Commission’s January electricity tariffs show domestic consumers are currently paying $0.18 per unit while the commercial/industrial unit cost is capped at $0.13 per unit.
Chumo added: “We are looking at power distribution as a national business. What we should actually be talking about currently is allowing the power producers to sell power directly to industries in order to eliminate the wheeling cost that increases the cost of power.”