Kenya Power lost Sh2.1 billion during the 15 percent tariff discount established last year
due to other State-owned companies in the electrical sector refusing to reduce their
prices as agreed with the government.
In its report on the financial statements of the power distributor for the year ending
June 2022, the Auditor-General made the revenue loss public.
The firms that would lower their billing in order to make the rate cut a reality were
Kenya Electricity Generation Company (KenGen), Kenya Electricity Transmission
Company Limited (Ketraco), and the Geothermal Development Company Limited
(GDC).
However, they failed to uphold their end of the bargain, allowing Kenya Power to carry
out the tariff reduction while taking the hit.
The government auditor stated that “KPLC implemented the tariff reduction beginning
January 2022, but the other agencies did not implement the cost reduction measures as
per their promises, which were anticipated to translate to Sh2.1 billion.”
The company did not receive the full revenue help that the 15 percent tariff reduction
directive was intended to provide.
According to a second examination of the power producer’s financial records, KenGen
failed to give Kenya Power the greatest billing discount of Sh1.75 billion.
According to the Kenya Power report, the national government used a significant
amount of money to accomplish the tariff reduction.
To support the program that was created to provide financial relief to consumers, the
State gave the electricity distributor a total of Sh7 billion.
In comparison to their obligations, the other government-owned energy companies,
such as KenGen, offered Kenya Power partial discounts.
The auditor stated in its evaluation of KenGen’s financial statements for the fiscal year
ended June 2022, “The board of directors agreed to pay an amount of Sh3.5 billion
through fair reduction of invoices to Kenya Power who would, in turn, convey the
benefits to consumers.”
However, the company’s management did not carry out the cost-cutting measures in
accordance with the agreements, which suggests that the reported revenues are
overstated by Sh1.75 billion, which would have been the company’s share in light of
Kenya Power, which has already carried out the full reduction on behalf of other energy
sector players.
The Auditor-General also stated that this is a violation of the contract. This makes it
possible for Kenya Power to demand payment from the generator.
Kenya Power would incur losses as a result of the previous administration’s
implementation of the policy, which was intended to provide consumers with financial
assistance.
Kenya Power now faces a bigger liquidity gap as a result of the State-owned companies’
Sh2.1 billion discount withholding, which coincides with a worsening of the utility’s
financial position during the review period.
On the advice of the International Monetary Fund, the government stopped the program
at the end of December 2022 due to the revenue damage from the subsidies on
electricity tariffs (IMF).
Despite an increase from Sh69 billion in June 2021, Kenya Power had a negative
working capital of Sh47.8 billion at the end of June 2022 as a result of the January rate
drop, which caused an annual loss in income of Sh26.3 billion.
