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Government and Policy

KAM Hails Report Calling For Reduction Of Power Costs

BY Soko Directory Team · October 1, 2021 10:10 am

KEY POINTS

The tariff for industrial consumers stands at US cents 18/kWh, compared to Ethiopia US cts 4/kWh, Egypt US cts 6/kWh, Uganda US cts 12/kWh, Tanzania cts 7/kWh, and South Africa US cts 9/kWh

The Kenya Association of Manufacturers (KAM) has hailed the report by the Presidential Taskforce on Review of Power Agreements saying the recommendations are good for business in the country.

“Kenya Association of Manufacturers recognizes the Report as a positive and encouraging move for the industry, and a significant milestone in the long-standing efforts towards the reduction of power costs to boost local businesses,” said Mucai Kunyiha, Chair of KAM.

On September 29th, 2021, President Uhuru Kenyatta directed the Cabinet Secretary, Ministry of Energy to implement the recommendations of the Presidential Taskforce on Review of Power Purchase Agreements. The report was handed over to the President.

According to KAM, the high cost of electricity in the country is attributed to various factors including expensive Purchase Power Agreements, high cost of fuel, multiple taxes, and levies imposed on electricity bills, VAT, and Fuel Cost Adjustment, as well as depressed demand growth.

This has led to Kenya having one of the highest electricity tariffs in the region pushing up the cost of production for local industries and rendering the manufacturing sector uncompetitive.

“Presently, the tariff for industrial consumers stands at US cents 18/kWh, compared to Ethiopia US cts 4/kWh, Egypt US cts 6/kWh, Uganda US cts 12/kWh, Tanzania cts 7/kWh and South Africa US cts 9/kWh,” added Mucai.

During KAM’s engagement with the President’s Taskforce on the Review of Power Purchase Agreements, the Association recommended among other requisites, the need for reduced end-user tariff, stability and reliability of the grid, planning with end-user tariff in focus, Kenya Power’s sustainability, net metering and fast-tracking of infrastructure projects.

The green light given by the President to kickstart the implementation of this report is timely, and a favorable boost for the sector as many businesses are on a recovery track.

The recommendations provided will play a critical role in lowering the overall cost of electricity. Particularly, in reducing system losses and aligning Power Purchase Agreements to the Least Cost Power Development Plan.

“In this spirit, it is imperative that there is now a focus on reviewing the taxes, levies, and charges on power bills for manufacturers to reduce the overall cost of power. As a country, we need to get to US cts 9/kWh at least, in order to be competitive in the region and preserve our edge as an investor-attractive destination,” said the Chair.

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